Newspaper article The Christian Science Monitor
Wealth Gap Widens: Whites' Net Worth Is 20 Times That of Blacks'
All racial groups lost ground in the recession, but blacks and Hispanics lost a bigger share of their net worth, a new study finds. As a result, the wealth gap is at its widest in at least 25 years.
The wealth gap between whites on one hand and blacks and Hispanics on the other stretched during the Great Recession to its widest level in a quarter-century, according to a new analysis of Census data. All racial groups saw their net worth shrink during the downturn, but that of whites shriveled much less, with the result that their median net worth is now about 20 times that of blacks and 18 times that of Hispanics.
The recession, which included a collapse in home values and high unemployment, took the greatest toll on minority wealth. From 2005 to 2009, median wealth fell by 66 percent among Hispanic households and 53 percent among blacks, compared with 16 percent among whites. The losses left Hispanic and black wealth at their lowest levels in at least 25 years.
"It's not so much that the wealthy were busy getting richer - it's that they slipped back less than those at the other end of the ladder," says Rakesh Kochhar, a demographer and co-author of the analysis released Tuesday by the Pew Research Center.
In 2009, the median net worth of white households was $113,149, compared with $6,325 for Hispanics and $5,677 for blacks. That gap is about twice as large as the 1 to 10 white-to-minority wealth ratio that prevailed during the two decades before the recession.
The housing crash that began in 2006 reduced home values for most American homeowners, but it hit minority families particularly hard because more of their wealth is tied to their homes.
"For nonwealthy people in the US, the huge preponderance of the wealth they have is in home equity," says Thomas Shapiro, a law and social policy professor who directs the Institute on Assets and Social Policy at Brandeis University in Waltham, Mass.
Among Hispanics, about two-thirds of their household wealth in 2005 derived from their homes. When the housing bubble burst, their median level of home equity declined by about half - from $99,983 to $49,145 - taking much of their wealth with it. Home equity for blacks - which accounted for about 59 percent of their household net worth in 2005 - fell by 23 percent, from $76,910 then to $59,000 in 2009. …