May 13, 2013
According to an Urban Institute study based on government data, the gap in the amount of wealth owned by families has widened significantly between white families and Black and Hispanic families during these years of recession, beginning in 2005. By “wealth” the study means assets held by families (savings, homes, and retirement accounts, minus debt – like mortgages and credit card balances).
They point out that while millions lost wealth during this period, the rate of loss of wealth for Black and Hispanic families was greater by far than the loss of wealth by white families. While the income gap between white families and Black and Hispanic families remained stable, with white families earning $2 for every dollar earned by Black and Hispanic families, the gap in actual wealth held by the families increased dramatically. Before the recession, white families held up to four times as much wealth as Black and Hispanic families. By 2010, it was up to six times as much.
The study cited two main reasons for this dramatic increase in what is called the “racial wealth gap.” The first cause cited is the disproportionately high loss of homes by black and Hispanic families – they were targeted and preyed upon by the banks for subprime or predatory loans at twice the rate of the overall population.
The second cause was the loss of retirement savings, which for black families shrank by 35 percent between 2007 and 2010.
In total, the study reports that Hispanic families lost 44 percent of their wealth between 2007 and 2010 while black families lost 31 percent. White families lost, by comparison, 11 percent.
Of course, these broad categories of white, black and Hispanic do not differentiate between classes – upper, middle class or working class. The figures are based on averages that include the extremely wealthy as well as the very poor, and the incomes and wealth of upper class whites with millions and billions of dollars skew the picture of family wealth of white working class families. Even with that in mind, according to the research, the trends remain the same. Lower earnings and higher unemployment rates have left black and Hispanic families with much less of a safety net to protect against having to spend accumulated savings like 401(k) funds to survive day-to-day.
The worst indictment of all: the authors of the study concluded that we are seeing the result of institutional racism that has diminished wealth for black families in the U.S. for more than 70 years; that is, for as long as it has been recorded and measured.
For those who claim the system works or that the recession is getting better and turning into a recovery, this study is the ultimate indictment. A system that generates this horrific institutional racism should have been buried long ago.