All Articles Tagged "wealth disparity"
Things aren’t looking too rosy for black Americans and their economic status, despite the fact African American spending power is expect to reach $1.1 trillion by 2015.
A group of scholars met for the African American Economic Summit at Howard University on Friday and they predicted “an alarming picture of the financial ills afflicting the black community even as the nation recovers from the recession,” reports The Washington Post.
Currently the white-black wealth disparity is more than 20 to 1; black homeownership has decreased; and more African Americans are unemployed, meaning income is down. While the economy has been showing signs of recovery, with recent jobs reports showing improvement, unemployment for blacks remains at 13.8 percent. The group of gathered scholars acknowledge that President Obama entered office during the worst economic situation since the Depression. But some think the President needs to more directly address issues of race.
“We are basically talking about an economic system that is shot through with discrimination,” said Bernard E. Anderson, a former assistant secretary of labor, during the meeting. He added that it seemed President Obama had yet to address economic disparities between blacks and whites. “He does not want to be labeled a president who is consumed by racial inequality in this country,” said Anderson, who has previously met with Obama’s economic advisers.
The attendees did not just talk about the problems, they also offered far-reaching, if politically unlikely, policy prescriptions, reports the newspaper. Among the ideas floated was one by Duke University professor William A. Darity Jr., who said policymakers should pursue a large-scale public jobs program to dramatically lower unemployment. Darrick Hamilton, an economist at the New School, added that the government should divert some of the money used to fund the income-tax deduction for mortgage interest to fund “baby bonds” that would provide $15,000 for disadvantaged newborns of any race to invest later in higher education, a business, or a home.
(Reuters) — New research finds an appalling 20 to one chasm in net worth between white and black Americans, and an 18 to one gap between whites and Hispanics. The Pew Research Center found that the net worth gap has widened during the Great Recession, mainly because the housing bust disproportionately cut into the wealth of African-Americans and Hispanics. The housing crash hurt these households disproportionately because they tended not to have much in the way of other assets, especially when it came to retirement savings. So, the Pew report — an analysis of the comprehensive U.S. Census Bureau Survey of Income and Program Participation for 2009 – points to a terribly important social problem we face today – and the growing retirement security gap confronting minority households.
By Alexis Garrett Stodghill
Whites now outpace all minority groups in America in terms of wealth accumulation according to a new study to be released on July 26 by the Pew Research Center. The wealth disparity between white Americans versus blacks, Asians and Latinos is larger than it has ever been since this data was first collected in 1984. White households now have 20 times the wealth of black families, and 18 times the wealth of Latinos. These rates are twice what they were before the recession hit and wiped out the housing equity of many of minorities in the foreclosure crisis. In 2005 Asian families had more assets than whites with an average of $168,103, but by 2009 that sum fell 54% to $78,066.
While African-Americans saw their wealth decline by 53%, and Latinos saw a 66% dip during the same period, whites faced losses of only 16%. Experts agree that the median net worth of white families was preserved despite the crash of the housing market because they are more likely to own stocks, bonds and a diverse array of holdings. By contrast, before the recession 59% of black wealth was contained in housing equity, along with two-thirds of the assets of Latinos. When the foreclosure crisis caused millions to lose homes, blacks and Latinos fell far behind whites in terms of average wealth — and now face the largest gap between the groups in recorded history. The Washington Post reports:
“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.
This is an important point, because it is wealth that can be passed down between generations, not income. Part of the reason that African-Americans had home equity as the greatest percentage of our median net worth is that often our homes were the sole assets possessed by black families. Much like stocks and bonds, they can be preserved and passed down through the years. But unlike stocks, homes can be paid off a little at a time by an entire household of workers for years.
The effects of slavery and Jim Crow segregation made the accumulation of non-housing assets, and their passing down, more difficult for African-Americans — but at least it was possible. This method of wealth accumulation and passing down became our mainstay. Even though times have changed, this way of thinking is not something we have grown out of as a group.
We are paying for this failure to evolve economically now. When the recession hit and incomes were lost — incomes that helped blacks pay for refinanced mortgages on inherited homes — our community did not have the diversified portfolio of assets that could have helped us weather the storm. We are at a point now in our collective development when stock investment is affordable, but it is clear that not enough blacks have taken this leap, and this is our responsibility.
Yet another critical factor is at play in the sudden sharp drop in black and Latino wealth being studied. This report seems to ignore the well-documented fact that blacks and Latinos were disproportionately targeted for highly destructive sub-prime mortgages. These groups were steered into these loans even if the credit rating of an applicant qualified him or her for a much better deal. While it is not the ultimate responsibility of the lender to ensure that a mortgage applicant is being treated fairly, the race-based exploitation that fueled the stripping of black and Latino wealth through the foreclosure crisis deserves mention.
Despite this clear cause, researchers seem puzzled about the wealth gap, in noting that while incomes have become more equal, overall disparities in asset accumulation persist. When speaking to The Washington Post about this issue, an expert from the Institute on Assets and Social Policy at Brandeis University said: “We know that the income gap is not as large; it has gotten smaller. But the wealth gap is stubbornly high.”
Stubborn? Well, here’s an idea.
It would help if corporations did not target people of color for mortgages that are likely to destroy what little wealth blacks and Latinos have, because it’s clear based on basic numbers crunching that they won’t be able to afford them. That’s a start.
At the same time, people of color need to learn how to use more financial tools intelligently as a means of protection from the devious mechanizations of companies motivated by nothing but greed. The fact that blacks and Latinos were seen as easy prey for the sub-prime mortgages that destroyed their wealth is in part the repsonsibility of these groups. Financial education and empowering action are the only solutions to rebuild wealth and prevent similar losses in the future.
But the huge wealth gap generated between whites and minorities due to massive losses of housing equity is hardly a mystery. It was almost predictable given the sub-prime mortgages blacks and Latinos were led to, like poisoned water. This staggering wealth chasm could have been predicted, as easily as it could have been prevented by ethical loan officers.