Research Highlights Featured Chart

January 8, 2026

Measuring welfare

A comprehensive measure of well-being shows that the gap between Black and White Americans is larger than traditional metrics suggest.

Tyler Smith

Source: barsik

Standard measures of welfare typically focus on single dimensions like wealth or life expectancy, but these isolated comparisons may substantially understate the extent of the welfare gap in the United States. In a paper in the American Economic Review: Insights, authors Jean-Félix Brouillette, Charles I. Jones, and Peter J. Klenow offer a comprehensive look at racial inequality in the United States by combining multiple dimensions of well-being into a single measure.

The authors constructed what economists call a consumption-equivalent measure of welfare, which incorporates life expectancy, consumption, incarceration rates, leisure time, and inequality. Because different economic outcomes are measured in different units, direct comparisons are difficult. By converting everything into consumption-equivalent terms, the researchers were able to assess the relative importance of these various factors.

Figure 3 in the paper shows the evolution of the consumption-equivalent measure of the welfare gap between Black and White Americans.

Figure 3 from Brouillette et al. (2025)

Life expectancy emerges as the largest single contributor to the gap between 1984 and 2022. Although Black life expectancy reached 95 percent of White life expectancy by 2022—74.5 years compared to 78.5 years—the welfare implications were still large. Based on standard values of a statistical life, each year of life is worth approximately five years of consumption, so the four-year gap in life expectancy translates to roughly 20 percent of annual consumption.

Consumption differences appear as the second largest contributor, followed by differences in incarceration rates. Leisure and inequality differences within groups contribute relatively little to either the levels or trends in the welfare gap.

While showing that there is still a considerable gap between Black and White Americans, the chart also reveals meaningful progress over time. In 1984, the welfare of Black Americans stood at just 40 percent of the welfare of White Americans, but rose to 59 percent by 2022. 

The authors’ welfare measurement provides an improved understanding of past racial inequality and is useful for future policy evaluation. Because most policies affect multiple outcomes simultaneously, the consumption-equivalent approach may provide a more complete metric for cost–benefit analysis.