Wealth Gap Widens Along Race Lines

New Study Shows Increasing Inequality

Wealth Gap Widens Along Race Lines
September 18, 2015

The Great Recession took quite a toll on the average American's net worth. A combined fiscal crisis and plummeting home values chopped off almost 40% of the median net worth of US households, from $135,700 in 2007 to $82,300 in 2010 (expressed in 2013 dollars). Since that time, a slow economic recovery has failed to rebuild net worth values. The median net worth in 2013 was $81,400, showing an even further decline from 2010. However, that decline is disproportionately falling among minorities.

A new study from the Pew Research Study took a closer look at the racial and ethnic components of wealth inequality and how their nature has changed over the last thirty years. Using data from the Survey of Consumer Finances conducted by the Federal Reserve, the researchers have shown that the median net worth of white households has risen slightly while those of black and Hispanic households have fallen dramatically.

The size of the gap in median incomes is startling even before the recent effects are considered. Since 1983, the smallest multiple in the median wealth of white households versus black or Hispanic households is six. In 2007, prior to the Great Recession, the median white net worth was $192,500 — approximately 8 times the median Hispanic household net worth of $23,600 and a bit over 10 times the $19,200 median net worth of black households.

In 2010, the Great Recession lowered the median net worth of white households to $138,600, a 28% drop from 2007 levels. During the same period, the median net worth of black households fell by approximately 13.5% from $19,200 to $16,600 and the net worth of Hispanic households fell by 32.2% from $23,600 to $16,000. The multiplier for white households’ wealth over minorities dropped to 8 over black households but rose to 9 over Hispanic households. The overall dollar drop was much larger within white households, but a double-digit percentage drop in net worth for minority households was particularly damaging to economic safety nets.

The recovery period of 2010-2013 only exacerbated the racial and ethnic wealth gap. White households gained around 2.3% in median wealth to $141,900, while that of black households fell 33.7% to $11,000 and that of Hispanic households fell 14.3% to $13,700. The multiplier for white households' wealth rose to 10 over Hispanics and 13 over blacks. Those are the largest multiples since the 1980s.

Taken as one period from 2007 to 2013, white household median net worth dropped by 26.3% while Hispanic household median net worth dropped by 41.9%, and black household median net worth dropped by 42.7%.

Why is the gap increasing during the recovery period? Income disparity is one reason. The median income of all minority households fell 9% during 2010-2013, compared to a 1% drop for non-Hispanic white households. With lower incomes and less room to spare, minority households are far more likely to have committed their existing incomes and even their savings accounts to paying monthly bills — and that's before taking into account a disproportionate income drop.

Asset appreciation also works against minorities, as white households disproportionately hold stocks and own homes. Homeownership rates fell across the board but minorities were most affected. Homeownership for white households dropped by 1.4 percentage points from 2010 to 2013 (75.3% to 73.9%), but fell by 3.2 percentage points among minority households (50.6% to 47.4%).

Unfortunately, these trends are unlikely to change without significant wage increases among minorities. Wealth and income inequality can only be properly addressed by a rise in prosperity among minority households.

Photo ©iStock.com/ skynesher & Feverpitched

  Conversation   |   34 Comments

Add a Comment

By submitting you agree to our Terms of Service
Daniel | 09.18.15 @ 18:03
Nothing here surprises me .. those that have seem to have it easier maintaining than those build have getting higher
George | 09.18.15 @ 18:04
I think everyone HOPES things get turned around for the better.
Nancy | 09.18.15 @ 18:04
Interesting findings but, unfortunately, not surprising. We're the land of the free not necessarily the land of the fair.
trish | 09.18.15 @ 18:07
I hate that this article didn't surprise me. =(
Christina | 09.18.15 @ 18:08
Not surprising at all. Good facts to actually see.
Angie | 09.18.15 @ 18:08
Why are the incomes so much lower? Are minorities being denied for jobs that pay well? Are the education requirements effectively keeping them from being hired from most higher paying jobs? These are alarming statistics!
Chrisitna | 09.18.15 @ 18:10
No surprise there... the government needs a complete overhaul :X
Sara | 09.18.15 @ 18:13
To be honest this is not surprising. Unfortunately I do not see it getting better anytime soon.
Beverly | 09.18.15 @ 18:14
There is usually more to a story than just numbers can show and factors that aren't taken into account. No one ever said life would be easy or fair. True happiness won't come from finances
Blake | 09.18.15 @ 18:15
I wonder what's causing the wage gap? I didn't even know this was a thing.
Jennifer Sears | 09.18.15 @ 18:17
Like others, I can't say that I'm at all surprised.
Chelsey | 09.18.15 @ 18:17
None of this is surprising. I so hope and pray that we get some major change in leadership that will hopefully try and change things for the better. So many people are struggling unnecessarily.
Jonathan | 09.18.15 @ 18:20
Pretty stark figures there, I knew there was a good gap but nothing like that!
Kailie | 09.18.15 @ 18:21
This was pretty much expected.
Britt | 09.18.15 @ 18:25
This doesn't surprise me for a number of reasons, honestly.
Bobbie | 09.18.15 @ 18:26
I think there needs to be a closer look at WHY there is such a gap. Is it education, job experience, inability to properly deal with finances?
Jill | 09.18.15 @ 18:26
Not supprised at all! So sad though!
Kyle | 09.18.15 @ 18:28
What can we possibly do to help close up the gap?
Steffanie | 09.18.15 @ 18:29
Nothing surprises me at all about this article. Sad, but true.
Ron | 09.18.15 @ 18:32
"The rich get richer and the poor get poorer" is conventional wisdom. Is it any surprise that the banking/investing firms who swindled subprime markets and/or were too big to fail get bail outs of taxpayer money, even foreign banks? Oppressive tudent loans with any interest at all is absurd. Banks borrow money at 0%, but where 8s the profit motive for the government i student loans? Banks and firms donate to political campaigns, but college students don't have that kind of pull(read:cash on hand).. Inequality now and inequality forever The game is rigged. Welcome to Rome.
Sarah | 09.18.15 @ 18:39
I guess I'm too low in the money chain to notice... we're all poor here.
Elaine | 09.18.15 @ 18:52
I agree with Bev, there has too be more to this story. A lot of factors are missing from this article that could make it read differently.
Jackie | 09.18.15 @ 18:55
I don't find the information surprising.
Kamie | 09.18.15 @ 18:58
Not surprised by any of this. And when you see it all written down it is more of a reality.
steven | 09.18.15 @ 18:58
Nothing real surprising here.
Zanna | 09.18.15 @ 19:03
Has anyone looked at the skyrocketing costs of education, the huge lack of qualified teachers and how it effects minorities in regards to wealth? I think there's a big correlation there that nobody seems to be talking about.
Wanda Langley | 09.18.15 @ 19:18
I am like several of the others. Why is there so much difference in these gaps?
Selena | 09.18.15 @ 19:18
Not the least bit surprised by this.
Alec | 09.18.15 @ 19:20
I don't understand what the difference is that could be causing the gap. There should be people investigating this!
gracie | 09.18.15 @ 19:58
These numbers are just disheartening not surprising. The news keeps saying things are better and getting better everyday. It would be nice if that proved out to be true and those that were hardest hit in the economy were able to enjoy the benefits of economy improving.
Kate | 09.18.15 @ 20:05
This doesn't surprise me. I have long felt those who have keep, and those who struggle to get often loose before those who have.. It's sad..
Jo Ann | 09.18.15 @ 20:16
This is really sad. It is a shame that minorities never seem to gain ground. The old saying 2 steps forward, 3 steps back definitely seems to apply here.
Kelley | 09.18.15 @ 20:33
I'm not sure it has to do so much with minorities making less for the same jobs as whites, but that they are less likely to land a higher paying job.
Meredith L | 09.18.15 @ 20:35
Considering that I've lost my home, my car and just now recovering economically because my husband has a job - and I can't get hired because I'm "over-qualified" I'd say that this doesn't reflect my household at all. I know there are disparities but part of the gap comes from education (or lack there of) which this article really could have expanded on.
$commenter.renderDisplayableName() | 11.25.20 @ 05:35