The Great Recession decimated the wealth of many Americans, but the downturn hit black and Hispanic families especially hard, a new study finds, widening the already large gap in wealth between white and minority households.
The average white family was six times wealthier in 2010 than the average black or Hispanic family, according to a study from the Urban Institute, a nonpartisan public policy research organization. That’s up from 1983, when the average white family was five-times as wealthy as the average black or Hispanic family.
To put that into more concrete terms: By 2010, the average white family had more than $500,000 more in total wealth than black or Hispanic families, up from $283,000 in 1983.
Overall, the economic downturn cut Hispanic families’ wealth by 40 percent, black households’ wealth by 31 percent and white households’ wealth by just 11 percent.
The racial income gap was actually much smaller than the wealth gap in 2010, with whites earning about two dollars for every dollar earned by black and Hispanic families, the study found. But when considering wealth, a measurement that includes both income and assets, black and Hispanic households appear at an even greater disadvantage since the recession in the event of an unexpected job loss, medical emergency, or other financial disaster.
The study adds to the growing body of evidence that the recession exacerbated already troubling trends. Only the richest Americans saw their wealth grow during the economic recovery, while everyone else’s dropped, according to a recent Pew report.
The housing bust and drop stock values dealt a blow to many Americans’ assets, but black and Hispanic families suffered disproportionately, the Urban Institute study found, indicating that the actions of some of the nation’s largest financial institutions in the lead up to the crisis may have augmented the racial wealth gap. Wells Fargo was among those accused of discriminatory practices in the lead up to the financial crisis, including targeting minority borrowers for predatory loans.
Hispanic households were hit especially hard on this front, with their average home equity cut in half between 2007 and 2010, compared to just one-quarter for black and white households, the study found.
At the same time, black families saw their retirement accounts drop by 35 percent in value on average, while Hispanic households’ dropped by 18 percent and white households saw a slight increase.
(Hat tip: The New York Times)