income gapThe twin demons of the housing market crash and the Great Recession have created historic wealth gaps among ethnic and racial groups in America, according to new Pew Research analysis: The median wealth of white households is 20 times that of black households, and 18 times that of Hispanic households.

From 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanic households and 53% among black households, but declined just 16% among whites, says Pew.

The result is a cavernous gap that's the largest since the government began publishing its Survey of Income and Program Participation 25 years ago -- roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009, reports Pew.

The main culprit, without question, is the housing downturn. "Minorities were effected more because they draw a higher share of wealth from home equity," explains Rakesh Kochhar, associate director for research with the Pew Hispanic Center. "Hispanics, in particular, are concentrated in areas where house prices first rose steeply and then crashed harder, like Arizona, California, Florida and Nevada." The period from 2005 to 2009 captures the bulk of the effect of the housing downturn from early 2006 onwards. The Case-Shiller Home Price Index was down about 30% over the period reviewed in the Pew Research study.

Stocks Have Recovered; Houses Haven't


"Up until the housing meltdown, the basic line was a dime on the dollar: Blacks had 10 cents of wealth for every dollar of wealth held by whites," says Charles Gallagher, PhD., professor and chair, race and ethnic relations, urban sociology, inequality at LaSalle University. "The wealth gains of most African Americans and Latinos were tied to an overheated housing market rather than other assets like stocks, bonds and 401(k)s."

Homeowners of all races saw the median value of their home equity decline: Among whites, it fell from $115,364 in 2005 to $95,000 in 2009, among blacks it dropped from $76,910 to $59,000. Hispanics took the biggest hit, with their home equity declining by more than half, from $99,983 to $41,145, according to Pew.

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In contrast, the S&P 500 was down about 11% from 2005 to 2009. "This means white households, who are more likely to own financial assets, were not affected by the stock market crash as minorities were by the housing crash," says Kochhar. Also, while the recession officially ended in 2009, the housing market has remained weak. The stock market, though, has rebounded, which tended to benefit whites more than blacks or Hispanics, who tend to have fewer such investments, reports Pew.

Also, unemployment during the recession rose more for Hispanics and blacks than for whites. "Unemployment will put a strain on your household finances, either reducing your ability to accumulate assets or cause you to draw down your assets," says Kochhar. "You may also have to borrow and go into more debt."

The economic downturn took its toll on the Asian community, too. In 2005, median Asian household wealth had been greater than the median for white households, but by 2009, Asians had lost their place at the top of the wealth hierarchy, reports Pew. Their net worth fell from $168,103 in 2005 to $78,066 in 2009, a drop of 54%. Like Hispanics, Asians are geographically concentrated in places such as California that were hit hardest by the housing market meltdown.

The rise in social inequity is good news for no one. "Wealth provides many benefits: protection against short-term economic shocks; retirement income; access to superior health; education and other services; social and political influence; security and status for future generations," says Kochhar." "The ability to reap these benefits have generally diminished for all members of society, but more so for some than others."

Joe Stallings, partner at the investment management firm Balentine, sums it up this way: "Although the focus in Washington today is on the 'here and now,' there are some serious systemic challenges facing the United States in the long-term. It seems unlikely that persistent inequality in wealth distribution, particularly as it affects the nation's fastest-growing demographic [Hispanics], is a recipe for success going forward."

How to Close the Gaps

The statistics are staggering and sobering, but is there anything to be done about them?

Harrine Freeman, author of How to Get Out of Debt, rattles off a list of ideas. "Extend some of the Bush tax cuts to help lower- and middle-income families. The bottom 80% of taxpayers received approximately 35% of the Bush tax cuts. The top 20% of taxpayers (the wealthy) received approximately 65% of the Bush tax cuts. The top 1% received 38% of the tax cuts. Increase the exemption amount for the individual Alternative Minimum Tax. Ensure that blacks with the same education level and skills as white counterparts are paid the same. Provide additional funding for college education to increase the number of students that can attend college, and reduce interest rates charged for student loans."

As for corporations, says Freeman, at a minimum, they should provide additional benefits for college education, increase reimbursement limits for college courses and employee training, and develop mentorship programs to train entry-level employees.

For individuals and families, it comes down to preparation. "Immediately build an emergency fund so as to avoid additional debt in event of unanticipated expenses, market declines, recession," says Eleanor Blayney, a certified financial planner and consumer advocate for the CFP Board of Standards. "Prepare a budget -- absolutely the best way to 'find' potential for additional savings or funds for paying down debt." In the medium term, build savings and retirement accounts through payroll deductions. And, because overall wealth is built primarily and most predictably through career development and advancement, commit to lifelong learning through education, training, and skills building.

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ha6ai

So? Who wrote this nonsense? Why quote this "Harrine Freeman". Her expertise is ...? Society has no obligation to "redistribute wealth". That is socialism and it is anti-American.

July 31 2011 at 5:35 AM Report abuse +1 rate up rate down Reply
RamRod

In San Antonio Texas, I witnessed the effects of the housing pozi-scheme. First inner city low-income housing dwellers move outward into neighborhoods they previously couldn't afford, simultainiously long time residents of those areascould qualify for better housing away from those new neighbors. And that move landed them in the neighborhoods of those who could now afford a newly built home on the outskirts of town - and the building boom was on! With "easy credit" every soci-economic group could "move on up" and (except for the bottom) maintain distance from those they were unwilling to live near. Now factor in the crash, and suddenly there was an implosion. But no one wants to move backward voluntarily. And with our collective standard of living having far exceeded our work ethic during the same period of time, we have meltdown - resulting in the situation you see today and the subject of this article.

July 28 2011 at 10:26 PM Report abuse rate up rate down Reply
1 reply to RamRod's comment
ha6ai

Yup. Move on up without earning it, and you'll have to move on down. (Hey, that sounds like a good organization; "moveondown.org") LOL!

July 31 2011 at 5:37 AM Report abuse +1 rate up rate down Reply
tmachine2

They need to do s study on how many whites have lost their jobs over 40 years old. Also white college graduates who are working at McDonald's. We are becoming a country of haves and have nots.

July 28 2011 at 12:44 PM Report abuse +2 rate up rate down Reply
cray542464

Here we go again.

July 28 2011 at 12:40 PM Report abuse rate up rate down Reply
ThinkUp70

What is missing big time now-a-days, is a great big heaping helping of common sense. Our ancestors didn't have college educations, but they built their own houses, and created their own businesses, through blood, sweat, and tears, and there wasn't any government handouts, banks, or colleges to keep them eternally supported. America needs to grow up, take action, and learn to take care of itself, independently.

July 28 2011 at 10:17 AM Report abuse +1 rate up rate down Reply
2 replies to ThinkUp70's comment
tmachine2

Boy you need to reread your history.

July 28 2011 at 12:46 PM Report abuse +1 rate up rate down Reply
linmarco

Some of them did what you say and others became wealthy through other less pleasant means all within the scope of prevailing law. Then some of them were downright crooks. As to blood, sweat, and tears that came after the Indians had been subdued by force of arms and given their blood. Ours is a great nation and I wouldn't want to be anywhere else. I've traveled to four of the six continents and you get your best deal here. But our history hasn't always been as glorious as the textbooks have portrayed it.

July 28 2011 at 5:32 PM Report abuse rate up rate down Reply
ilm9p

We really should just open our wallets and give it all away to the blacks. I mean the trillions in social programs we've pourned on them since the 60's simply hasn't worked. They don't want a hand up, they want a hand out. They want jobs with all the work picked out and still get paid on Friday. They want it all for nothing. How stupid we've been to expect anything else!

July 28 2011 at 8:25 AM Report abuse +3 rate up rate down Reply
2 replies to ilm9p's comment
mfc3823

ilm9p, Well Said....BINGO........Perhaps people will wake up, and put the Race Card to sleep..........Here in America people of all races can become as wealthy as they strive to become. All it takes is education, hard work and dedication............Moe

July 28 2011 at 9:23 AM Report abuse rate up rate down Reply
linmarco

I am black, a septuagenarian, hold undergraduate and graduate degrees, a veteran (1957-1960), and retired.
I have never lived off governmental assistance and have always made my own way on my on. Speaking for myself and myself only I don't want a damned thing from the government or those who say I do. Scratch me from your list. While we are at it whites don't do so badly in the welfare department especially corporate welfare. They scrounge like all get out. Stop generalizing.

July 28 2011 at 5:45 PM Report abuse rate up rate down Reply
wwas3434

This gap was caused by giving our money to banks and Wall Street to bail them out. Taking down the middle class and creating a two class system. I say make the Banks and Wall Street give it back. I figure if they pay off the quote 780 billion with interest there is almost a trillion coming back to our treasury for the debt or to fund medicare and social security since more than a trillion has been scooped by our high spending congress from what should have been a protected trust.

July 28 2011 at 7:34 AM Report abuse rate up rate down Reply
Dan

Its a no brainer that this article was concocted by the AOL TIME WARNER ZIONISTS as this quote sums up their goal quite clearly 100 years ago:

"We must realise that our party's most powerful weapon is racial tension. By pounding into the consciousness of the dark races that for centuries they have been oppressed by the Whites, we can mould them to our program. The terms 'colonialism' and 'imperialism' must be featured in our propaganda. In America we will aim for subtle victory. While inflaming the Negro minority against the Whites, we will endeavour to instil in the Whites a guilt complex for exploiting the Negroes. We will aid the Negroes to rise to prominence in every walk of life, in the professions and in the world of sport and entertainment. With this prestige, the Negroes will be able to intermarry with the Whites and begin a process which will deliver America to our cause."

—Israel Cohen writing about the communist party's objectives in "A Racial Program for the Twentieth Century", published in 1912.

July 27 2011 at 8:12 PM Report abuse rate up rate down Reply
Dan

Its a no brainer that this article came from AOL TIME WARNER ZIONISTS...If you have any knowledge of history, well, this quote sums up are current domestic fiascoto to a tee:

"We must realise that our party's most powerful weapon is racial tension. By pounding into the consciousness of the dark races that for centuries they have been oppressed by the Whites, we can mould them to our program. The terms 'colonialism' and 'imperialism' must be featured in our propaganda. In America we will aim for subtle victory. While inflaming the Negro minority against the Whites, we will endeavour to instil in the Whites a guilt complex for exploiting the Negroes. We will aid the Negroes to rise to prominence in every walk of life, in the professions and in the world of sport and entertainment. With this prestige, the Negroes will be able to intermarry with the Whites and begin a process which will deliver America to our cause."

—Israel Cohen writing about the communist party's objectives in "A Racial Program for the Twentieth Century", published in 1912.

July 27 2011 at 8:08 PM Report abuse -1 rate up rate down Reply
fmirabelli

This was published yesterday too. either Financial News believes old stores are not noticed or they think we are totally unaware of what they publish.

Either chagne the content daily or stop putting garbage on the net.

July 27 2011 at 6:06 PM Report abuse -1 rate up rate down Reply