Income by race is an especially interesting topic during these times of social awareness and racial injustice. Let us breakdown income by race based on the latest U.S. Census Bureau data.
Before we begin, I want to emphasize that your day job income should be only one source of income. You must build multiple income streams if you want to eventually achieve financial independence sooner.
Further, you should continuously invest due to inflation. Depending on the government or a pension to save you is not a prudent long-term financial strategy.
In this post, we’ll first address income by race. Then I’d like to talk about some factual and some personal reasons why Asian income is the highest in the United States. Race-related debates seem to be constant in America, yet Asians are largely left out of the conversation.
Instead of just making comparisons between Black and White or Black, White, and Hispanic, it’s import to include Asians as well.
Income By Race: Asian Income Is Highest
Asian: $98,174 ($29,471 or 43% higher than overall median)
White: $76,057 ($7,354 or 10.7% higher than overall median)
All races median household income: $68,703
Hispanic: $56,113 ($12,590 or 18.3% lower than overall median)
Black: $45,438 ($23,265 or 33.8% lower than overall median)
What’s great about this latest income by race data is that all races have seen a healthy rise in income since 2013.
However, there is a widening income gap between the median Asian income, the median income for all races, and the median Black income.
Asian median household income is more than double the Black median household income and 75% higher than the Hispanic median household income.
Why Is Asian Income Pulling Away?
Here are some reasons why Asian income is accelerating at a faster rate than income from other races. I’ll share my personal perspective as a Taiwanese-American down below.
1) Smaller population, less “weight.”
Asians account for only ~6% of the American population. One stark example of the benefits of having a smaller population is to take a look at Singapore and Malaysia.
The per capita GDP in Singapore is an impressive $56,000, partly because its easier to take care of and mobilize 5.4 million people than it is to take care of 30 million Malaysians, whose GDP per capita is only $11,000. They used to be one country until Singapore split on August 9, 1965.
2) Asian immigrants who can afford to come to America tend to be wealthier.
It costs money to flee a country for better opportunity. My 23-year-old neighbor from China who bought a $2.25M house is an example. If you’re poor, you’re stuck. Because the US is viewed as having some of the best universities in the world, many wealthier Asian parents send their kids here, Australia, and the UK.
If you can afford to pay US private school or out-of-state tuition, you are probably wealthier than the median person. There is much less financial aid for international students. In fact, many colleges purposefully try and court international students because they pay top dollar.
Take a look at the Asian American Pacific Island population breakdown in the chart below. It shows that out of the total AAPI population in 2017, 56 percent were foreign born. Foreign born AAPI tend to have more resources and hold higher-paying jobs.
3) Tremendous focus on education.
Education is emphasized more than anything else in the Asian household. Get good grades, go to college, or else be a disappointment. Ever wonder why there are so many Asian dentists, doctors, and lawyers? More education is correlated with higher income and wealth.
A 2013 Nielsen Research Report found that Asian American households have a median net worth of $89,300 compared to $68,800 for overall US households, a 30% difference. Meanwhile, roughly 49% of Asian Americans have Bachelor’s degrees vs. 28% of the general US population, a 75% difference.
4) More working people in each household.
How do people afford to live in expensive Hawaii where there are few high paying jobs? Multiple incomes under one roof. It’s not uncommon to see a father, a mother, an adult son and his wife all live together and work.
It’s common to see multiple generations under one roof in the Hispanic community as well. Family versus independence from family is highly emphasized.
What Is Considered Asian?
The biggest pushback from academics and Asian people is the classification of the word “Asian.” Thai culture is very different from Chinese culture. Japanese culture is different from Filipino culture.
Every Asian race has its own language that can’t be easily understood by another Asian race. Meanwhile, some Asian countries like India have 22 official languages and 150 languages spoken by a sizable population!
Academics are afraid of the “model minority,” which unfairly puts pressure on different Asian races who may not fit the mold.
Can you imagine being an Asian who doesn’t do well in school and isn’t in a profession that requires a graduate degree? Expectations can hurt people’s happiness and pride.
The Many Different Types Of Asians
Check out how many different Asian people there are from this Wikipedia chart.
Pew Research has also allowed us to see the breakdown of the various different types of Asian income. It’s interesting to see Indian income at $100,000, or about 35% higher than the median income for all Asians.
This may be due to a higher proportion of Indian workers in the high tech and medical industries. But if you are Burmese, Nepalese, Bangladeshi, or Indonesian, you may resent the stereotype that Asians are the highest income earning race.
Now that we understand not all Asians are the same, I want to share my personal thoughts on income by race from a Chinese American person who came to the United States for 9th grade and never left. My father was born and raised in Hawaii, as were his parents. My mother was born in Taiwan, and met my father in college.
Growing Up As An Asian-American
With language and cultural headwinds Asians face in America, why is the median Asian American income so much higher than other races?
There’s no proof Asians are any smarter or harder working than other races. I quit math after junior year in high school because I hated math and didn’t see the practical use of taking Calculus in day-to-day life. Kicking back came easy to me.
I can’t speak for all Asian-Americans, but I can provide some perspective as a Taiwanese-American who grew up in four different Asian countries for 13 years before coming to America for high school and college.
I was born in the Philippines and lived in Japan, Taiwan, and Malaysia. In college I studied abroad in China for six months. In the workplace, I took business trips to India, Thailand, Hong Kong, Japan, and Indonesia for 13 years in a row from 1999 – 2012. I’ve lived in the States for the past 25 years.
Experiences That Shaped The Soul
When I was in the 4th grade in Taiwan, a white kid tripped me on the pitch and proceeded to yell racial slurs after I fell to the ground. He kept on barking obscenities until I swept his legs and stomped on his solar plexus in retaliation. He began to cry and we were both sent to “face the wall” for the entire afternoon recess period.
While we were squishing ants climbing on the brick just inches away from our faces, my assailant surprisingly turned to me and apologized. I was touched and apologized right back. We never fought or played dirty on the pitch again.
Chinese vs. Americans
The soccer game was between “Chinese” vs. “Americans” while I was attending Taipei American School in the early 1980s. I was placed on the Chinese team due to my ethnicity, instead of my nationality. I was too young to understand that I had just experienced my first racial conflict.
Racial Encounter At Denny’s
When I was a sophomore attending The College Of William & Mary in Williamsburg, Virginia, I had another very memorable racial encounter.
My girlfriend (who is half-Asian and half-White) and I were eating some midnight waffles at Denny’s, of all places when a group of offensive linemen came barging in. They sat in the booth next to us and told us to “get the fuck out you chinks” or else they’d beat the crap out of us.
By this time, I was already used to racial conflict as a 20 year old Asian American living in Virginia for the past seven years of high school and college. I always spoke up when there was an injustice, but this time I was outnumbered four-to-one.
Although I mentally strategized on how to debilitate my oppressors, my girlfriend and I decided to leave as we were just about finished with our food anyway.
The Motivation To Reach Financial Independence
I felt ashamed I couldn’t do anything to fight for my girlfriend’s honor. A week after the incident, I made myself a promise to be financially independent as soon as possible so I would never have to take abuse from anybody again.
If my loved ones encountered racial hate, then I wanted to have financial means to solve the problem beyond my fists. As a result, I focused on saving to invest in as many passive income sources as possible.
Why Asian Americans Save And Earn So Much
Building wealth starts with savings. There is no such thing as investing, buying a home, or building alternative income streams without savings.
Let me share with you reasons why I think Asian Americans save and earn more than the overall median. Again, this is just one person’s point of view on income by race.
1) Asians are allergic to debt.
Taking on debt to purchase a car, a piece of property, or stocks is a relatively new concept for many Asians. We’ve been taught the tenet, “If you can’t pay for something in cash, you can’t afford it.” This tenet runs counter to the heavy consumerism culture in America.
If you go to any property developer in China, it is common for 80%+ of the units to be purchased with cash compared to less than 40% in America. The same trend continues in India. Debt is slavery. Cash is freedom.
Before the pandemic, the US personal savings rate was roughly 6% according to the US Bureau Of Economic Analysis compared to 30%+ in places like China and India.
2) Lots of historical uncertainty and upheaval.
When you have political instability and war, people tend to save more for their uncertain futures. Over the past 100 years or so, there have been a lot of tragedies in developing Asia. The Cultural Revolution and the Nanjing Massacre are two such tragedies in China. The ongoing heavy hand of the government may be another.
The Taiwanese are perpetually paranoid the Chinese will invade. The Japanese have been aggressively saving since their bubble collapsed in the 1980s due to deflation.
The 1997 Asian Investment Crisis destroyed the wealth of millions of Thais, Indonesians, Malaysians, and South Koreans. Meanwhile, America has enjoyed a much more stable path of growth thanks to our Democratic system. Having better expectations of the future gives you more confidence in spending more money.
3) Few Asians in leadership positions.
When there are hardly any Asian American politicians, actors, and CEOs, it’s more difficult to visualize yourself in such positions as a kid. After all, the Asian population is small. When there are few examples to aspire to, there’s a tendency not to even bother.
Instead, Asians may just decide to be their own boss through entrepreneurial endeavors e.g. restaurants, convenience stores, laundromats, landlording, online businesses, etc. Entrepreneurship tends to be much more lucrative than being a median income worker over the long term.
4) Family finances.
It’s common to see post-college Asian adults still live at home with their parents. Why pay rent when you can live with the parents and save money for a downpayment, is a common way of thinking. There’s also the traditional aspect of living at home until one gets married, unlike US culture, which encourages independence as soon as possible.
If you save $30,000 a year in rent for 8 years until age 30, you will likely be better off financially than average. Personally, I could never imagine living back home with my parents after college.
However, the usage of The Bank of Mom and Dad is increasing to get a leg up. Given our parents have invested the longest during the biggest bull market in history, they are also the wealthiest generation.
5) Sports is not a realistic way out.
Only a tiny percentage of the population ever become professional athletes. But the odds are even starker for Asian Americans in athletics, an area where meritocracy reigns supreme. There are hardly any Asian American basketball, football, or baseball players for example. And these three sports are a part of Americana where the best athletes are revered as heroes.
Even for non-contact sports like tennis, there have only been a handful of Asian athletes who have risen to the top of the global ranks. You’re only making $100,000 – $150,000 a year before travel expenses as the 100th ranked tennis player in the world. Without the hope of athletics, the only way left is in the field of academics and the arts.
6) Academics is the main level playing field.
If you study harder, you will likely get better grades. Better grades will likely get you into a better university. If you get into a better university, you’ll likely get a better job and make more money.
In academics, it doesn’t matter if you’re only 5 feet 1 inches tall, you’ve got the same opportunity as someone 6 feet 10 inches tall. Even if you are poor, so long as you have a stable household you can still study as long as someone who is rich.
There is nothing more important to the Asian American population than academics. Parents will do absolutely anything to help give their kids a chance to excel in school – from after-class tutors every day to Sunday school.
Unfortunately, many magnet schools like Thomas Jefferson HS and Lowell HS have done away with their admissions exams in favor of a lottery system. Further, colleges like Harvard seem to have more stringent standards for admissions for Asian candidates.
7) Lower divorce rates.
Asian American families divorce at roughly half the rate of other Americans. There is a stronger social stigma against divorce in the Asian community. Although most marriages occur due to love, practical reasons for marriage may be more common.
For example, arranged marriages can be found in Indian and Chinese culture to a lesser extent. I have Asian friends who aren’t romantically in love with their husbands, but stay together due to social pressure and convenience.
If you have a more stable household, finances tend to be stronger and children tend to have a better chance of going to college and finding a better paying job.
7) The Realization Nobody Will Save Us
Given Asian Americans account for only ~6% of the US population, many Asian Americans realize that nobody is going to save us – not the government, not our colleagues, not the NBA, not the majority.
Asian Americans are often ignored by the media, as evidenced by the lack of support during the Asian American attacks post pandemic. Even if every single Asian American was brilliant and physically intimidating, we’d still get crushed by everybody else as such a small minority.
The only people Asian Americans can count on are our immediate family and education. This is why you see such a concentration of Asian minority groups in various urban settings e.g. Chinatown, Koreatown, Japantown. It’s a similar concept to why schools of fish swim together in the great unknown ocean.
Accepting The Way The World Is
My father explained to me after my fight on the pitch that this sort of racial conflict would keep on happening as I grew older. He was absolutely right. He taught me that in order to stop getting picked on I would have to fight back with my mind because there’s always going to be someone physically bigger and more intimidating than me.
And even if I was a hulk with a black-belt in martial arts, a pip-squeak with a gun could end everything in a hurry. With his advice in mind, I started taking school much more seriously.
When I graduated from college and got my first job in NYC I decided to save as much money as I could. After the first year, I maxed out my 401k and saved 20% of my after-tax income.
Yes, it sucked sharing a studio with my high school buddy as a 23 year old, but these are the types of sacrifices I had to make in order to save. Getting in at 5:30am and lasting until 7:30pm in order to eat the free cafeteria food wasn’t so bad.
After my third year of work, I was regularly saving 50% of my after-tax income because all I could think about, when it was dark coming in to work and dark leaving work was how wonderful financial independence would be. My goal was to make the most money as soon as possible in order to break free.
Burn Your Boats To Find A Way To Boost Income And Wealth
Perhaps it’s easier making and saving money as a minority in America because there’s so much urgency to get ahead thanks to a tiny safety net. Going through consistent racial adversity and seeing so much poverty in developing countries really motivates one to aggressively work.
There’s a saying that if you want to succeed, you should burn your boat. Once you’ve got no way to leave, you’ll simply do your best to thrive. But it’s hard to burn your boat when you’re living on SS America, a luxury cruise liner with all you can eat buffet 24 hours a day!
The income by race data from the U.S. Census Bureau should be eye-opening for all. Life is certainly not fair. But I hope through Financial Samurai and other free finance publications, we can help all races make a higher income and amass greater wealth.
Once you have financial freedom, you will have infinite courage to speak out against wrongdoings. You also will feel empowered to live a life that’s true to your values.
Recommendation To Build Wealth
In order to optimize your finances, you’ve first got to track your finances. I recommend signing up for Personal Capital’s free financial tools so you can track your net worth. You can also analyze your investment portfolios for excessive fees. For retirement planning, run your financials through their fantastic Retirement Planning Calculator.
Those who are on top of their finances build much greater wealth longer term than those who don’t. I’ve used Personal Capital since 2012. It’s the best free financial app out there to manage your money.
Build Wealth Through Real Estate
Among Asian families, real estate is the favorite way to build wealth. Given real estate is a tangible asset, Asians view real state as a more trustworthy way to get rich. This is why you see so many Asian landlords. around America.
Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not fully reflected this reality yet, hence the opportunity.
Take a look at my two favorite real estate crowdfunding platforms:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eREIT. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the easiest way to gain exposure.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you are a real estate enthusiast and want to build your own portfolio, CrowdStreet is a great way to go.
Both platforms are free to sign up and explore.
I’ve personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.