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Minorities hit hardest as wealth gap widens

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White households have a net worth 20 times that of black households and 18 times that of Hispanic households, according to a Pew Research Center analysis released today. The wealth gaps between these groups are at a record high and are about twice their pre-recession size.

Between 2005 and 2009, household wealth plummeted 66 percent among Hispanics, 54 percent among Asians and 53 percent among blacks. The net worth of white households, on the other hand, fell 16 percent. The declines left the typical black household with just $5,677 in wealth and the typical white household with $113,149 in 2009.

Net worth – one's total assets minus debts – is an important economic indicator of well-being. It shelters against unemployment spells, can be accumulated and passed down to future generations, and is the primary source of support for many households – namely the elderly, said Rakesh Kochhar, associate director for research at the Pew Hispanic Center and an author of the report. 

The center's findings are based on an analysis of the Survey of Income and Program Participation, an economic questionnaire distributed periodically to more than 36,000 households by the U.S. Census Bureau.

Although the analysis is on a national level, California's significance is clear: California is home to more Hispanics and Asians than any other state, and it was among the hardest hit by the housing crisis.

Home equity is the biggest driver of household wealth for all racial and ethnic groups, and in California, home prices dropped 37 percent between 2005 and 2009. Owned homes made up 65 percent of Hispanics' household wealth in 2005, compared with 44 percent of whites' household wealth.

By 2009, homes represented a smaller share of net worth for all groups. But home equity continues to drag down household wealth – particularly for minorities in states crippled by the housing bust: California, Arizona, Florida, Michigan and Nevada. As a result, wealth gaps could be even greater today, Kochhar said.

"From the end of 2009 to presently, it's possible that the gaps have grown because the stock market has recovered, but the housing market has not," he said. "Those who own more stocks … by 'those' we mean white households – one could imagine they have done better. Whether they have indeed, we don't know."

Disparities in wealth have grown not only among racial and ethnic groups, but also within them. The share of total wealth held by the top 10 percent of households increased from 2005 to 2009 within all groups, the Pew analysis found.

Overall, the wealthiest 10 percent of households held 49 percent of wealth in 2005 and 56 percent in 2009. The most substantial increase in the concentration of wealth at the top was among Asians and Hispanics: The top 10 percent's share of wealth rose from 44 percent to 61 percent among Asians and from 56 percent to 72 percent among Hispanics.

But these gaps in wealth did not grow because the rich got richer, researchers said. In fact, the threshold for the top 10 percent of wealth was lower in 2009 than in 2005. For all U.S. households, the 90th percentile of wealth fell 7 percent, from more than $646,000 to just under $600,000. The decline was most dramatic among Hispanics, falling from nearly $396,000 to about $236,000 – a 40 percent drop.

At the same time, the proportion of American households with zero or negative net worth has increased. One out of five households had zero or negative household wealth in 2009, up from 15 percent in 2005.

The share of households with zero or negative net worth grew most substantially among minorities: from 12 percent to 19 percent among Asians, 23 percent to 31 percent among Hispanics and 29 percent to 35 percent among blacks. White households with zero or negative net worth grew from 11 to 15 percent.

These figures reflect groups' susceptibility to economic downturns, Kochhar said.

"To begin with, if you were low-income and a low-wealth household, you're going to experience relatively greater financial impact," he said, adding that minorities experienced, for example, greater increases in their unemployment rates during the recession. "Those are characteristics that make you more vulnerable to economic downturns."

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