The United States was already home to a persistent wealth gap between white and minority families before the Great Recession, but the downturn made that gap even worse, according to a new study from the Urban Institute. Before the recession, white families held about four times more wealth than the average nonwhite family. By the end of the recession in 2010, though, white families were six times as wealthy, as the New York Times reports:
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 gap between white and minority families increased for several reasons, mainly because the housing bust that sparked the recession was more pernicious for nonwhite families than it was for whites. Black and Latinos were twice as likely to have been affected by the housing crisis, thanks in part to predatory lending and foreclosure policies, and the loss of housing value and homes demolished accumulated wealth for those families.
Minority families were also more likely to lose jobs during the recession and have been slower to return to the workforce. That was only exacerbated by crunched budgets at the state and local level and federal spending cuts that led to a massive decline in public sector jobs, where blacks and Latinos are more likely to work. That left many families unable to weather the recession as well as white families, and, as the Urban report notes, led them to tap into retirement accounts and other long-term savings that further drained the amount of wealth they held. That blacks and Latinos were already more likely to be unemployed — and are still facing unemployment rates nearly double that of whites four years later — has only made it worse.
Previous studies have found similar results — an analysis of Census Data in 2012 found that the recession doubled the wealth gap between whites and blacks, and it has tripled in the last 25 years. And with the federal government continuing to turn its eye away from the people hurt worst by the recession, pursuing further spending cuts and largely letting banks off the hook for their role in the crisis, increasing the odds that the gap between white and minority families will only continue to grow larger.