Living on the edge

A new study shows that the gap in wealth between the nation's white population and its black and Hispanic populations is growing.

By Suzanne Goldenberg
October 19, 2004 6:36PM (UTC)
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The wealth gap between white households and Hispanic and African-American families in the U.S. has widened significantly, with the last recession inflicting a heavy toll on minority households, a new study said Monday.

An analysis of U.S. census data by the Pew Hispanic Center revealed that the 2001 economic downturn deepened a legacy of economic discrimination, with Hispanics and African-Americans harder hit and taking longer to recover. By 2002, it had produced a further deterioration of the economic divide, where minorities owned only a fraction of the wealth enjoyed by whites. The median net worth of white households was $88,651, 11 times greater than that of Hispanic families ($7,932) and 14 times greater than that of African-American families ($5,988).


"We have always known about the wealth gap, but what is new and disturbing is that the gaps are increasing," said Roderick Harrison, a demographer at the Joint Center for Political and Economic Studies in Washington. "What you are seeing here are the historic disadvantages of black and Hispanic populations from generations ago being carried over."

The Pew study focuses on the damage caused to Hispanic and African-American aspirations during the economic downturn. Between 1999 and 2001, rising unemployment reduced the net worth of Hispanics and African Americans by 27 percent. That left minority families without a financial cushion, and far more vulnerable to economic reversals than white households.

"Many of them are living on the edge, and more than one-quarter have zero or negative wealth," said Rakesh Kochhar, author of the report. "They don't have the cushion, and that makes recovery harder."


Harrison argues that minority families are also the last to benefit from times of economic expansion. Employers are more likely to hire whites, and whites also move more quickly to take advantage of a buoyant stock market. That intensifies the effects of a 30 percent wage gap between white and minority workers, making it that much more difficult for Hispanics and African-Americans to overcome a traditional disadvantage.

Crucially, minority families are far less likely to own their own homes -- in white households, ownership rates are 74 percent. Instead, a legacy of discrimination and other barriers have conspired to keep African-American and Hispanic families as renters. Homeownership rates among both groups is at 47 percent. Some families cannot even aspire to homeownership; more than a quarter of black and Hispanic households own no assets beyond a car.

"A young white couple might have the advantage of inheritance, their parents may give them a down payment for a house, or the bank will look on them more kindly, but a young black family doesn't have that. It is just a little harder to enter the mainstream, and homeownership is the key," Kochhar said.


In addition, the Hispanic population has been concentrated in areas with high housing costs, like New York and Los Angeles, making it more difficult to get on the property ladder. But the report suggests the outlook for Hispanics could brighten as the immigrant community puts down roots in America. A younger generation of Hispanics is becoming better educated and moving into better-paying jobs; the community is also dispersing to towns around the country where housing is more affordable.

Suzanne Goldenberg

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