A new report issued by the Pew Research Center shows that during the Great Recession the gap between median wealth of white households and minority households grew to the largest in a quarter century.
According to the report, the median wealth of white households is 20 times greater than that of black households and 18 times greater than that of Hispanic households. These gaps are roughly twice the size of wealth ratios between the three groups for the two decades prior to the Great Recession. In terms of percentages, the end of the housing bubble in 2006 followed by the 2007-2009 recession took a much greater toll on wealth of minorities than whites.
The numbers are astonishing. From 2005-2009 inflation-adjusted median wealth fell by 66% among Hispanic households, 53% among black households and 16% among white households.
The report not only analyzes household wealth but also looks at the macroeconomic context of the impact of the recession, including the impact on asset ownership, the geography of the housing downturn and additional wealth gaps within racial and ethnic groups. It is in the macroeconomic analysis that the degree to which minorities lost ground comes into troubling focus.
For example, the net worth of Hispanic households decreased from $18,359 in 2005 to $6,325 in 2009. That dramatic decrease — a 66% drop — can be explained by the fact that Hispanics derived nearly two-thirds of their net worth in 2005 from home equity and were more likely to reside in areas most affected by the housing crisis. Hispanic net worth also diminished in part because of a 42% rise in median debt levels, including education loans.
Asians were also dramatically impacted by the recession. In 2005 median Asian household wealth had been greater than median white household wealth. But by 2009 Asians lost their place at the top of the wealth hierarchy as their net worth dropped by 54%.
To the extent that the American narrative that hard work and fair play will lead to upward social mobility was ever a truth, it certainly no longer is. Predatory lending practices, stagnant wages and non-existent job growth have made it impossible for the next generation of Americans to move up the economic ladder. Opportunities made possible through affordable land grant universities have evaporated — college is too expensive even at state schools and more and more minorities turn to for-profit colleges with a hope they can balance school and a full-time job only to succeed in accumulating mountains of expensive educational loans and a degree of very little utility. This is the legacy of the Bush years — a return to the Guilded Age.
Photo from tracyo via flickr.