No one who is remotely familiar with American demographics should be surprised to hear that Anglo families, on average, are wealthier than black or Latino families. Nonetheless, the magnitude of the disparity revealed by a new study is staggering.
The median wealth of Anglo households is now 20 times that of black households and 18 times that of Hispanic households, according to the Pew Research Center.
“These lopsided wealth ratios are the largest since the government began publishing such data a quarter-century ago and roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession,” reported Pew. Not that the lower rates reported earlier were any reason for equanimity. Researchers have been sounding the alarm for years.
In 1997, sociologists Melvin Oliver and Thomas Shapiro published “Black Wealth/White Wealth,” in which they pointed out that the black and white middle classes were fundamentally different. Middle-class blacks “possess only 15 cents for every dollar of wealth held by middle-class whites,” they wrote. The black middle class, they concluded, was “precarious and fragile.”
In 2008, scholars at Demos and the Institute on Assets and Social Policy at Brandeis University, noting an increase in the wealth disparity, warned that blacks and Latinos were at a particularly high risk of “falling out of the middle class.”
Although it is true that blacks and Latinos have lost ground relative to Anglos, the real problem is that they started out with so much less to begin with. In fact, if you simply look at dollars (pre- and post-recession) as opposed to disparity ratios, Anglos lost the most. But they are still much better off than blacks and Latinos because they were so much further ahead.
In 2005, Anglos had a median net worth, measured in 2009 dollars, of $134,992, according to Pew. Latinos came in at $18,359 and blacks at $12,124. Fast-forward to 2009, and Anglo household net wealth was $113,149, compared with $5,677 for blacks and $6,325 for Latinos.
In short, Anglo households lost $21,843 during those four years, compared with $12,034 for Latinos and $6,447 for blacks. Even though Anglos lost three times more than blacks, they had a much larger financial cushion. And it is that cushion that allowed them, despite their larger losses, to come out in significantly better shape.
The reason for the huge disparities are largely historical. Slavery, followed by a century of harsh discrimination, essentially prohibited most blacks, until the late 1960s, from earning enough to hand down much of anything to their children. For Latinos, the disparities have less to do with Jim Crow than with the makeup of recent immigrants, who have been disproportionately poor and relatively uneducated.
The economic downturn made thing worse. Latinos, as Pew points out, were more likely to live in states — California, Florida, Nevada and Arizona — where housing values fell sharply. Latinos and blacks also were targeted for subprime loans. And since the recession ended, blacks and Latinos have had a harder time finding work.
Unemployment among blacks, at 16.2 percent, is roughly twice what it is for Anglos. Among Latinos, it is nearly 50 percent higher. That higher unemployment, combined with the relative lack of wealth, has created a crisis in black and Latinos communities — leaving more than 30 percent of both populations with either no net worth or a negative net worth.
The problem, however, cannot be defined purely in racial terms. Just as wealth disparities are increasing in society generally, they are increasing among people of color. Among the group of black Harvard MBAs I surveyed for my most recent book, few seemed in danger of falling into economic ruin. Some 40% of them reported an annual household income in excess of $300,000, and most confidently predicted that their children would do even better.
The problem Pew documented is less about color than about access to wealth. For blacks and Latinos with substantial resources, things are not so bad. The problem is that, relatively speaking, there are so few of them
In “The Miner’s Canary,” professors Lani Guinier and Gerald Torres compared “racially marginalized” groups to the birds that miners once carried. When the canaries collapsed, miners knew the air was too noxious to breathe. The canary’s distress, they wrote, was a warning “that we are all at risk.”
Blacks and Latinos are still performing the role of the miner’s canary, not because they are black and Latino but because they are disproportionately vulnerable, in a society where increasing numbers of Anglos are discovering that they are vulnerable, too.
The opinions in this commentary are solely those of Ellis Cose.