Net Worth of Average Black Family Vs White

The COVID-19 pandemic has inflicted devastating effects on the U.South. economic system, with job losses  specially concentrated among women, minorities, and low-wage workers. Economists take described the uneven and diff economic recovery from the COVID-19 recession as a "G-shaped" recovery, characterized past divergent recovery trajectories for the affluent relative to those of less means. While considerable attention has been devoted to examining the preexisting disparities in labor market outcomes that left some households more than vulnerable than others to the COVID-19 recession, less attention has been paid to the office of wealth in determining a household's ability to buffer the pandemic'due south economical shocks.

Wealth (defined equally the departure between a household's avails and debt) provides a critical condom net to households during economic downturns. Wealth holds several advantages over wages as an economical resource: In particular, income from wealth is taxed at much lower rates than income from work, and wealth can serve as a source of savings to absorb temporary setbacks such equally a loss of employment income.

A previous Hamilton Project analysis revealed staggering inequalities in wealth held by white versus Black households. Using updated information from the Survey of Consumer Finances (SCF) for 2019, we find that the Blackness-white wealth gap persisted heading into the COVID-xix pandemic, leaving Black households with far fewer resources to weather the storm.

Wealth Inequality Preceding COVID-19

In 2019 the median white household held $188,200 in wealth—vii.eight times that of the typical Black household ($24,100; figure 1). Information technology is worth noting that levels of average wealth, which are more heavily skewed by households with the greatest amounts of wealth, are higher: white households reported average wealth of $983,400, which is 6.9 times that of Blackness households ($142,500; SCF). While median wealth is more reflective of the typical household, the scale of average wealth is indicative of the outsized levels of wealth held by the richest households.

The Black-white wealth gap today is a continuation of decades-long trends in wealth inequality, as shown in figure i. Over the past 30 years, the median wealth of white households has consistently dwarfed that of Black households—ranging from a gap of $106,900 in 1992 to $185,400 in 2007 (both adjusted for inflation to 2019 dollars). Furthermore:

• In the second quarter of 2020, white households—who account for lx percent of the U.S. population—held 84 percent ($94 trillion) of total household wealth in the U.Southward.
• Comparatively, Blackness households—who business relationship for 13.iv percent of the U.Due south. population—held just 4 percent ($4.6 trillion) of full household wealth.

Buffering Economic Shocks during Downturns

The power of wealth to buffer economical shocks tin can provide critical support to households during economical downturns—yet not all households take equal holdings of wealth at their disposal. The Black-white wealth gap serves as an important cistron in understanding how economic recoveries can become uneven and diff across demographics. Black and white households both experienced a reduction in median wealth from 2007 to 2010 during the Slap-up Recession. Despite white households property college levels of wealth than Black households throughout the Great Recession, the turn down in median wealth for white and Black households was nearly equal during this flow: the median white household experienced a 27 percent decline in wealth from 2007 to 2010 compared to a 28 percent decline for the median Black household (figure one; authors' calculations).

Even so in the aftermath of the Cracking Recession, white households began to recover the wealth they had lost: wealth for the median white household rose by i percent from 2010 to 2013. Past dissimilarity, wealth for the median Black household continued to fall—failing by 23 percentage during this menses (figure 1; authors' calculations). These divergent changes in wealth in the years immediately following the Great Recession illustrate how recoveries from recessions do not necessarily benefit all households equally. In fact, the Great Recession exacerbated the Black-white wealth gap and left Blackness households more vulnerable to the current COVID-19 recession.

The Intersection of the Black-white and Gender Wealth Gaps

In addition to the Black-white wealth gap, a gender wealth gap (and its intersections with race) reveals some other dimension of wealth inequality. We use microdata from the 2019 Survey of Consumer Finances (SCF) to analyze how the Black-white wealth gap varies by gender throughout the life bike. Considering the SCF is a household-level survey and the vast majority of householder respondents inside married couples are men, our analyses involving gender are limited to unmarried households. In single households, male and female respondents are each representative of their personal holdings of wealth.

Figure ii shows that single white men outset with the highest median wealth, which continues to outpace that of single white women and single Black men and women throughout the life cycle. The median wealth of unmarried white men under the age of 35 ($22,640) is 3.v times greater than that of single white women ($6,470), 14.6 times greater than that of single Black men ($one,550), and 224.ii times greater than that of single Black women ($101). Past the age of 55 and older, unmarried white men agree 1.3 times more wealth than unmarried white women and 8.1 times more wealth than single Black men. The median wealth of single Black women trails slightly behind that of single Black men until the age of 55, when single Black women hold $40,760 in median wealth compared to single Black men with $27,100.

Evaluating wealth gaps by race also every bit gender provides clear evidence of the relatively meager resources that women—Black women, in particular—have to withstand the economic shocks of the COVID-nineteen recession. Labor market data testify how women accept been striking particularly during the COVID-19 recession: of the 1.i meg people who left the labor market in September 2020, over 860,000 were women. Black women have faced especially large job losses; the share of Black women with a task decreased by 11.0 pct points from February to Apr 2020 compared to a nine.9 percentage point reduction in the share of white women with a job and a 9.2 percentage signal decline in the share of white men with a job.

Information technology is important to note that these racial and gender wealth gaps cannot simply be attributed to differences in household savings patterns or cashflow management challenges; rather, they are the issue of public policy decisions spanning centuries throughout U.S. history. For example, landmark progressive laws, ranging from the New Deal to the formation of Social Security, excluded many occupations (such every bit domestic workers) widely held by Blackness women—the majority of whom remain excluded from Social Security today. Accordingly, it is imperative to evaluate wealth gaps past both race and gender to fully understand the depth and breadth of connected wealth inequality in the U.S. today.

Inherited Wealth

Though wealth accumulates with age, the persistence of wealth gaps at every stage of the life cycle further reflects disparities in the intergenerational transfer of wealth via inheritances. White households are substantially more likely to expect and receive inheritances than Black households. Figure 3 shows that in 2019, 17 percent of white households expected to receive an inheritance compared to just 6 percent of Black households. These differing expectations of inheritance receipt comport with disparities in the actual occurrence and magnitude of intergenerational wealth transfers: xxx percent of white households received an inheritance in 2019 at an boilerplate level of $195,500 compared to x percentage of Black households at an average level of $100,000. Because inheritances are lightly taxed, inequalities in inheritances play a significant role in perpetuating a Black-white wealth gap that spans generations.

The Blackness-White Wealth Gap Intensifies the Effects of Labor Market Disparities

Racial disparities in wealth tin intensify the severity of income shocks, as households with lower levels of wealth accept fewer resources available to atmosphere the agin economic impacts of job loss. For Blackness households who have reported unduly high levels of unemployment—and even more so during the COVID-xix recession—this means the Black-white wealth gap can exacerbate the effects of the negative labor market outcomes that Blackness households are more than likely to face up.

When comparing the labor market place distress of Black families relative to white families, it is important to consider trends in both unemployment and underemployment rates. Unemployment—the number of people who do non have a task and are actively seeking piece of work—is a common indicator of labor market strength. However, an equally important measure is underemployment, divers as the number of people who currently work part-time but would rather have a full-time job and people who want and are able to take a job only have not sought work in the last four weeks. Underemployment can more broadly capture the share of the population that is ready and willing to work more if employers were hiring.

Rates of unemployment for Black individuals—whether measured past the traditional, narrower metric of unemployment ("U-three") or the broader metric of underemployment ("U-6")—accept been consistently higher than unemployment among white individuals in every year since 1994 (authors' calculations). Figure 4 focuses on unemployment and underemployment rates beginning in January 2019 through September 2020 of the COVID-19 recession. At the onset of the pandemic, unemployment and underemployment rates for Black and white Americans more than doubled from March to April 2020. Unemployment and underemployment peaked in April 2020 for both groups, merely these rates were significantly higher for Black Americans. More than one quarter of Black Americans were classified equally underemployed at its elevation—i.5 times the underemployment charge per unit for white Americans. Notably, fifty-fifty the narrower measure out of unemployment for Blackness Americans surpassed the broader measure of underemployment for white Americans since June 2020. As of September 2020, the unemployment charge per unit of Black Americans was nevertheless v.v percent points higher than that of white Americans, while the underemployment charge per unit of Black Americans was 7.2 percentage points higher than that of white Americans.

One reason that labor market outcomes in the COVID-nineteen recession have been worse for Black workers is that they are more than likely to be employed in industries hit hardest by the COVID-19 recession. 3 of the hardest-hit industries by the pandemic in terms of task loss—retail trade, transportation and warehousing, and leisure and hospitality—are amidst the top ten employers of Black workers. When it comes to outcomes for Black-endemic businesses during the COVID-19 recession, the statistics are likewise grim: analysis by the Economic Policy Constitute institute that 28 percent of Black-endemic businesses were in industries with the largest total job losses relative to just 20 percent of white-endemic businesses. Although Blackness-owned businesses only represent a minority of all businesses, they are disproportionately likely to operate in sectors most severely affected by the COVID-nineteen pandemic and associated shutdowns.

Black Households Face Higher Rates of Distress during COVID-xix

With lower levels of wealth prior to the pandemic, compounded by continued labor market place disparities during the pandemic, access to emergency savings and other assets are crucial for Black households to withstand the COVID-nineteen recession. Yet black households accept substantially less emergency savings than white households: the average value of liquid assets among white households was $8,100 in 2019 compared to $ane,500 for Black households. Furthermore, 72 percent of white households say they could get $3,000 from family or friends compared to 41 percent of Blackness households.

Racial disparities between Blackness and white households are nowadays in holdings of nonliquid assets as well. In 2019, 73 per centum of white families compared to 42 pct of Blackness families owned a habitation. Black families are not but less probable to ain a habitation, just their homeownership likewise yields lower levels of assets. In 2019 the typical white families' home value was $230,000 compared to $150,000 for Black families. Similarly, of the $30.8 trillion in total existent estate assets reported in the 2nd quarter of 2020, white households held 78 percent ($23.9 trillion) compared to 5 percent ($i.6 trillion) held by Blackness households.

With fewer nonliquid assets to infringe confronting or sell, Black households were particularly vulnerable to economic shocks heading into the COVID-19 pandemic. For some Blackness households, this has led to taking extraordinary measures to stay afloat. Leveraging information from the Survey of Household Economics and Decisionmaking (SHED) along with the SCF, we can observe how families have been utilizing their retirement assets to weather the COVID-19 recession.

Despite holding lower levels of retirement assets, young Black families were more likely to borrow from or greenbacks out their retirement savings during the current crisis. Among households with positive retirement equity, effigy v shows that the median value of retirement disinterestedness for households with a household head under the age of 35 in 2019 was $5,000 for Black Americans compared to $7,500 for white Americans. Although Blackness households tended to hold lower levels of retirement disinterestedness at this age, 14 percent of Black Americans nether the age of 35 borrowed from or cashed out their retirement savings compared to just 4 percent of white Americans under the historic period of 35 in July 2020 (SHED; authors' calculations). Figure five shows that the median value of retirement disinterestedness amid white households with a household head at to the lowest degree 55 with retirement assets was 2.4 times that amidst Black households—however only x percent of white Americans over the historic period of 55 borrowed from or cashed out their retirement savings compared to 22 percentage of Black Americans over the age of 55 (SHED; authors' calculations).

Decision

In the short-term, renewed fiscal support is needed to curb the economic pain many households  are experiencing considering they are unable to absorb the economic shocks of the COVID-nineteen recession. More specifically, policies aimed at providing income support and strengthening the safety net, along with implementing automated stabilizers that trigger expansions of economic assist during fiscal crises, are disquisitional during this fourth dimension.

Even so while a stronger prophylactic net and additional income back up can provide families with firsthand protection against economic crises, it is unlikely to provide them with the long-term stability to prepare for time to come shocks in the aforementioned way that wealth can. Accordingly, when designing policies to reduce the Black-white wealth gap, avoiding the conflation of income with wealth is imperative. In fact, our previous Hamilton Project analysis showed that the Black-white wealth gap remains even amidst households of like incomes. Neither differences in income nor differences in educational attainment, indebtedness, or a host of other demographic and socioeconomic indicators can fully business relationship for the persistence of the Blackness-white wealth gap.

Indeed, closing the Black-white wealth gap will crave that the deep and systemic economic disparities brought about by centuries of discriminatory policies are addressed through significant structural changes across a range of policy areas. Equally discussed in a previous Hamilton Project analysis, these policies range from redlining and the denial of financial services to minority communities, to the Jim Crow Era'southward "Black Codes" strictly limiting opportunities in many southern states—all of which contributed to the asymmetric accumulation of wealth held by white households while exacerbating the economic fragility of many Black households. Overcoming the effects of these policies will necessitate substantive and systemic changes in instruction, pocket-size business, healthcare, broadband access, revenue enhancement reform, and broader identify-based policies.

The COVID-19 pandemic underscores the importance of the Black-white wealth gap and its impact on the ability of households to weather the economic shocks caused past recessions. Past expanding policymakers' focus non only on strengthening the safety net and income supports, but also on the inclusion of systemic and structural public policy changes across a range of areas to shut the Black-white wealth gap, disparities in the ability of Black and white households to conditions the next economical storm will be profoundly reduced.

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Source: https://www.brookings.edu/blog/up-front/2020/12/08/the-black-white-wealth-gap-left-black-households-more-vulnerable/

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