Study: Racial wealth gap widening in U.S.
Lack of homeownership, pensions noted
5/28/2013PITTSBURGH — Wealth disparities for middle-income blacks and Hispanics have worsened over the past three decades relative to white families, largely because of a lower likelihood of owning homes and retirement accounts, according to the Urban Institute.
Research from the Washington-based nonprofit points to an extraordinary wealth inequality between the races.
Whites on average had six times the net worth of blacks and Hispanics in 2010 (an average of $632,000 vs. $103,000). Comparing the median that year, whites actually had eight times as much wealth.
Wealth or net worth is defined as a person’s total assets — such as bank and retirement accounts, and home value — minus debt — which includes mortgages, student loans, and credit card balances.
The income gap, by comparison, is much smaller.
In 2010, the average income for whites was twice that of blacks and Hispanics ($89,000 vs. $46,000).
“What we see looking at wealth disparities is that African-Americans and Latinos are not on the same wealth-building trajectory as white families,” said Caroline Ratcliffe, a senior fellow at the Urban Institute and co-author of the report. “They are less likely to own homes and retirement accounts, so they miss out on these traditionally powerful wealth-building tools.”
The report found the racial gap grows sharply with age. Early in wealth-building years (when adults are 32 to 40), white families have on average 3.5 to 4 times that of families of color — $184,000. But by the peak years (ages 59 to 67), that had skyrocketed up to $1.1 million — seven times more than blacks and nearly five times more than Hispanics.
The Urban Institute’s report, “Less than Equal: Racial Dispari- ties in Wealth Accumulation,” was funded by the Ford Foundation, the Russell Sage Foundation, and the Annie E. Casey Foundation. The researchers reached their conclusions using data from the 1983 to 2010 editions of the Federal Reserve Board’s Survey of Consumer Finances.
Jim Carr, a senior fellow at the Center for American Progress in New York, said the report reinforces several recent studies from other organizations, such as the Pew Research Center, showing the racial wealth gap continues to grow wider.
“The disproportionate loss of homeownership among people of color is the largest contributor to the startling increase in wealth disparity,” Mr. Carr said. “Severely depressed home prices are another contributor. To the extent home prices recover, families that have managed to hold on to their homes will also begin to recover their lost wealth.”
But, he said, the racial wealth gap overall may grow further because so many families of color lost their homes.
The Great Recession from 2007 to 2009 didn’t cause the wealth disparities, but it did magnify them. White, black, and Hispanic families all experienced sharp declines, but Hispanics experienced the largest (40 percent) because of lower home values.
Black family wealth was hit hardest by falling retirement account balances (31 percent decline). The wealth of white families fell 11 percent, according to the report.
The Block News Alliance consists of The Blade and The Pittsburgh Post-Gazette. Tim Grant is a reporter with the Post-Gazette.