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Prosperity gap between races in U.S. widened during recession

By Catholic Online (NEWS CONSORTIUM)
April 30th, 2013
Catholic Online (www.catholic.org)

An unfortunate fact of American life is the economic disparity found amongst the races here. Whites always tend to do financially better than African Americans and Hispanics. Adding to this cruel divide is the fact that the economic gap became even wider during the recession. "It was already dismal," Professor Darrick Hamilton at the New School in New York said of the wealth gap between black and white households. "It got even worse."

LOS ANGELES, CA (Catholic Online) - Ironically, seemingly good economic news spells bad economic news for many in current U.S. society. With the housing recovery and the rebound in the stock market, the wealth gap may in fact still be growing. This dims the prospects for economic advancement for current and future generations of Americans from minority groups.

A study conducted by the Urban Institute found that the racial wealth gap widened during the recession, even as the income gap between white Americans and nonwhite Americans remained stable.

White families, on average, earned about $2 for every $1 that black and Hispanic families earned in 2010. This ratio has remained roughly constant for the last 30 years.

When it comes to wealth, however, which is measured by assets, like cash savings, homes and retirement accounts, minus debts, like mortgages and credit card balances - white families still outpace black and Hispanic ones.

Non-Hispanic white families before the recession, 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 average white family had about $632,000 in wealth, versus $98,000 for black families and $110,000 for Hispanic families.

"The racial wealth gap is deeply rooted in our society," Caroline Ratcliffe, one of the authors of the Urban Institute study says. "It's here, it's not going away, and we need to care about it."

Experts point out that there are other factors at play behind these statistics. Young black people are much less likely than young white people to receive a large sum from their parents or other relatives to pay for college, start a business or make a down payment on a home. That, in turn, makes their wealth-building prospects shakier as they move into adulthood.

Two major factors helped to widen this wealth gap in recent years. The housing downturn hit black and Hispanic households substantially harder than it hit white households. Many young Hispanic families, for instance, bought homes as the housing bubble was inflating and reaching its peak, leaving them saddled with heavy debt.

Black families also were hit by the housing collapse. Higher unemployment rates and lower incomes among blacks left them less able to keep paying their mortgages and more likely to lose their homes, experts said.

Black families also suffered bigger hits to their retirement savings, the Urban Institute found. The value of black families' retirement accounts shrank 35 percent between 2007 and 2010, while white families' accounts actually gained nine percent over the same period. With lower earnings and higher unemployment rates leaving them with a thinner safety net to begin with, black families were more likely to take funds out of the market when it was depressed, leaving them out in the cold as the market recovered.

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