2004 October 18 Monday
Wealth Gap Widening Between Whites, Hispanics, Blacks

The wealth gap between the races is widening. (PDF format)

WASHINGTON, DC(October 18, 2004) 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.

Whites have 11.17 times as much wealth per household than Hispanics. Whites have an even greater 14.8 times as much wealth per household as blacks. My guess is that white households are smaller on average due to smaller numbers of children born to whites. So the wealth gap per person is probably even wider.

Here are some of the bullet points from the press release:

Twenty-six percent of Hispanic, 32 percent of non-Hispanic Black and 13 percent of non-Hispanic White households had zero or negative net worth in 2002. These proportions are essentially unchanged since 1996.

Fifty-five to 60 percent of Hispanic and Black households had wealth less than one-fourth the national median level of wealth between 1996 and 2002. Fewer than 40 percent have middle-class levels of wealth and this proportion has not changed since 1996. Nearly 75 percent of White households have middle-class or higher levels of wealth.

The wealthiest 25 percent of Hispanic and non-Hispanic Black households own 93 percent of the total wealth of each group. Among non-Hispanic White households, the top 25 percent own 79 percent of total wealth. The percentage of White households who owned homes in 2002 was 74.3 percent. The homeownership rates for Hispanic and non-Hispanic Blacks were 47.3 percent and 47.7 percent respectively.

Hispanic immigrants from Central American and Caribbean countries had a net worth of only $2,508 in 2002. Cuban immigrants led the way for first-generation Hispanics with a net worth of $39,787. Mexican immigrants are in the middle with a net worth of $7,602 in 2002.

You can read the full report in PDF format.

Republican strategists such as George Bush's advisor Karl Rove are spewing utter nonsense when they talk about how Republicans can capture more of the Hispanic vote. Poor non-white people faced with the Democratic Party's offer of racial preferences and Robin Hood taxing for their benefit are not going to vote Republican. Hispanics are going to remain Democrats. The Republicans are going to become the White Party. Racial divisions in America are going to become sharper and racial relations are going to become worse as the fight over money and crime intensifies.

Ethnic groups that do much worse than whites in school and in the job market are growing as a percentage of the US population. This is just one of America's two developing great demographic disasters. The other is the financial disaster which will be precipitated by the retirement of the baby boomers. These negative trends are going to develop into a political and economic "Perfect Storm" in the 2010s and 2020s. An extremely aggressive immigration policy aimed at deporting all the illegal aliens while simultaneously imposing high skills requirements on prospective immigrants could make that coming disaster less severe. But even with wise policies (which few in Washington DC advocate) things are still going to get pretty bad.

Update: What is missing from the above report? Asians. South Asians. East Asians. They live in the United States. But to the leftist intellectuals who write about ethnic groups in America they are largely invisible. Why? They are inconvenient. They do at least as well as whites economically and yet they are not white. How can the failures of blacks and Hispanics be the result of white oppression and white racism if there are non-white groups that have equal or higher average incomes and educational attainments in the United States? How can systematic government sanctioned institutional racism against whites be justified if there are non-white groups in America doing better than whites? How inconvenient. So the intellectuals ignore them and ignore the real reasons different ethnic and racial groups do differently on average.

Share |      By Randall Parker at 2004 October 18 01:17 PM  Immigration Economics


Comments
Kurt said at October 18, 2004 2:40 PM:

Yup, the Republicans will become the white party and the democrats will become the party of government hand-outs.

Race-based politics can be quite ugly. South Africa and Malaysia come to mind. The "diversity" crowd in Washington D.C. want to make America a more "interesting" place. Malaysia is a very "interesting" country whereas Singapore is considered by the hip, "diversity" crowd to be boring. Take a guess at which one is better for business and technology.

Do we really want to become an "interesting" country?

Kurt said at October 18, 2004 2:45 PM:

karl Rove and the clique of neo-cons that surround the president make up what has got to be the most dellusional adminstration in at least a generation. It is truly unfortunate that both major political parties have become completely delluded on the nature of wealth creation and society.

I think there will be hell to pay.

Invisible Scientist said at October 18, 2004 2:53 PM:

The only problem is not the separation between the whites and the non-whites, but the issue is also
separation between the high-IQ elite and the lower IQ classes, inluding the whites, too.

Whenever there is a free market, the upper class surpasses the lower class because
of Darwin's laws. In 1982, the top 1 % families owned oly 20 % of the US, but by March 2000,
the top 1 % owned more than 45 % of the wealth in the US. Right now the top 10 % families
own 90 % of the wealth in the US, and as long as the taxes are low and there is free market,
the new money created by the economy will end up getting concentrated in the high IQ elite.

In March 2000 median net worth of an American family was $72,000, but the average was $380,000,
due to the concentration of wealth in the upper class. For individuals, the median net worth was
$42,000, but note that most of it is in real estate and other non-liquid assets. the amount of
cash or cash-equivalent is low.

Only wars, revolutions, earthquakes, or volcanic eruptions can interrupt this process of separation.

I am speculating that in another generation, say 20 to 25 years from now, the separation will get
even more pronounced, it is conceivable that the top 5 % will own 95 % of the wealth by then, (right now
the top 10 % richest families own 90 % of the wealth, not that far already!)

Invisible Scientist said at October 18, 2004 3:03 PM:

Let me mention some concrete figures about the accumulation and concentration of wealth in
dollar amounts. For 2 decades, for most years, the US government has been running a
deficit spending each year. For example, this year's deficit spending is close to $500 billion,
almost 5 % of the GDP, and this $500 billion, is close to the corporate profits of Standard and Poor's
500 biggest companies. And in most years, unless there is a major shift in taxation
and economic trend, most of the government deficit spending, ends up registered as
corporate profits. This means that most of the new money is going to the upper class, year
hundreds of billions of NEW dollars are accumulating in the bank accounts of the upper class.

The taxes remained very high for several decades after the Great Depression, but during the last
few decades, the taxes got lowered very significantly, making it possible to accumulate wealth.
Previously, the high taxes in the US surpassed many other countries in the world.

Luke Lea said at October 18, 2004 3:54 PM:

I believe the distribution of wealth follows a power law, as do so many phenomenon that are governed largely by chance, e.g., the size distribution of earthquakes, volcanic irruptions, landslides, etc. It seems to be a law of nature. On the other hand, I believe that Charles Murray showed in The Bell Curve that the differences in economic success seen between the various ethnic groups all but disappears once we control for I.Q.. So really what we are talking about here is the relative decline of the least able groups in our society, who were already worst off. The trend started in the early seventies, and is driven be a variety of factors (technological development, trade with low-wage countries, immigration) which cause a decline in the relative demand for labor (relative to capital, that is). The remedy in my view is to subsidize wages with the revenues generated by a progressive consumption tax, which would increase welfare without destroying the efficiency of the market and the virtues of capitalism (ie, rewards would still be proportional to effort for both laborers and capitalists, and there would still be incentives to save, invest and become wealthy.

Jody said at October 18, 2004 9:13 PM:

From my quick skim of the report, there's two big issues that the researchers should've considered that I don't see addressed:

1. Normalizing for the number of adults in a household. Simply put, far more whites (80%) than blacks (35%) or hispanics (69%)live in two parent homes (see for instance here - Fig 1). This makes a tremendous difference in income and wealth. First if you have two earning adults in a household - as many homes are these days- you're going to immediately get double the income. Double the income over time and voila, a big difference in wealth - the metric used in the study. Even if one parent stays at home, that frees up the other parent to work longer hours and make more money. Similarly, two parent homes are also better equipped to handle economic shocks (if one becomes temporarily disabled, the other can work for a while)

2. Normalizing for time in country. Simply put, if you've only been in the US for a few years, even with the same income, you wouldn't be expected to have the same level of wealth as someone who has lived in country for all their lives.

After these two things have been accounted for, I would expect that there would still be a gap, just not as large. The remaining gap would then be, I believe, primarily attributable to differences in education or IQ (with education significantly impacted by recency of immigration) and family size (indicating greater expenses so less wealth accumulation).

To me this report is another example of the misplaced emphasis on advocacacy instead of on methodology that I find too often in the softer sciences, particularly in sociology.

Invisible Scientist said at October 18, 2004 9:23 PM:

I do not know what you mean by "power law" for the distribution of wealth, but the
progressive accumulation of wealth as a function of time, and as a function of the IQ
of the social group, seems to be multiplicative, and hence exponential..

The formula is exponential, as I will derive below, but the validity
of the formula gets INTERRUPTED every 2 generations (approximately) by cyclical depressions
and major wars. In the latter sense, you are right, but before I elaborate on the cyclical
breakdown of the formula, let me first write it down for you to see if you disagree:
In general, approximately, your interest income, in average, grows as
C[n] = C[0]*(1+ %i)^n,
where C[0]= your initial capital, %i = your average percentage annual interest, n= year.
So far, this formula is exponential because (1+%i)^n = exp(b*n) where b=log(1+%i)
so that C[n}=C[0]*exp(b*n).
Now more generally, instead of your annual percentage interest earned %i, we can
write a = "your percentage economic growth that includes your interest income, your
salary as pecentage of your net worth, and all your other income as percentage of your
net worth, all computed in average"
Then your net worth is given by
C[n]=C[0]*(1+a)^n = exp(b*n) where this time b=log(1+a).
Now you might disagree and say that that the number "a" changes every year, so that the
exponential formula cannot be written as above, but if "a" changes every year, then you get
C[n]=C[0]*(1+a[1])*(1+a[2])* ..... (1+a[n]) where a[1], a[2], ..., a[n] represent the
annual percentage growth in your net worth, but once again, this is an exponential growth,
where the lower bound is given by computing b="log(1+a)" where a is among the few lower values
of a[1], a[2], ... a[n]. For simplicity, we can find a modified average of the a[1], ... ,a[n]
and call it "a" to make the exponential formula still valid in C[n]=C[0]*exp(b*n).

But now, I claim that the net worth percentage growth coeffieient "a" above,
is influenced by the average IQ of the individual... Of course, there are geniuses who are
poor for one reason or another, but in average, there is a correlation between
your ability to accumulate wealth and your IQ.
This is why, I claim that IF you agree with the latter observation about IQ and wealth,
is demonstrated byRandall Parker's previous articles, then
it is clear that the coefficient "a" is really an increasing function g = g(IQ) of the average
IQ of the social class, in such a way that g can be negative if the IQ is too low.
This is why
C[n] = C[0]*exp(n*b) where b = log(1+g(IQ)) with g=g(IQ) as above.

But like I said, for some reason, mother nature cyclically makes the formula INVALID
by causing wars, revolutions, or political legislation that results in distrupting the free
market. But whenever there is a free market where the strong people are allowed to do their
free enterprise, the weaker ones simply fall behing EXPONENTIALLY due to the fact that
g is an increasing function i.e. g(x) is less than g(y) whenever x is less than y.

In other words, each social class (separated by IQ groups) has its own exponential
economic progress rate, the exponential progress coefficient b=log(1+g(IQ)) where IQ is
understood to be an average for the social group, just as "g" is an average function,
in such a way that ultimately the higher IQ social groups surpass other groups exponentially fast,
even though the other groups are also progressing exponentially ( in fact, some of the less
competitive groups can see their net worth shrink as a function of time, if g(IQ) is less than zero.

I believe that this formula becomes invalid every 2 or 3 generations, due to natural catastrophes
like wars, revolutions, political legislation against competition, etc., but once competition
is restored, the free market makes the same formula valid, at least approximately.

Randall Parker said at October 18, 2004 9:53 PM:

Jody,

If the reason that each household has lower total assets is due to single parenthood that does not undermine the significance of the result. It is not like the black problem with single parent families is going away in the foreseeable future. They have about 70% (give or take a point or two) illegitimate births.

Hispanics have only twice the illegitimacy rate of whites. That isn't going to get any better either. It is my impression that Hispanic social pathologies such as illegitimacy and drug abuse get worse in later generations.

Oh, and illegitimacy rate is negatively correlated with IQ.

Jody said at October 18, 2004 10:29 PM:

It does undermine the significance of the result as the report implies systematic racism (which is not the case though it will be cited as such) and thus gives a reason to take "corrective" actions ala affirmative action.

As a snapshot, it's a snapshot. If the report were being performed in a vacuum, I would merely note it and move on.

However, the strong focus on race throughout the report as opposed to what I believe are the true causes of the gap (single parents, immigration, education) serves to demagogue the issue rather than trying to solve the issue.

So by demagoguing the issue, the black single parent family/education problem will indeed not go away in the forseeable future (how can you solve a problem if it is not acknowledged outside of Bill Cosby?) and racially divisive politics will continue. As such I see this report as part of the problem (rather than studying the causes, they're choosing to create a talking point for the racial demogogues).

John S Bolton said at October 18, 2004 10:51 PM:

The census' "asset ownership of households:1998 and 2000" also shows this same ten-fold gap, and it has been persisting at much the same ratio for as long as data have been reported. The new effect of a bumpier cyclical divergence could be because of the easier credit for homebuyers in recent years. Latino households are peculiarly lacking in financial assets; which means they need to find zero- or minimal down payment mortgages. Any downturn gets them foreclosed at high rates. The differential household sizes (searching: "while U.S. households") as between these groups, mean that the hispanic # must have ~40% subtracted, and the Asian ~20%, to compare per capita net worth or income medians. The "average income per household member by race" and hispanic origin from the census, gives: non-h white-25k, hisp-12k and asian p.i.-23k. This might explain why, in LACity, they found that ten-fold net worth per capita divergence as between the whites(non-hispanic) and all others. Immigration from these populations in aggregate will not be net taxpayers, not in terms of property taxes or income or capital gains taxes, much less in total. Thus a negative judgement on the immigration policies issues; they have imported poverty and placed burdens on the citizenry.

lindenen said at October 18, 2004 11:01 PM:

Interesting that this study excludes Asians. I wonder how they tend to vote in the US. Just a mixed bag or do specific ethnicities lean one way or the other?

John S Bolton said at October 18, 2004 11:04 PM:

Another effect that can be noted, acting particularly on the hispanic households, from looking at the above type of data, is that the relative improvement of the 70's and 80's seems to have been wiped out during the 90's by continued mass immigration. It shows in the comparative net worth to the majority, from '92 to the present. It wouldn't be that hispanics are more discriminated-against today than 20 or 30 years ago; but the relative positions of net worth and income per person are showing greater differentials.

Derek Copold said at October 19, 2004 6:39 AM:

RE: The Delusional Administration:
"In the summer of 2002, after I had written an article in Esquire that the White House didn't like about Bush's former communications director, Karen Hughes, I had a meeting with a senior adviser to Bush. He expressed the White House's displeasure, and then he told me something that at the time I didn't fully comprehend -- but which I now believe gets to the very heart of the Bush presidency.

"The aide said that guys like me were 'in what we call the reality-based community,' which he defined as people who 'believe that solutions emerge from your judicious study of discernible reality.' I nodded and murmured something about enlightenment principles and empiricism. He cut me off. 'That's not the way the world really works anymore,' he continued. 'We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do.'

"Who besides guys like me are part of the reality-based community? Many of the other elected officials in Washington, it would seem. A group of Democratic and Republican members of Congress were called in to discuss Iraq sometime before the October 2002 vote authorizing Bush to move forward. A Republican senator recently told Time Magazine that the president walked in and said: 'Look, I want your vote. I'm not going to debate it with you.' When one of the senators began to ask a question, Bush snapped, 'Look, I'm not going to debate it with you.'"

Derek Copold said at October 19, 2004 6:40 AM:

RE: The Delusional Administration:
From this link at the NYT:

"In the summer of 2002, after I had written an article in Esquire that the White House didn't like about Bush's former communications director, Karen Hughes, I had a meeting with a senior adviser to Bush. He expressed the White House's displeasure, and then he told me something that at the time I didn't fully comprehend -- but which I now believe gets to the very heart of the Bush presidency.

"The aide said that guys like me were 'in what we call the reality-based community,' which he defined as people who 'believe that solutions emerge from your judicious study of discernible reality.' I nodded and murmured something about enlightenment principles and empiricism. He cut me off. 'That's not the way the world really works anymore,' he continued. 'We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do.'

"Who besides guys like me are part of the reality-based community? Many of the other elected officials in Washington, it would seem. A group of Democratic and Republican members of Congress were called in to discuss Iraq sometime before the October 2002 vote authorizing Bush to move forward. A Republican senator recently told Time Magazine that the president walked in and said: 'Look, I want your vote. I'm not going to debate it with you.' When one of the senators began to ask a question, Bush snapped, 'Look, I'm not going to debate it with you.'"

Randall Parker said at October 19, 2004 12:15 PM:

Jody,

I have become so accustomed to filtering out the bogus leftist claims of systematic racism that I missed them this time around,

Randall Parker said at October 19, 2004 12:24 PM:

Derek, Great article from the NY Times. I fixed the link to make it easier to use..

I'm an empiricist through and through. So I'm in the reality-based community. No wonder I do not identify with George W. Bush.

Of course the Left has its own problems with reality and empiricism. When it comes to human nature the Left denies the results of Darwinism and are still hoping to achieve the New Soviet Man fantasy. Their denial of the genetic basis of IQ and of racial and ethnic differences in IQ amounts to Lysenkoism.

John S Bolton said at October 19, 2004 7:10 PM:

The above quotation, if it correctly characterizes the leading attitude in such circles, shows a damaging growth of the philosophy of fascism in government. They will just act thoughtlessly, and in an unprincipled, incoherent way; since reality is supposedly not greater than their will to act. If facts are presented, such as that immigrants get in each other's way to the extent of creating mass poverty, they'll say we will just act mindlessly and create a new reality. If someone mentions that adults don't learn foreign languages as distinct from some almost useless pidgin, and evidence of this also is the extraordinary gap in net worth which persists; they'll say we can expand any way we want, and create an alternative reality.

crush41 said at October 20, 2004 5:19 PM:

I'm having an awful time trying to find a weblink, but a recent poll released by a black think tank shows Bush has doubled his support among likely black voters from 9% in 2000 to 18% "if the election were held today."

The lion's share of that growth probably comes from social concerns, specifically gay-marriage. Nonetheless, how does that play into your analysis of the Republican party becoming the party of whites (as if it has been otherwise in the past)?

Randall Parker said at October 20, 2004 5:29 PM:

Crush41. There is no way the Republicans are going to get a majority of the black vote.

If the Republicans became totally opposed to low skilled immigration they'd gain some black votes. But at most they'd peak at 30% and I doubt they can even get that high.

John S Bolton said at October 20, 2004 9:32 PM:

We've been told that this importation of diversity is improving things; yet the relative net worth comparison shows that our standards are being brought down with each year's cohorts of anti-merit immigrants. It shows up even more when the household income or net worth per person is used. Setting up menial labor ghetto economies of non-English speaking populations in ever-larger numbers, was going to somehow improve things; but these figures show that public policy of this diversity-valuing kind, is doing horrific damage to our minimum standards. It is not on the up-and-up; it is on the down-and-down.

John S Bolton said at October 21, 2004 9:40 PM:

Regarding other minority groups: Lingxin Hao's "Wealth of Immigrant and Native-born Americans" (search-term) reports that Asian median net worth is ~1/3 that of the majority, in the U.S. The federal reserve's study has an other-than-white-black-latino category with median net worth a bit less than half that of the majority. This seems to be the result of non-English speaking people needing ghettoes, which have to have a low-single family residence pattern. This retards the acquisition of home equity in such populations.

John S Bolton said at October 21, 2004 11:29 PM:

The AP report gave the impression that the above differentials are the result of a history of discrimination. The ups and downs related to the business cycle are a result of last hired, first fired, they implied. I suppose they weren't about to say that the reason some groups are considered last-hired, is because they are lacking in the qualities that other groups tend to have more of. If most immigrants do not add to our per capita wealth, but a great many add to our poverty rates, the third-world advocates have their fallback position lined up: cry discrimination. Then they have another excuse to demand more power for more officials to redistribute more wealth. The conservatives get to say: but we believe in assimilation and the American dream, and we're not racists, we want to share with the entire 3rd world.


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