Minorities Hit Hardest by the Recession

Gap in Wealth by Race Exacerbated by Prolonged Recession

by Wes Markham on February 14, 2012

According to a study released last year, one of the many sad results stemming from the recessionary period of 2005 to 2009 was that minority net worth dropped significantly more than that of the white majority. The gap was greater in 2009 than it has been since the government began publishing the statistical data in 1984.

Household wealth, as defined by the Pew Research Center study, “is the accumulated sum of assets (houses, cars, savings and checking accounts, stocks and mutual funds, retirement accounts, etc.) minus the sum of debt (mortgages, auto loans, credit card debt, etc.). It is different from household income, which measures the annual inflow of wages, interest, profits and other sources of earning.”

The study found that inflation-adjusted median wealth of Hispanic households fell by 66 percent and 53 percent in black households. By comparison, white households dropped by only 16 percent. Perhaps even more shocking is the percentage for minority households which had zero or negative net worth. This happens as a result of a household’s value being lower than the sum of its debts.

35 percent of black and 31 percent of Hispanic households had zero to negative net worth while white households were at 15 percent. The 2005 numbers for the same groups were at 29 percent, 23 percent, and 11 percent, respectively.

The study attributes the staggering drop in home values as the reason for the most of the loss in net worth. Hispanics seem to be the most effected by the drop in home values.

Not all minorities have fallen to such extreme lows as black and Hispanic households. The median Asian household wealth was actually greater than that of whites in 2005. By the end of 2009, however, whites had reclaimed the top ranking. Asian net worth dropped by 54 percent.

The study attributes the huge fall to a continued influx of poor Asian immigrants during the years of the study and a concentration of Asians, like Hispanics, in areas hit hardest by the housing crash. These include Arizona, California, Florida, Michigan and Nevada. Another reason given by the study lies with the fact that Asians and Hispanics especially have much of their net worth tied in with the value of the home. Whites on the other hand, are much more likely to have investments and stocks in which to store value.

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