Millions of Americans suffered a loss of wealth during the recession and the sluggish recovery that followed. But the last half-decade has proved far worse for black and Hispanic families than for white families, starkly widening the already large gulf in wealth between non-Hispanic white Americans and most minority groups, according to a new study from the Urban Institute.
"It was already dismal," Darrick Hamilton, a professor at the New School in New York, said of the wealth gap between black and white households. "It got even worse."
Given the dynamics of the housing recovery and the rebound in the stock market, the wealth gap might still be growing, experts said, further dimming the prospects for economic advancement for current and future generations of Americans from minority groups.
The Urban Institute study found that the racial wealth gap yawned during the recession, even as the income gap between white Americans and nonwhite Americans remained stable. As of 2010, white families, on average, earned about $2 for every $1 that black and Hispanic families earned, a ratio that has remained roughly constant for the last 30 years.
But when it comes to wealth — as measured by assets, like cash savings, homes and retirement accounts, minus debts, like mortgages and credit card balances — white families have far outpaced black and Hispanic ones. Before the recession, non-Hispanic white families, on average, were about four times as wealthy as nonwhite families, according to the Urban Institute's analysis of Federal Reserve data. By 2010, whites were about six times as wealthy.
The dollar value of that gap has grown, as well. By the most recent data, the average white family had about $632,000 in wealth, versus $98,000 for black families and $110,000 for Hispanic families.
"The racial wealth gap is deeply rooted in our society," said Caroline Ratcliffe, one of the authors of the Urban Institute study. "It's here, it's not going away, and we need to care about it."
Many experts consider the wealth gap to be more pernicious than the income gap, as it perpetuates from generation to generation and has a powerful effect on economic security and mobility. Young black people are much less likely than young white people to receive a large sum from their parents or other relatives to pay for college, start a business or make a down payment on a home, for instance. That, in turn, makes their wealth-building prospects shakier as they move into adulthood.
Two major factors helped to widen this wealth gap in recent years. The first is that the housing downturn hit black and Hispanic households harder than it hit white households, in aggregate. Many young Hispanic families, for instance, bought homes as the housing bubble was inflating and reaching its peak, leaving them saddled with heavy debt burdens as house prices plunged in places like suburban Phoenix and inland California.
Black families also were hit disproportionately by the housing collapse, because heading into the recession housing constituted a higher proportion of their wealth than for white families, leaving them more exposed when the market crashed. Higher unemployment rates and lower incomes among blacks left them less able to keep paying their mortgages and more likely to lose their homes, experts said.
Discriminatory lending practices were also a factor. "We know that communities of color, their rate of subprime or predatory loans was twice what it is in the overall population," said Tom Shapiro, the director of the Institute on Assets and Social Policy at Brandeis University.
Black families also suffered bigger hits to their retirement savings, the Urban Institute found. On aggregate, the value of black families' retirement accounts shrank 35 percent between 2007 and 2010, while white families' accounts actually gained 9 percent over the same period. With lower earnings and higher unemployment rates leaving them with a thinner safety net to begin with, black families were more likely to take funds out of the market when it was depressed, leaving them out in the cold as the market recovered.
"That reservoir of what you can dig into for emergencies and contingencies is a lot shallower in communities of color," Professor Shapiro said. "That pushes black families to sling off assets, like I.R.A.'s or stocks, that you might have had another goal in mind for."