Race and the Wealth Gap

[pscot]

WASHINGTON — The wealth gaps between whites and minorities have grown to their widest levels in a quarter-century. The recession and 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.

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.

http://www.msnbc.msn.com/id/43887485/ns/business-eye_on_the_economy/

[dkf]

1. Housing is leveraged so it makes sense that a downturn hits harder.

You could have put $5000 down and your house could have declined $50,000 or even $100,000 in value.

Funny thing is if these people walk away and erase the loss, will they actually increase their net worth?

[Warpy]

2. Offhand, given the nature of fiat currency to inflate rather than deflate

I'd be tempted to keep the roof over my head if I could afford it, no matter what the numbers said. Chances are good that in 25 years (if one bought at the peak in 2006), the paper value will have recovered to what I'd paid for it.

However, that's all predicated on having a stable job with a steady income, something that's certainly no longer assured.

However, in the short term, the loss in housing value is definitely driving the racial disparity in loss of net worth. Blacks and Hispanics just don't have the 0.5% at the top to drag their overall numbers up.

Eliminate the uberclass, and whites might have fairly similar numbers.

[pscot]

3. That last part is a good point

that should probably be analyzed in detail.