Paul L. Caron

Monday, December 15, 2014

Average American's Wealth Down 40% Since 2007, Inequality Has Widened Across Racial Lines

Pew Research Center, Wealth Inequality Has Widened Along Racial, Ethnic Lines Since End of Great Recession:

The Great Recession, fueled by the crises in the housing and financial markets, was universally hard on the net worth of American families. But even as the economic recovery has begun to mend asset prices, not all households have benefited alike, and wealth inequality has widened along racial and ethnic lines.

Pew 1

The wealth of white households was 13 times the median wealth of black households in 2013, compared with eight times the wealth in 2010, according to a new Pew Research Center analysis of data from the Federal Reserve’s Survey of Consumer Finances. Likewise, the wealth of white households is now more than 10 times the wealth of Hispanic households, compared with nine times the wealth in 2010. ...

Pew 3The current gap between blacks and whites has reached its highest point since 1989, when whites had 17 times the wealth of black households. The current white-to-Hispanic wealth ratio has reached a level not seen since 2001. ...

Leaving aside race and ethnicity, the net worth of American families overall — the difference between the values of their assets and liabilities — held steady during the economic recovery. The typical household had a net worth of $81,400 in 2013, according to the Fed’s survey — almost the same as what it was in 2010, when the median net worth of U.S. households was $82,300 (values expressed in 2013 dollars).

The stability in household wealth follows a dramatic drop during the Great Recession. From 2007 to 2010, the median net worth of American families decreased by 39.4%, from $135,700 to $82,300

Pew 2

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A new model of government is emerging in response to concentrated wealth and power -- that it is a redistributive engine that takes away from the wealthy and the crony capitalists to the lower classes. Correctly done, this recycles wealth and creates a virtuous cycle in a booming economy. Instead, what we have here is increasing concentration of wealth, and power by people willing and able to use it to their financial ends. Too many citizens are operating on out of date views of government as a modern leviathan more appropriate for the 1970s and overlooking the power and wealth concentrations that threaten to usurp government in the early 21st century.

Posted by: Uxorius | Dec 16, 2014 6:54:52 AM

Also interesting:
In the 80s, blacks and hispanics were on par with each other.
In the 90s, up until about 2004, blacks were doing better than hispanics.
Since then hispanics have been doing better than blacks, even though most of the mass migration from poor countries has been hispanic.

If you ask me, this could very explain the unrest that has been burgeoning from black communities in places like Ferguson far more than anything else.

Posted by: scf | Dec 15, 2014 11:14:15 AM

Thanks Paul, as always, for the extent of great work you do, including this story.

Posted by: Kurtis | Dec 15, 2014 10:06:03 AM

I'm with Dale on Ralph's comment, the first one. The Federal Reserve has created a financial bubble, for political purposes, that will end under the watch of the next administration and will have a devastating "trickle down" effect on people who didn't even benefit from the phantom growth.

Posted by: Woody | Dec 15, 2014 8:34:36 AM

I'm glad to see the comments about the Federal Reserve's impact on economic inequality, i.e., flooding Wall Street with trillions of dollars. This is an issue that deserves more attention by the mainstream media.

Posted by: Dale Spradling | Dec 15, 2014 8:08:24 AM

Presented with this information, ninety-five percent of black voters would still go for Obama and the Democrats. Bush is blame, you know, and statistics that show Obama failures are racist.

Posted by: Woody | Dec 15, 2014 7:53:40 AM

The Great Recession, fueled by the exporting of our manufacturing sector and the abandonment of the production role, is not over and won't be over for a long time.

When all the pundits were touting NAFTA and other redistribution agreements, they promised us prosperity, jobs, and massive exports. Now that their promises have fallen through, they're reduced to "cooling the mark," i.e., placating the victims of their con game.

Economic growth isn't likely now, because there's nothing left here to grow. Our factories, jobs, and productive capital are in other countries, growing there. We produce little, we consume much, and we borrow to cover the difference.

Our economy is dominated by an externality : we have a "produce in China, sell in the West" policy (as Pravda labeled it). That's good for corporations' profits, and it's good for the consumer's access to cheap goods. But it crushes the middle class, would-be factory workers, and the economy at large.

Posted by: Larry E | Dec 15, 2014 7:43:25 AM

And so the progressive project progresses, as it has always done.

Posted by: Mikesixes | Dec 15, 2014 7:25:08 AM

Since money is blind to skin color, instead of being so quick to blame race, it would be far more productive to look at personal behavior. I see one comment that states “Federal Reserve policies to inflate asset prices (real estate, stock market) have likely disproportionately benefited affluent whites.” This tacit admission that our own government has inflated the value of assets that tend to held, not by Caucasians and Asians, but by people who tend to follow the proven habits of successful people, one of which is to save for the future. One such person is Oprah,who plowed her income into her own media empire. She is one of the most wealthy women in America.

This distinction starts early in life. My wife, who works with young women, sees a lot of expensive shoes, jeans and smartphones being owned by youth who have almost no money. These people will grow up to consume their incomes rather than to invest it. Their self-selection has nothing to do with what color their skin is.

The hidden elephant in the room is that we give the Federal Reserve a pass on the social effects of their policies. There wouldn't be any assets that are disproportionately inflated in value where it not for deliberate government policy.

Posted by: theBuckWheat | Dec 15, 2014 7:05:44 AM

I'm no socialist, but this isn't going to end well.

The economy doesn't need large percentage of the population for labor.

Companies aren't designed to create employment for carbon based life forms (labor). Companies are designed to make money for capital investors.

The gap will continue to widen and this will lead to social unrest.

I'm not very hopeful.

Posted by: terry malloy | Dec 15, 2014 6:48:34 AM

All we hear about are a couple random officer shootings while the media is silent on this. I've realized it is a bargain that most American's are all too happy to make.

Posted by: JM | Dec 15, 2014 6:30:38 AM

Federal Reserve policies to inflate asset prices (real estate, stock market) have likely disproportionately benefited affluent whites. It is interesting that the last time the gap was large was in 1989, just before a stock market crash. Also, I would be interested to have a breakdown not by race but by class (a la Joel Kotkin.) I suspect there is a white underclass who has been completely left behind thanks to the current policy's toxic mix of stagnating wage growth and rising asset prices (in which they do not participate.) Showing only racial differences may tell only part of the story. Thanks.

Posted by: Ralph | Dec 15, 2014 6:29:30 AM