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Friday, September 2, 2011

America's massive racial wealth gap

America's massive racial wealth gap 
White familes did poorly in the Great Recession, but the numbers are dramatically bleaker for black and Hispanic households  

POSTED ON JULY 27, 2011, AT 10:26 AM

Homeowners wait in line for a foreclosure prevention seminar in Florida: The Great Recession has turned the wealth gap between white and black families into a gaping chasm.
Homeowners wait in line for a foreclosure prevention seminar in Florida: 
The Great Recession has turned the wealth gap between white and black 
families into a gaping chasm.
Photo: Joe Raedle/Getty Images

The Great Recession afflicted much of America, but it hit some demographics harder than others. The Pew Research Center scrutinized the net wealth of different racial groups in 2005 and 2009, and found that the financial gap between whites and minorities has become increasingly "lopsided" (a "colossal understatement" on Pew's part, says Brian O'Connell at TIME). Pew adds that the wealth divide between white families and black and Hispanic households is bigger now than at any time since the Census Bureau began tracking such data by race in 1984. What's going on in America? Here, a brief guide

:Exactly how big is the wealth difference?White households were about 20 times wealthier than black ones in 2009, and 18 times wealthier than Hispanic ones. Every group's income fell between 2005 and 2009, but Hispanics' inflation-adjusted median wealth plummeted 66 percent, versus 53 percent among blacks, 54 percent among Asians, and just 16 percent among whites. As a result, the average white household had a net worth of $113,149 in 2009, a black household had $5,677, a Hispanic one, $6,325, and the average Asian household, $78,066. About a third of black and Hispanic households has zero or negative worth, versus 15 percent for whites.

How big did the gap used to be?In 1984, white households were 12 times wealthier than black households, and eight times wealthier than Hispanic ones. The gap was narrowest in 1995, when white households were only seven times wealthier than black and Latino ones. 

How does Pew define wealth?It looks at a household's assets (houses, cars, bank accounts, stocks and other investments, and retirement accounts) minus its debts (mortgages, car and student loans, credit card debt, etc.). Measuring wealth this way "can give a fuller picture of financial status than simply relying on household income," says Natasha Lennard at Salon. And since wealth can be passed on, while annual income can't, this inequality will probably only grow with time.

Why have whites fared so much better?"The bursting of the housing market bubble in 2006 and the recession that followed from late 2007 to mid-2009 took a far greater toll on the wealth of minorities than whites," the Pew study says. The housing implosion was especially hard on Hispanics, since a disproportionate number of them are concentrated in states like Florida, California, Arizona, and Nevada, where the housing boom and subsequent bust were especially dramatic. White households also have more diversified assets, including 401(k)s and IRAs, while blacks and Hispanics had more of their net worth in their homes. Since the stock market has bounced back since 2009 while the housing market is still weak, the wealth gap has already probably widened even more from its 2009 record, Pew says.

Sources: Business InsiderDaily KosJack & Jill PoliticsMediaiteNew York Times

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