A new study from the Pew Hispanic Center finds that the wealth gap between Hispanic and non-Hispanic White households is bigger now than in the recent past. And the gap in wealth is far greater than the gap in income. According to the study, the median net worth of Hispanic households in 2002 was $7,932. This was only nine percent of $88,651, the median wealth of non-Hispanic White households at the same time. The net worth of Non-Hispanic Blacks was only $5,988. Thus, the wealth of Latino and Black households is less than one-tenth the wealth of White households even though Census data show their income is two-thirds again as high.
The economic situation is worse now than before the latest recession. A Pew Hispanic Center analysis of data from the Census Bureau finds that the 2001 recession and the jobless recovery that followed were much harder on the net worth of minority households. Between 1999 and 2001, the net worth of Hispanic and non-Hispanic Black households fell by 27 percent each while the net worth of non-Hispanic White households increased by 2 percent.
There are many reasons for the growing gap, according to the study that focuses on the net worth of Hispanic households in the 1996 to 2002 time period. Minorities, for example, have more limited access to financial markets and face greater barriers to homeownership. The ownership of a home bears a strong relationship with the net worth of a household. Homeowners own more of other assets and have a huge advantage in net worth over renters and other households. Hispanic homeowners, in fact, have a net worth that is half again as high as the wealth of non-Hispanic homeowners. But non-Hispanic households are much more likely to own homes and that creates an even bigger gulf in wealth across the two groups.
Large segments of Hispanic and non-Hispanic Black households are vulnerable to economic turndowns since more than one-quarter of them have little or no net worth. Also, more than one out of four Hispanic and non-Hispanic Black households own no assets other than a car or unsecured debt.
Hispanics are also relatively young, not as highly educated, concentrated in high cost regions, such as New York and California, where homeownership can be less attainable, and much more likely to be immigrants. All of these factors contribute to lower levels of wealth but are also self-correcting to some extent.
"The wealth gap should shrink as the Latino population ages and acquires greater education, especially college degrees," said Roberto Suro, director of the Pew Hispanic Center. "The Hispanic population is also starting to penetrate into new settlement areas, such as, Raleigh, Omaha and Nashville, and this trend may help more Latino households become homeowners."
The data from the Census Bureau shows the estimation of wealth maintained within the borders of the U.S. only. But, for many immigrants, and especially Hispanics, the ability to support family members through remittances is an important motive for coming to the United States. More than 10 million Latin American immigrants in the United States last year sent in excess of $30 billion to their families back home. That computes to more than $2,500 per year for each Hispanic household in the U.S. If that sum were saved and invested within the U.S. it would have a significant impact on the measured wealth of Hispanic households, even if it were not nearly enough to close the gap between them and non-Hispanic households.
The report's key findings include:
The Pew Hispanic Center was founded in 2001 with support from The Pew Charitable Trusts. The Center conducts non-partisan research that aims at improving understanding of the Hispanic population. It is a project of the Pew Research Center.