The Racial Wealth Gap: Left Out of the Boom
Press Release
For Immediate
Release - Sept. 30, 1999
Contact:Betsy Leondar-Wright
(617) 423-2148 x13
The Racial Wealth Gap: Left Out of the Boom
Most black
& Hispanic families
lack opportunity to build assets
For the past several years, the U.S. Census Bureau has trumpeted the rising incomes of African-American and Hispanic households. Yet, the booming economy has not helped all racial groups equally. At $25,351 in 1998, the black median household income is still only 60% of the median white income of $42,439. Hispanic median household income rose 4.8% between 1997 and 1998, but only to $28,330, just 67% of the white median.
In addition, African-American and Hispanic household wealth is extremely low, reveals Shifting Fortunes: The Perils of the Growing American Wealth Gap, a report published by United for a Fair Economy. While the typical white household had $18,000 in financial wealth (net worth minus equity in owner-occupied housing) in 1995 (the latest year for which complete figures are available), the typical black household had just $200 and the typical Hispanic household had zero.
One piece of good news from the recent Census release, that Hispanic poverty rates have fallen, does not mean that these families are financially secure. At about 26%, African-American and Hispanic poverty rates are more than three times higher the white rate of 8%. The gap in wealth between white families and black or Hispanic families remains huge. The percentage of black or Hispanic households with zero or negative net worth (greater debt than assets) is twice as high as for white households.
Access to homeownership, long seen as the key to achieving the American dream, is still restricted for black and Hispanic families because of employment, housing, lending and other discrimination. Their rate of homeownership is only about two-thirds the rate for white households.
Shifting Fortunes, by Chuck Collins, Betsy Leondar-Wright and Holly Sklar, features the latest findings of economist Edward Wolff of New York University, a leading authority on wealth distribution. The so-called booming economy has left many Americans behind. The top 1 percent of households own 40 percent of the wealth -- twice the share they had in the mid-1970s. Meanwhile, most households have lower net worth, adjusting for inflation, than they did in 1983, and the news is worse for minorities.
FAMILIES OF COLOR ON THE EDGE:
The median black household had a net worth of just $7,400 in 1995, including home equity about 12 percent of the $61,000 in median wealth for whites.
The median Hispanic household had a net worth of only $5,000 in 1995, including home equity just 8 percent of whites.
In 1995, 31 percent of black and 38 percent of Hispanic households had zero or negative net worth (greater debt than assets), compared to 15 percent for whites.
OBSTACLES TO HOMEOWNERSHIP:
In 1995, the homeownership rate was 47 percent for blacks and 44 percent for Hispanics, about two-thirds the rate for white households (69 percent). The benefits of owning a home multiply over time as home equity can help pay for college educations, business start-ups, retirement and inheritance.
A 1992 report by the Boston Federal Reserve that systematically controlled for the largest range of financial, employment and other lending variables found that blacks and Hispanics í¬were two to three times as likely to be denied mortgage loans as whites. In fact, high-income minorities in Boston were more likely to be turned down than low-income whites.í®
In 1999, the Kansas City Star analyzed mortgage applications taken by area banks and mortgage companies from 1992 to 1997. It found that í¬most loans made in minority neighborhoods refinance existing debt and are made by companies that often charge higher interest rates and fees. In white neighborhoods, by contrast, most loans are made at market rates and go to buy homes.í®
A 1999 report by the Association of Community Organizations for Reform Now (ACORN) said that in 1998 African-Americans were denied mortgages 217 percent as often as whites, up from 206 percent in 1995. Latino applicants were rejected 183 percent as often as whites, up from 169 percent in 1995.
"To have a sense of economic security, families need savings to fall back on during hard times and investments for retirement. The gains from the economic boom of the 1990s have gone disproportionately to wealthy white male asset-holders, leaving most black and Hispanic families economically insecure," said Liza Goldman-Huertas, education coordinator of United for a Fair Economy.
As first steps towards solving the racial wealth gap, the U.S. government should reverse the erosion of the minimum wage, expand the Earned Income Tax Credit, and recommit itself to the development of adequate affordable housing. Anti-discrimination policies must be fully enforced. Individual Development Accounts (IDAs) would allow low- and moderate-income households to have their savings matched by public or private funds.
United for a Fair Economy is a national organization that spotlights increased economic inequality and offers positive solutions for shared prosperity.
Copies of Shifting
Fortunes are available from United for a Fair Economy (617/423-2148,
email info
faireconomy.org">faireconomy.org
ISBN: 0-9659249-2-0.
