There is more to be said about the white/minority wealth gap, in spite of yesterday's seemingly extensive media coverage. In particular, we need to reflect not only on how much wealth was lost following the Great Recession and the inequality that created, but also on what those losses tell us about the ability of minorities to build wealth in America.
To begin, though the wealth gap is the largest since they began recording these statistics (1984), neither the gap nor the dramatic growth in inequality was caused by the Great Recession alone. Certainly, the Great Recession helped. The white/black wealth gap grew from 11:1 to 20:1 and the white/Hispanic wealth gap grew from 7:1 to 15:1. But observe the trend from 1995 to present and it becomes clear that the wealth gap has been increasing all along.
In 1995, the white/black wealth gap reached an all time low of 7:1. This was in keeping with a longer historic trend where, since 1984, the White/Black wealth gap had remained stable or declined. But from 1995 to 2004, the gap grew by over 150 percent to 11:1.
This earlier trend has not been referenced in the recent conversation for an obvious reason: everyone is more concerned about how much wealth was lost following the economic collapse. This is understandable. The losses were dramatic and uneven: Hispanics lost 66 percent of their wealth and blacks lost 53 percent, while whites lost just 16 percent. But what if those unequal losses are related to the previous growth in inequality?
So far, the mainstream argument has ignored this connection. According to the Pew study, blacks and Hispanics lost most of their wealth because they had invested in their homes and little else: "Stock funds, IRA and Keogh accounts as well as 401(k) and savings accounts were responsible for 28 percent of whites' net worth, compared with 19 percent for blacks and 15 percent for Hispanics." Asset diversity meant that, as the stock market has recovered, White wealth was resistant to the recession's effects. Though housing values are down by an average of 30 percent, the median wealth of whites fell only from $134,992 to $113,149.
But the asset diversity story is not all there is. We need to consider the different values of white and minority assets.
It goes without saying that not all assets are the same. But this recession has amply proven that. Hispanics lost 51 percent of their home equity, blacks lost 26 percent, and whites lost 18 percent. Among those who held stocks and mutual funds, Hispanics lost 32 percent of their investment's value and blacks lost over 71 percent. The median value of the investments owned by whites declined by only 9 percent! And there are similar discrepancies to be found in the losses associated with pension plans and the value of businesses. Thus, it appears that even with a significant amount of asset diversity, minorities were still more likely to lose wealth than their White counterparts because their assets are more vulnerable.
None of the current coverage has zeroed in on this problem or its relationship to the growing inequality witnessed from 1995-2005. For that analysis, it would be worth returning to the arguments found in Thomas Shapiro's twin books covering the black/white wealth gap: The Hidden Cost of Being African-American: How Wealth Perpetuates Inequality and Black Wealth/White Wealth: A New Perspective on Racial Equality (co-edited with Melvin Oliver).
The basics of Shapiro's argument (which can be applied to the white/Hispanic wealth gap as well) is that historic and present-day discrimination have prevented blacks from acquiring high-value assets. Shapiro focuses on how the practices of red-lining, white-flight, and recently sub-prime mortgages have created situations where minorities purchase homes that have lesser value than an equally priced home that is more readily available to whites. And living in less affluent neighborhoods then leads to additional drains on wealth: higher car insurance premiums, paying for private schools rather than being able to send your children to good public schools, and difficulty accessing cheap lines of credit by utilizing your home equity.
Now, what does all of this have to do with the growth of inequality from 1995-2005? The argument that Shapiro might advance is that the cause of that period of wealth inequality was not depreciating assets but unequal access to valuable assets. That is to say, both whites and minorities saw their wealth grow across the decade, but white wealth grew substantially more because of unequal access to more valuable homes, stocks, mutual funds, and pension plans. And unequal access then has meant less security for Hispanics and blacks now.
In my view, most people ignored inequality in the late 90s and early 00's because everyone seemed to be getting a little richer, living a little better, and eating a little more. But just as the bursting housing bubble revealed that our national wealth was built upon gimmicks and cons, it also revealed that our growth was remarkably unequal. Racial and economic justice advocates like Shapiro have been making this point for a long time now. But yesterday we missed an opportunity to recognize them for their hard work and to join them in their fight for a more equitable society. Let's not let another day pass us by.