Fewer investment assets mean greater minority losses
The difference between the rich and poor in this country has been a hot topic of debate for as long as there has been a United States.
And since 2009, the conflict between the two has grown a whopping 19 percentage points, according to a recent Pew Research Center Poll.
Wealth gaps between whites and minorities have grown to their widest levels in a quarter-century. The recession and an uneven recovery have erased decades of minority gains, leaving whites on average with 20 times the net worth of Blacks and 18 times that of Hispanics, according to an analysis of new census data.
“African Americans, in common with everyone else, have been steered toward bad uses of credit instead of good uses of credit,” said Michael D. Greaney, Director of Research Center for Economic and Social Justice. “The difference is that, with the tradition of having been property themselves, they do not, in general, have the tradition of ownership of wealth, that is, assets that generate income (capital), as opposed to ownership of consumer goods.”
The analysis shows the racial and ethnic impact of the economic meltdown, which ravaged housing values and sent unemployment soaring. It offers the most direct government evidence yet of the disparity between predominantly younger minorities whose main asset is their home and older whites who are more likely to have 401(k) retirement accounts or other stock holdings.
“What’s pushing the wealth of whites is the rebound in the stock market and corporate savings, while younger Hispanics and African Americans who bought homes in the last decade — because that was the American dream — are seeing big declines,” said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in income inequality.
The median wealth of white U.S. households in 2009 was $113,149, compared with $6,325 for Hispanics and $5,677 for Blacks, according to the analysis released Tuesday by the Pew Research Center. Those ratios, roughly 20 to 1 for Blacks and 18 to 1 for Hispanics, far exceed the low mark of 7 to 1 for both groups reached in 1995, when the nation’s economic expansion lifted many low-income groups to the middle class.
The white–Black wealth gap is also the widest since the census began tracking such data in 1984, when the ratio was roughly 12 to 1.
“I am afraid that this pushes us back to what the Kerner Commission characterized as `two societies, separate and unequal,’” said Roderick Harrison, a former chief of racial statistics at the Census Bureau, referring to the 1960s presidential commission that examined U.S. race relations. “The great difference is that the second society has now become both Black and Hispanic.”
Stock holdings play an important role in the economic well-being of white households. Stock funds, IRA and Keogh accounts as well as 401(k) and savings accounts were responsible for 28 percent of whites’ net worth, compared with 19 percent for Blacks and 15 percent for Hispanics.
According to the Pew study, the housing boom of the early to mid-2000s boosted the wealth of Hispanics in particular, who were disproportionately employed in the thriving construction industry. Hispanics also were more likely to live and buy homes in states such as California, Florida, Nevada and Arizona, which were in the forefront of the real estate bubble, enjoying early gains in home values.
But those gains quickly shriveled in the housing bust. After reaching a median wealth of $18,359 in 2005, the wealth of Hispanics — who derived nearly two-thirds of their net worth from home equity — had declined by 66 percent by 2009. Among Blacks, who now have the highest unemployment rate at 16.2 percent, their household wealth fell 53 percent from $12,124 to $5,677.
In contrast, the median household wealth of whites dipped a modest 16 percent from $134,992 to $113,149, cushioned in part by a stock market recovery that began in mid-2009.
“The findings are a reminder — if one was needed — of what a large share of Blacks and Hispanics live on the economic margins,” said Paul Taylor, director of Pew Social & Demographic Trends. “When the economy tanked, they’re the groups that took the heaviest blows.”
The NAACP and other Black groups have urged President Barack Obama to resist deep cuts to housing assistance and safety net programs, saying it would disproportionately hurt urban areas with high poverty and unemployment. The U.S. poverty rate currently stands at 14.3 percent, with the ranks of the working poor at the highest level since the 1960s. Some analysts believe the poverty rate will climb higher when new figures are released in September.
“Typically in recessions, minorities suffer from being last hired and first fired. They are likely to lose jobs more rapidly at the beginning of the recession, and are far slower to gain jobs as the economy recovers,” said Harrison, who is now a sociologist at Howard University. “One suspects that Blacks who lost jobs in the recession, or who have tried to help family members or relatives who did, have now spent whatever savings or other cashable assets they had.”
About 35 percent of Black households and 31 percent of Hispanic households had zero or negative net worth in 2009, compared with 15 percent of white households. In 2005, the comparable shares were 29 percent for Blacks, 23 percent for Hispanics and 11 percent for whites.
Across all race and ethnic groups, the wealth gap between rich and poor widened. The share of wealth held by the top 10 percent of U.S. households increased from 49 percent in 2005 to 56 percent in 2009. The threshold for entry into the wealthiest top 10 percent, however, dipped lower: from $646,327 in 2005 to $598,435.
The numbers are based on the Census Bureau’s Survey of Income and Program Participation, which sampled more than 36,000 households on wealth from September–December 2009. Census first began publishing wealth data from this survey, broken down by race and ethnicity, in 1984.
An awareness of economic inequality is not new. Pew surveys going back to 1987 have found an average of 75 percent of the American public thinking that the “rich are getting richer and the poor are getting poorer.” As far back as 1941, 60 percent of respondents told the Gallup poll that there was too much power in the hands of a few rich people and large corporations in the United States.
Despite that longstanding sense of inequality, there is no more sentiment today for populist revolt than there was then. A recent Gallup poll found 54 percent believing that income inequality was an “acceptable part of our economic system” — a slight increase over the 45 percent that held that view back in 1998.
What’s different these days is that a despondent public, struggling with difficult times and an uncertain future, is upset over a perceived lack of fairness in public policy. For example, 61 percent of Americans now say the economic system in this country unfairly favors the wealthy.
As a result, in the public’s evaluations of divisions within American society, conflicts between rich and poor now rank ahead of three other potential sources of group tension — between immigrants and the native born; between Blacks and whites; and between young and old.
NEWSONE.com and the Pew Research Center contributed to this report.
Zack Burgess is an enterprise writer for The Tribune. He is a freelance writer and editor who covers culture, politics and sports. He can be contacted at zackburgess.com.