On the wealth gap

Pew recently published a report accompanied by a press release that highlights the recent growth in the ratio of the median wealth of white households relative to that of black and Hispanic households. As of 2009, the median white household's net worth was 20 times that of blacks. Just four years prior, the multiple had 'only' been 11.

The median net worth of white households fell over $22k from $135k in '05 to $113k '09, while black net worth decreased $6, from $12k to $6k. White wealth decreased more than NAM wealth in absolute terms.

As nearly one-quarter of NAM households have no assets beyond a vehicle (about 1 in 17 white households are in the same situation), it's a bit misleading to focus on relative multiples, since the floor is not zero, but some undefined negative number far below that. If a double dip recession propels us into "peak everything", imagine the consequences are another $20k off of median white household net worth and another $5k off black net worth. Now we're looking at a multiple of nearly 100 between white and black wealth. Is it plausible that the relative increased suffering of blacks will be an order of magnitude worse than the pain this causes whites? If black net worth falls to $100 and white net worth to $50k, is the black situation 500 times worse? Doubtful (though it is admittedly difficult to quantify economic suffering). And what if median black wealth falls $7k, into negative territory, where a large number of blacks already are? The multiplier becomes a negative number, which just gets really confusing in the popular press.

Anyway, the underlying data that comparative reports like these are built upon is often useful for calibrating one's hazy conception of the American scene (in this case, by affluence and race) into something sharper. Unfortunately, even though the report understandably focuses on median rather than mean wealth, breaking out actual average dollar figures by asset class for all households is more tenable for mean wealth than it is for median wealth based on the figures provided. Consequently, that's what the following table displays, derived primarily from the data on page 6 of the full report (all figures are in US dollars, rounded to the nearest $100):

Asset class	Whites	Hispanics	Blacks	Asians
Total assets	271,000	73,000	73,800	313,000
Own home	103,000	40,200	41,300	109,600
Rental property	16,300	6,600	4,400	15,700
Other real estate	10,800	1,500	2,200	3,100
Stocks and mutual funds	43,400	2,200	3,700	100,200
IRA and Keogh accounts	27,100	4,400	4,400	18,800
401(k) and thrift accounts	32,500	8,000	10,300	31,300
Financial institution accounts	16,300	4,400	4,400	18,800
Other interest-earning assets	5,400	700	700	3,100
Business equity	19,000	10,200	6,600	15,700
Vehicles	8,100	3,700	3,000	6,300
Other assets	8,100	1,500	700	3,100
Unsecured liabilities	(13,500)	(9,500)	(8,900)	(12,500)

The gap between whites and NAMs is by far the widest in categories involving financial assets. While the average white family's sedan is only twice as nice as the average Hispanic's family van, the white family's Scottrade account is 20 times as valuable. Seeing people on the street gives the general impression that whites tend to be a little better off than NAMs, but it's certainly nothing like a British tourist traveling to a village in the Congo. Seeing each of these people's personal ledgers reveals that behind relatively equal public appearances, whites have a lot more tucked away than NAMs do (and Asians--whose cars are less flashy than those of whites--have even more than that tucked away). If whites and Asians tried to be as opulent relative to their real wealth as blacks (and to a lesser extent, Hispanics) do, racial tensions and the clamor for robin hood economics would be even worse than they already are.

A couple of other interesting asides: 1) The report mentions that the Asian figure for stocks and bonds is noticeably higher than it was four years ago, even though the DJIA lost around 40% of its value over that period of time, and suggests caution in putting too much stake in an Asian sample that may have had an unexpectedly high number of very affluent participants. The total mean wealth of Asian households holds over the four year period. As the recession hit states with large immigrant populations the hardest, it would be expected for mean Asian wealth to drop quite a bit, like Hispanic mean wealth did. So the caution is valid.

2) While the median Hispanic household's net worth is higher than the median black net worth, mean black net worth is higher than mean Hispanic net worth. Among the lower classes, blacks struggle a little more than Hispanics do. But there are a lot more blacks than there are Hispanics who make it big in things like sports and the world of entertainment.