Wealth of black families has disappeared

The below intern blog is a commentary on the lack of wealth among black families based on the article that can be found below the commentary.

The average black family’s net work has dropped steadily during the past 30 years. The decrease was most pronounced between 2007 and 2009 when the average net worth dropped from $9,300 to $2,200. During the same time period the average which family’s net worth fell from $143,600 to $94,600, according to economist Edward Wolff. This discrepancy in net worth puts the next generation of black people at a disadvantage compared to their white counterparts. It is quite disconcerting that the financial situation of the black family has worsened with time. Historically blacks have had far less wealth than whites and it is upsetting that as of 2009 that gap was still very wide. I wonder what structural changes need to be in place for black families to finally have equal or higher net worth than whites. White families have time on their side, inheriting generations of wealth to which they can add. Policies need to be in place to make wealth accumulation easier for black families so that they can leave a substantial amount and decrease the financial challenges of generations to come.

Wealth of black families has disappeared

By Rex Nutting

WASHINGTON (MarketWatch) — The Great Recession has been hard on almost everyone, but it’s been really tough on black households, who have seen much of the economic progress of the past generation disappear.

Despite high-profile success stories such as Barack Obama or Oprah Winfrey, the typical black family is poorer by some standards today than it was nearly 30 years ago. In a country where access to capital is everything, most blacks have nothing.

Part of the story of the recession is a story about jobs. The unemployment rate for most demographic groups essentially doubled during the recession, according to the Bureau of Labor Statistics. For blacks, the jobless rate rose from 7.7% to 16.5%, while the jobless rate for whites went from 3.9% to 9%.

Those disparities in employment are well known. What’s not fully appreciated is how deeply the recession cut into the incomes of black households, and how the recession devastated the wealth of black families.
Median net worth for black households dropped from $9,300 in 2007 to $2,200 in 2009, far less than the $98,000 owned by the typical white household.

Median household income for blacks fell 7.2% from 2007 to 2009, significantly more than the 4.2% decline for whites or the 4.9% drop in Hispanics’ income, according to the Census Bureau. (The median means half of households had more, half had less.) See the data on median income at the Census Bureau’s website.

It’s not until you look at the figures for net worth — assets minus liabilities — that you can understand just how marginalized blacks are in our capitalist society.

Most blacks really don’t have any capital at all. The average black person leaves his or her heirs just enough to pay the undertaker, with the typical black household’s net worth totaling just $2,200, according to the latest data.

Let’s be clear: The vast majority of wealth in this country is owned by a few people, mostly white. It’s estimated that about 80% of all wealth is owned by 20% of the people, while about a third is owned by the top 1%. About 40% have no wealth at all.

What little wealth the typical black family has is mostly tied up in the house. With housing prices falling for the past five years, black wealth has been wiped out.

The typical black family had about three times as much wealth in 1983 than it did in 2009 — $6,300 in inflation-adjusted terms in 1983 compared with just $2,200 in 2009, according to an analysis of the Federal Reserve’s Survey of Consumer Finances. Read more about the survey on the Fed’s website.

The figures are shocking. In 2001, the median net worth of a white family stood at $124,600. For blacks, the median wealth was $12,500. For every dollar of wealth owned by the typical white family, the typical black family had 10 cents. Remember, these are figures for middle-class families.

By 2007, the median wealth for white families hit $143,600, thanks to the housing bubble and a stock-market rally. But blacks were left behind. They don’t own many financial assets, and they missed out on the housing bubble almost completely. Their net worth fell to $9,300. For every dollar of capital owned by middle-class whites, middle-class blacks had 6 cents.

Then things got even uglier. By 2009, the typical white family had $94,600 in wealth, compared with $2,200 for blacks, according to an analysis by economist Edward Wolff. Blacks had 2 cents on the dollar.

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