Study: Recession Widened Racial Gaps in Wealth, Income

New data show that the Great Recession exacerbated racial economic gaps.

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It's no surprise that there are big economic gaps between races in the United States, but a new study shows just how big those gaps are – and that the Great Recession in many cases only served to widen them.

For example, between 1999 and 2009 white households where at least one of the bread winners lost a job had higher median incomes than black households where no one was unemployed, according to the study from the Pew Charitable Trusts' Economic Mobility Project. Researchers analyzed data from the Panel Study of Income Dynamics, a long-term economic survey operated by the University of Michigan.

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As of 2008, in the middle of the recession, white households that had experienced any unemployment over the previous decade had a median income of $70,385. Black households that had experienced no unemployment had a median income of $50,000.

"To us that just really highlights the significant difference in economic security that white families and black families experience and also draws some clear lines to why we see such a clear mobility gap between blacks and whites," says Erin Currier, director of the Economic Mobility Project.

(Pew Charitable Trusts)

Unemployment also affected different racial and ethnic groups to differing degrees. While only 30 percent of non-Hispanic white households experienced unemployment, the rates were 41 percent for black households and 51 percent for Latino households.

That squares with data from the Labor Department. While the unemployment rate for whites generally hung between 4 and 6 percent in the pre-recession 2000s, the black unemployment rate was generally 8 to 11 percent during that period (both of these racial groups may include Hispanics in these data).

The data also show that while unemployment hit both whites and blacks, white households had more assets to fall back on when they experienced joblessness. Among white households that experienced unemployment over the period studied, median wealth fell by roughly one-third from 2007 to 2009, to $30,114. That's a much larger drop than either group of black households experienced, but those households had far less wealth to begin with in things like savings accounts, retirement accounts, and assets like stocks. As of 2009, black households that had experienced no unemployment had around $15,600 in wealth, and those that did experience unemployment had a mere $1,100. Meanwhile, white homes that experienced no joblessness were the only of these four groups whose wealth grew over the course of the recession, and it grew quickly: from under $80,000 in 2007 to over $90,000 in 2009.

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These disparities in unemployment, income, and wealth are interrelated—higher rates of unemployment means lower income and, thus, less ability to accumulate wealth, for example. Education also plays into this cycle—less educated people tend to earn less and then perhaps save less, which makes it more difficult to send the next generation to college.

Though it is unclear from the study, another factor that may explain the gaps between races are that black households tend to have higher rates of single parenthood than white households. That means that when the sole parent is unemployed, it has no income. Currier also points out that white households are more likely to inherit more wealth, which can soften the blow in the event of a financial shock.

Data from earlier Economic Mobility Project studies show that whites tend to be more likely to experience upward mobility than blacks. Across much of the income spectrum, whites are generally more likely than blacks to earn more than their parents, and blacks are more likely to earn less.

"I think the more global lesson that we can take from this research is that you cannot be economically mobile if you cannot be economically secure," says Currier.

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