Wealth disparities by race have grown during the pandemic despite income gains

Wealth disparities by race have grown during the pandemic despite income gains

NEW YORK (AP) — Strong performance in financial markets, particularly huge stock market gains in 2021, helped entrench existing trends in wealth inequality during the pandemic, new data released this week showed.

According to a report from the Federal Reserve Bank of New York, the real net worth of white individuals exceeded that of black and Latino individuals by 30 percentage points and 9 percentage points, respectively, from the first quarter of 2019 through the second quarter of 2023.

This period saw a remarkable level of government financial support and, after the initial shock of the pandemic, a surprisingly strong labor market. The unemployment rate for black Americans in particular is now 5.3%, near a record low, compared to the overall unemployment rate of 3.7%. Earnings for the typical full-time Black worker have risen 7.1% since before the pandemic.

Closing the wealth gap is more difficult because many more white households traditionally have money in stocks and mutual funds. A separate Fed survey shows that as of 2022, about 65.6% of white households had investments in stocks, compared with 28.3% of Hispanic households and 39.2% of Black households.

“The study really shows the difference between making gains when it comes to income, and closing that gap, versus getting rich when it comes to wealth,” said Janelle Jones, vice president of policy and advocacy at the Washington Center for Equitable Growth.

While government support such as increased unemployment benefits and stimulus checks helped stave off a coronavirus recession, financial asset prices rose significantly as the economy reopened through 2021, increasing racial wealth disparities. While those market-linked assets fell in 2022 when the Fed quickly raised interest rates, “these declines did not fully offset previous rises,” according to the Federal Reserve Bank of New York.

“Much of the difference in net worth by race and ethnicity since 2019 can be attributed to differences in the real values ​​of financial asset holdings,” the report authors wrote, “including the fact that black households have more wealth concentrated in pensions than in stocks,” the report’s authors wrote. Mutual funds and exchange-traded funds, or ETFs.

The Federal Reserve Bank of New York found that more than 50% of black people’s financial wealth is invested in pensions. Less than 20% of Black wealth is stored in private companies, corporate stocks, and mutual funds. In contrast, less than 30% of white financial wealth is invested in pensions, with about 50% of it invested in companies, stocks and mutual funds.

“Black workers are still more likely to join a union, which may play a role in the retirement story,” Jones said. “But how people are exposed to being able to invest in the stock market — whether it’s something they grew up with or not — we know that’s different for white families than it is for people of color.” Black family members are less likely to receive an inheritance, she said.

During the pandemic, the real value of financial assets owned by blacks in 2022 fell below their 2019 level and continued to decline steadily, while the real value of financial assets owned by Hispanics fell below their 2019 level in 2022 and remained stagnant. . Neither group’s real financial assets have recovered to their 2019 values.

Owning a business is another component of financial wealth, and separate data shows that Black-owned businesses have had a more difficult time during the pandemic.

While less than 10% of all U.S. business owners are Black, Black-owned businesses were also more concentrated in hard-hit industries when the coronavirus first spread, according to an Economic Policy Institute analysis of government data. In April 2020, more than 40% of Black business owners reported they were not working, compared to just 17% of white business owners.

The industries that saw the largest overall job losses early in the pandemic were also sectors in which more Black-owned businesses were concentrated — accommodation, food services, retail, health care, and social assistance. About 28% of black-owned businesses are in these industries, compared to less than 20% of white-owned businesses, according to the Bureau of Labor Statistics.

However, Deputy Treasury Secretary Wally Adeyemo said Wednesday that economic conditions are improving for Black families, pointing to rising employment rates and wages for Black Americans since before the pandemic, and an increase in Black business ownership and participation in the stock market.

Adeyemo noted that some “policy prescriptions” may be necessary to balance the distribution of financial wealth in the United States

He added: “The gap between the wealth of blacks and whites in America is still very large.”

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The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

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