GWEN IFILL: As the economy struggles to rebound, a new analysis of census data shows gaping wealth disparities have opened up among white, black and Hispanic Americans. The Pew Research Center found that this economic chasm, documented most recently in 2005, grew even worse during the housing bust and the subsequent recession.
In 2009, white households had a median net worth of just over $113,000. Compare that to $6,300 for Latinos, and not quite $5,700 for African-Americans. Between 2005 and 2009, whites lost 16 percent of their median net worth, but Latinos lost 66 percent, black households 53 percent, and Asians, who had topped white households in 2005, dropped 54 percent.
For more on the results of the study, we’re joined by the report’s lead author, Paul Taylor of the Pew Research Center, and Roderick Harrison of Howard University. He is the former chief of racial statistics at the Census Bureau.
Paul, these numbers are amazing, white households’ median wealth 20 times greater than black households. Why do we think? What is the driver of these kinds of numbers?
PAUL TAYLOR, Pew Research Center: Well, we were able to look at a before-and-after set of snapshots from 2005 to 2009.
In 2005, the wealth gap ratios were roughly 10-1. And they doubled to 20-1. So, they were already big and they got even bigger. So what happened? The main driver of these disparate impacts was the housing market. Blacks and Hispanics have fewer financial assets. Wealth — wealth is a combination of all your assets, your home, your car, your 401(k), your stocks, if you have them, minus all your debts, your mortgage, your car loan, your student loan, your credit card.
The financial portfolio of blacks and Hispanics are much more dependent on their housing wealth than on anything else. They don’t have much else. So, when the housing market tanked, as it started to in 2006, it disproportionately impacted blacks and Hispanics. On top of that, there was a regional impact.
The housing market rose higher and fell more steeply in certain sections of the country. Those were sections in particular that Hispanics, but also to some degree Asians, are disproportionately located in. So you had sort of a double whammy.
GWEN IFILL: And we also have been watching, Roderick Harrison, these unemployment numbers, in which we see there is such a great gap between black unemployment, for instance, and certainly youth unemployment than white unemployment. Is this something that is connected, or is that a separate phenomena?
RODERICK HARRISON, Howard University: It’s related.
I mean, wealth becomes an accumulation from income. You have to have savings to invest in a house, in stocks or bonds, in other things. And, clearly, historically, some of the wealth gap when it was 10-1 reflected the lower incomes and therefore the greater difficulty of saving and investing.
Also — and this is going to be very important going forward — I think we are going to have a generation of blacks and Hispanics, given this very severe drop, who won’t be able to contribute, as they might historically have, to their children’s education and investment in their future to perhaps a down payment for a home or other kinds of investments that typically are very important to transmitting wealth to the next generation, even before inheritance and things.
GWEN IFILL: So, looking forward, we see the potential for a trend. Is that what brought us here, or is this a spike that might go away once the economy rebounds, especially the housing market?
PAUL TAYLOR: Well, hard to know. It’s hard to predict the future.
As you say, the unemployment rates through this recession and this very slow jobless recovery, you see blacks double the unemployment rate of whites and Hispanics nearly at those same levels as well. So at least at the moment and looking forward in the near term, there’s not a lot of prospect for hope if you’re concerned about the economic fortunes of minority communities in this country.
GWEN IFILL: One of the things that people — go ahead. You were going to say something.
RODERICK HARRISON: I would be less — I think the prospects are very dim. The housing market is coming back very slowly. And it’s coming back most slowly in the poor neighborhoods, where these homeowners are more likely to be. These are neighborhoods that got hit with the subprime and heavily with foreclosures.
So I think it’s going to be — the recovery is slow enough, and I don’t think housing is going to recover for years after employment does.
GWEN IFILL: Well, that’s one of things I was going to ask you, which is one of the — if there’s one bright spot at all in this economic picture right now, it’s that the stock market seems to be coming back. But that somehow doesn’t seem to affect these groups.
RODERICK HARRISON: Well, again, as Mr. Taylor indicated, the — whites have much higher rates of owning stocks than blacks or Hispanics do.
So, that — some of the losses from the recession in the stock market in white net worth have been recouped as the stock market has risen, not fully recouped, but that’s part of what is causing the gap. It’s both the losses in black and Hispanic — the white households have lost net worth as well, but those who have assets other than a home are faring much better.
GWEN IFILL: Right.
There is an old phrase, last hired, first fired, and it also seems to be true in this case, which is the last people who were able to get into buy houses bought them at a not-fortuitous time. Is that what is also driving these numbers?
PAUL TAYLOR: And there’s an actually poignant — there’s a very poignant quality to that.
If you think about the housing boom that began in the ’90s and accelerated in the late ’90s and into the 2000s, and it was born of a lot of things, including good intentions, the belief that expanding home ownership is good for the economy, it’s good for the social fabric.
And, indeed, of those first-time homebuyers, as that housing boom went up, a disproportionate share were minorities, blacks, Hispanics, Asians, immigrants. And I think the country as a whole felt pretty good about that. And then, of course, we had, you know — you know, the bills came due and everything crashed.
And you had folks obviously who were undercapitalized and probably shouldn’t have been homebuyers to begin with. And you had predatory lending practices that we have now — all now seen. What you had, you know, in terms of his Hispanics in particular is a population group that is very mobile, that was drawn to those areas of the country that were drawn literally to build those houses and in many cases to start their lives and get with a small down payment to buy some of those houses.
But they did come late to the party. They purchased those houses at prices that were inflated by the bubble.
GWEN IFILL: Which is why we see disparate impacts in places like Florida and California and Arizona.
PAUL TAYLOR: Exactly. Exactly. And so those are the states that have been hit the hardest and those are the states where Hispanics and Asians in particular disproportionately live and are — and were homeowners.
GWEN IFILL: Are there government policies which are part of the problem or part of the solution here or are they, as we talked about predatory lending, private sector policies which should be addressed?
RODERICK HARRISON: It’s both private and public.
I think one thing that we need to note is that income inequalities and class inequalities are now larger in the United States than through much of Europe. Intergenerational mobility is now greater in Europe. We used to think of ourselves as the land of opportunity. So, Europe is now making more efficient use of finding and allowing to rise talented people who are born in lower-income brackets than the United States is.
That doesn’t speak well for global competitiveness. So to the degree that both private sector and — or our reliance on free markets that have some of these negative effects, the fact that we don’t have government policy to the extent in Europe that — that tries to temper the effects of these markets, the fact that…
GWEN IFILL: Economic equality is not a goal.
RODERICK HARRISON: And it is part of, I think, what’s killing the economy. Again, there is not enough consumer demand in the lower- and middle-income ranges.
It was sustained by debt, by — by accumulating debt. People sustained their living standards. And, of course, that was unsustainable. So we’re now paying — part of one cause of the great recession, I think, is the greater income inequality and the degree to which it leaves insufficient purchasing power in the lower- and middle-income brackets.
GWEN IFILL: Roderick Harrison of Howard University, and Paul Taylor of the Pew Research Center, thank you both very much.
RODERICK HARRISON: Thank you.
PAUL TAYLOR: Thank you.