United States Seeing Large and Growing Wealth Gap

On July 26, the Pew Research Center released a study, “Wealth Gaps Rise to Record Highs Between Whites, Blacks and Hispanics.”

Pew reported that the wealth of different racial groups in the United States became dramatically more unequal between 2005 and 2009.

The recession and jobless recovery have eradicated decades of minority gains. It leaves whites, on average, with 20 times the net worth of blacks and 18 times that of Hispanics.

While people of every background suffered a wealth decline during the Great Recession, African-Americans and Hispanics lost more: white families lost 16 percent; black families lost 53 percent; and Hispanics lost 66 percent.

The disparity between white households on the one hand and black and Hispanic families on the other is larger now than at any time since the Census Bureau began tracking such data by race in 1984. In 1995, white households were seven times richer than black and Latino families.

The 2009 Median Wealth Breakdown is white, $113,149; black, $5,677; and Hispanic, $6,325. The Median Household Income by Racial Group was white, $54,461; black, $32,584; and Hispanic, $38,324

How does Pew define wealth?

Households’ assets comprise houses, cars, bank accounts, retirement assets and investments minus debts.

Why does the wealth gap exist? Pew co-author Rakesh Kochar attributed white people’s greater wealth to their higher annual earnings, intergenerational wealth transfers, and less reliance upon housing.

“People in minority communities are less likely to own their homes” than are whites. But for those who do, the home is often the single dominant asset they own.

Whites owned relatively more of 401(k)s, IRAs and stocks. The stock market has bounced back since 2009 while the housing market is still weak.

The wealth inequality between races will likely grow over time because it can be passed on to future generations.

White and black homeowners saw the median value of their home equity decline during this period, but not by as much as Hispanics.

Homeownership rates for whites and blacks remained relatively unchanged. Among blacks it fell from 47 percent to 46 percent. Among whites it remained unchanged at 74 percent. Latinos lost 2.6 percent, falling from 56.2 percent to 53.6 percent.

There also was a significant discrepancy in poverty rates between races.

Most whites belong to the middle class or higher. Only about 15 percent of white households have zero or negative net worth while about one-third of all black and Latino households suffer from zero or negative net worth.

Wealth disparities increased not only between racial and ethnic groups, they also rose within each group.

The top 10 percent of the wealth ladder were relatively less impacted by the economic downturn than those in the remaining 90 percent. The increase was the greatest among Hispanics, with the top 10 percent boosting their share of all Hispanic household wealth from 56 percent in 2005 to 72 percent in 2009.

Among whites, the share of wealth owned by the top 10 percent rose from 46 percent in 2005 to 51 percent in 2009.

Robert Harrison, a former chief of racial statistics at the Census Bureau, was quoted as saying, “I am afraid that this pushes us back to what the Kerner Commission characterized as ‘two societies, separate and unequal.’ The great difference is that the second society has now become both black and Hispanic.”

The commission found that the 1967 race riots primarily resulted from black frustration over lack of economic opportunity. In April 1968, one month after the release of the Kerner report, rioting broke out in more than 100 cities following the assassination of civil rights leader Martin Luther King Jr.

A strong job recovery will hopefully increase overall wealth levels and reduce inequities.