The Pew Research Center just released a report showing that Latinos have been hit particularly hard by the Great Recession. A number of key economic indicators demonstrate just how devastating the recession has been for Latino families.
The most jaw-dropping statistic is the steep decline in the median net worth of Latino households -- defined as assets minus debts. In 2005, including their home equity value, Latino households had a median net worth of $18,359, a small percentage of the median net worth of white ($134,992) and Asian ($168,103) households. But by 2009, this already-low total of $18,359 had sharply declined to just $6,325, a drop of 66 percent -- the biggest drop among all groups in percentage terms.
What explains this? More than anything else, the cause was the disproportionate impact that the housing crisis had on Latino households: "Nearly two-thirds (65 percent) of Hispanic household wealth in 2005 was derived from owned homes." That's a larger share of households and families relying on their homes as their principal and most valuable asset than any of the other major ethnic groups that Pew examined. For Latinos:
No other asset accounted for more than 10 percent of total net worth in 2005. Given the large role played by housing, the decrease in real estate values from 2005 to 2009 had a large negative impact on the net worth of Hispanic households. Their mean wealth fell from $122,649 in 2005 to $73,026 in 2009, a loss of $49,623. Almost all of this loss is attributable to declining home equity levels.
When multiplying this mean (i.e. average) loss of wealth by the total number of Latino households in the country, I calculate approximately a $660 billion loss in wealth for Latinos. This amount of wealth lost by Latinos as a result of the recession is $137 billion greater than the entire GDP of Switzerland, and if Latino lost wealth were a country, it would be the 19th richest in the world.
Other statistics further illustrate how the housing crash has impacted Latinos. First, "[a]ccording to the Pew Research survey, 33 percent of Hispanic homeowners report being underwater, compared with 15 percent of blacks and 13 percent of whites." And second, according to the Center for Responsible Lending, between 2007 and 2009, approximately 8 percent of Latinos lost their homes to foreclosure, and 21.4 percent are likely to be at "imminent risk of foreclosure." This makes perfect sense when considering that the five states that suffered the biggest drop in home prices between 2005 and 2009 -- Nevada, Florida, Arizona, California and Michigan -- were states with significant Latino populations. In fact, the drop in median net worth for Latinos in these five states was nothing short of disastrous:
For Hispanics in these five states, median net worth tumbled from $51,464 in 2005 to $6,375 in 2009, a loss of 88 percent. For Hispanics residing outside of these five states, median net worth fell from $11,853 to $6,200, or by 48 percent.
Two additional factors conspired to cause the precipitous drop in net worth for Latinos. The first and perhaps more important factor, because it directly leads to the second, is the sharp increase in the unemployment rate and joblessness for Latinos. The Latino unemployment rate more than doubled from the end of 2007 to 2009, growing from 5.9 percent to 12.6 percent. A year and a half later, Latino unemployment has dropped just a percentage point, standing at 11.6 percent as of June 2011.
The next factor is the result of such a high unemployment rate and lack of available jobs for Latinos. Because so many Latinos don't have jobs, many simply can't afford to pay for the basic necessities of life, or make the payments on the debt they incur to pay for these necessities. As the Pew report states, Latinos' "net worth also diminished because of a 42 percent rise in median levels of debt they carried in the form of unsecured liabilities (credit card debt, education loans, etc.)."
Earlier studies reinforce this link between a lack of job opportunities caused by the recession and the inability to pay the bills. A 2010 report (PDF) by the Pew Research Center revealed that 40 percent of employed Latinos were forced to work fewer hours because of the recession. This means that even for the Latinos who are lucky enough to have jobs, 40 percent of them are not working enough or not working full time. Obviously, this means they have less income to spend on themselves and their families' needs. A 2010 report by the AARP (PDF) detailed the percentage of Latinos 45 and older who were having trouble paying for certain basic needs, and identified those needs. As a result of the recession, 33 percent of Latinos in this age group reported having trouble paying their rent or mortgage, 35 percent had to cut back on medications, 35 percent stopped contributing to their 401(k)s, a whopping 56 percent had problems paying for gas, and grimly, 43 percent had problems paying for food and utilities.
I discussed these latter data while speaking on a panel at the CHCI conference last year, and the attendees found the numbers shocking, even though they had been witnessing the effects in communities around the country. Only blacks have been hit as hard or harder in this recession in some respects. Between 2005 and 2009, the black median household net worth dropped from $12,124 to $5,677, a decline of 53 percent. This decline was not as steep as that of Latinos (66 percent), but the median net worth for black families has ended up to be $648 less than the median for Latinos as a result of the recession. Whites on the other hand, saw their net worth decline only 16 percent, from $134,992 to $113,149 over the same time period, while Asians lost more than half of their net worth -- 54 percent -- but still ended up in a much better place than blacks and Latinos, because their median net worth now stands at $78,066.
Since the recession began, there has not been much, if any, good economic news for either Latinos or blacks. All of the economic data discussed here are essentially quality of life indicators -- and they are all just as depressing as they are alarming. I don't even have space to discuss the huge disparity in poverty rates between Latinos (25.3 percent) and blacks (25.8 percent), as compared to whites (9.4 percent) and Asians (12.5 percent). But somehow, in light of the mountains of available data, neither President Obama nor Congress (or either political party) has devised an agenda or a plan to create jobs. Unfortunately, the focus in Washington -- in terms of public officials and the mainstream, establishment media -- is fixed on cutting domestic discretionary spending and shredding the social safety net that has kept millions out of poverty and allowed Americans to access health care services when they otherwise couldn't have afforded it. Somehow the politicians have managed to ignore the public's support for these benefits and opposition to these proposals.
Our leaders should be finding ways to grow the economy and create employment opportunities with smart, targeted investments -- especially for infrastructure -- and projects that will particularly help the most vulnerable communities, which have been the most severely impacted as a result of the recession. This latest report from the Pew Research Center is just another reminder of how disconnected our leaders and elite opinion are from the needs and desires of the American public -- and especially those of Latinos and blacks -- who continue to suffer the effects of the worst economic calamity since the Great Depression.