Is the Recession Racist?
Posted: August 3rd, 2011 | Author: Joe | Filed under: Economy | Tags: Debt, Economy, Recession, Wealth | 1 Comment »The Great Recession is the most racist recession in generations!
At least that’s the implication in the CNN Money story titled: Recession worsens racial wealth gap
It all revolves around the “wealth gap.” There’s been much chatter about the gap between rich and poor since 2008, and the writers of this CNNMoney story (and others) seem to think the gap is due to race.
Can a recession be racist? Is the wealth gap really race based?
Here’s the breakdown of the effects of the recession along “race lines”…
The wealth gap (2009).
The story relies on data from a 2009 study by the Pew Research Center, which found that:
“[T]he median wealth of white households was 20 times that of black households and 18 times that of Hispanic households.”
The study defines household wealth as:
“the sum of a family’s assets minus the sum of its debts.”
Assets include:
- homes
- cars
- savings accounts
- financial investments
Debts include:
- mortgages
- auto loans
- credit card debt
- “other things”
I’m not sure what they group into “other things”. Presumably other debt?
Regardless, the study found that while the Great Recession hammered just about everyone’s wealth, the gap between white households and black or Hispanic households is the widest it has been since 1984, when the government began publishing such data by ethnicity.
The AP puts it differently:
“The recession and uneven recovery have erased decades of minority gains, leaving whites on average with 20 times the net worth of blacks and 18 times that of Hispanics, according to an analysis of new Census data.”
The wealth of blacks vs. whites.
The Pew study uses the data from the Census Bureau to highlight the disproportionate effect of the housing market on blacks and Hispanics.
The study acknowledges that:
“The wealth of white households in America has always been greater than black and Hispanic households. But the recession widened the gap significantly”
Why would the recession widen the gap significantly? That implies that those at the bottom fell farther or those at the top rose greater or a combination of both?
Remember that talk above about an “uneven recovery”?
Why it isn’t a race thing.
Dig a little deep and you start to see inklings that even the AP and CNN know that this is not a race-based issue:
“the wealth of white households has probably benefited from the rise in stock prices over the last few years, since a much higher share of whites own stocks.”
If this were really due to race, then we’d be seeing ads from ETrade, Scott Trade, Fidelity, etc.. stating things like:
“$7 online trades*”
* Whites only
or using phrases like
“Minorities need not apply”
Since this is clearly not happening, I submit a better use of the Pew and media’s time and energy would be to conduct a study analyzing the wealth gap in terms of general education and financial education.
Outright racial discrimination is simply not legal, and not present in the majority of the U.S. any longer. Certainly not to the extent that would be necessary to “keep minorities down” in the wealth gap on purpose.
The real problem with these kinds of reports and studies is that it allows people to remain distracted by issues that are no longer real (i.e. racial discrimination) at the expense of ignore real causes of the problem like education and general financial savvy.
I may be going out on a limb here, but I think that most blacks don’t invest in the stock market because they simply don’t hear family members or community leaders talking about assets and investing and building wealth. They get no exposure to that. Instead, they hear about racial discrimination and how white people want to keep them down, all while they can’t do it alone and need a government program to do it for them.
Nobody ever got wealthy living on public assistance.
Further evidence
The study goes on to make the following points:
- The main asset of minorities is their home
- older whites are more likely to have 401(k) retirement accounts or other stock holdings.
If your biggest asset was your home, then you’re definitely at the lower end of the wealth scale after the historic housing bubble burst. But is that a racial thing?
The AP article points to the “uneven recovery” as the culprit to the wealth gap being so large this time around:
“What’s pushing the wealth of whites is the rebound in the stock market and corporate savings, while younger Hispanics and African-Americans who bought homes in the last decade… are seeing big declines”
Also according to the study, Hispanics are more likely to be employed in the construction industry and more likely to live and buy homes in states such as California, Florida, Nevada and Arizona – each at the forefront of the real estate bubble.
Again, is that a race thing? Is there a law stipulating that Hispanics can only go into construction?
The media and government policy wonks are now lamenting that this pushes our country further into “what the Kerner Commission characterized as ‘two societies, separate and unequal,’”
Focusing on race does nothing but perpetuate this. Instead, we should focus on introducing concepts of personal finance to more minorities. Educate them instead of indoctrinate them into believing that they need a government handout to survive.
It’s nice to see someone besides myself talking about these bigger issues.
Your comment, “Nobody ever got wealthy living on public assistance.” is right on.
All we hear from minority leaders is how there is a gap between whites and minorities. We NEVER hear about how minorities need to buck up and start making wise decisions.