Wealth gap widens between whites, minorities, report says
By Peter Whoriskey,
The wealth gap between whites and minorities has risen to a historic high, according to new census data analyzed by the Pew Research Center, as the collapse of housing prices more severely affected the net worth of African American and Hispanic households.
The report, which was to be released Tuesday, shows that the recession wreaked havoc on the wealth of all Americans but that whites lost the least amount as a percentage of their holdings.
Between 2005 and 2009, the median net worth of Hispanic households dropped by 66 percent and that of black households fell by 53 percent, according to the report. In contrast, the median net worth of white households dropped by only 16 percent.
The median net worth of a white family now stands at 20 times that of a black family and 18 times that of a Hispanic family — roughly twice the gap that existed before the recession and the biggest gap since data began being collected in 1984.
“The lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago,” said the report, “Wealth Gaps Rise to Record Highs Between Whites, Blacks and Hispanics.”
“The bursting of the housing bubble in the great recession has been much harder on minority households than on white households,” said Rakesh Kochhar, a senior researcher at the Pew Research Center, who worked on the report. The main reason minority households were more affected is that a larger proportion of their net worth consisted of housing equity, he said.
Before the recession, housing equity accounted for about two-thirds of the net worth of Hispanics and about 59 percent of that of black families. By contrast, 44 percent of white families’ wealth consisted of housing equity.
“White households have been more diversified — they are more likely to own stocks and bonds,” Kochhar said.
As a result, when the housing market collapsed, the effect fell heavier on black and Hispanic households, according to the report. Between 2005 and 2009, the median net worth of black families fell to $5,677 from $12,124, and that of Hispanic families fell to $6,325 from $18,359. In the same period, the median net worth of white households dropped to $113,149 from $134,992.
Household wealth is the sum of assets, including houses, cars and banking accounts, minus debts, including mortgages, auto loans and credit cards.
Researchers who study the economics of households by ethnic groups said that although the gap in incomes between whites and blacks has narrowed over decades, the wealth gap has been more persistent.
“We know that the income gap is not as large; it has gotten smaller,” said Tatjana Meschede, research director at the Institute on Assets and Social Policy at Brandeis University. “But the wealth gap is stubbornly high.”
The recession also has slashed the wealth of Asian American households, which in 2005 had higher median wealth than white families but by 2009 had less. Their median wealth figure fell from $168,103 in 2005 to $78,066 in 2009, a drop of 54 percent.
Between 2005 and 2009, the share of wealth owned by the wealthiest 10 percent of all households rose to 56 percent from 49 percent. The same shift to the wealthiest was found among all ethnic groups. Among Hispanics, the share of the wealthiest rose to 72 percent from 56 percent, and among blacks it rose to 67 percent from 59 percent.
The report also found that in every group, the gap between the richest and everyone else expanded. No matter what the ethnic group, “wealth grew more concentrated at the top,” it said.