Recession caused wealth gap to widen between races, part two
Earlier this week, we looked at startling new U.S. Census Bureau data which reports that the wealth gap between whites and minority groups has significantly widened during the economic recession. This has led to disproportionate rates of unemployment, foreclosure, and other devastating circumstances among members of those groups.
Analysts say that the different assets held by each group are largely responsible for the disparity. For example, whites initially suffered during the recession when the stock market took a hit and the values on their stock funds, IRA and 401(k) accounts plummeted. However, when the stock market began to recover in 2009, those values also began to rise, giving white households the relative financial security they enjoy now.
In comparison, the primary – and often only – asset of Hispanic and black families is their home. Many of these homeowners purchased houses in the mid-1990s, when home prices were on the rise, and as a result, the wealth gap ratio reached just 7 to 1 in 1995 for both minority groups, and many Hispanic and black families were lifted to the middle class.
However, when the housing market crashed and home prices plummeted in 2008 and 2009, those groups saw their home values hit bottom as well. Because Hispanics derive approximately two-thirds of their net worth from their home equity, that group saw their collective wealth decline by a staggering 66 percent by 2009.
In sum, the poverty rate in the United States has reached 14.3 percent, with the number of working-age poor at its highest level in over 50 years. Clearly, something needs to be done to decrease these numbers and end the wealth gap between races.
Source: Atlanta Journal-Constitution, “Wealth gap widens between whites, minorities,” Hope Yen, 26 July 2011