Tishaura Jones

A new report from the Federal Reserve Bank of St. Louis shows that disparities in wealth across race and ethnicity remain largely unchanged from a quarter-century ago, though it does not consider discrimination or “cumulative disadvantage” as factors because they fall “beyond the scope” of the expertise of the researchers.

Authors William Emmons and Bryan Noeth, senior economic adviser and policy analyst at the St. Louis Fed’s Center for Household Financial Stability, found that white and Asian families continue to be more than twice as likely as Hispanic and black families to have above-median wealth. Wealth is assets minus liabilities.

In inflation-adjusted dollars, the median wealth of a white family in 1989 was $130,102. In 2013, it was $134,008. For an Asian family, the two medians were $64,165 and $91,440. For a Hispanic family, they were $9,229 and $13,900. For a black family, they were $7,736 and $11,184.

Median Hispanic and black wealth levels are about 90 percent lower than the median white wealth level, yet median income levels of Hispanics and blacks are only 40 percent lower. The larger wealth gap, compared to the income gap, “could be due to Hispanics’ and blacks’ in­vesting in low-return assets like housing, as well as to borrowing at high interest rates,” the report stated.

St. Louis Treasurer Tishaura O. Jones said the report shows that – whatever intergenerational cycles of poverty might place African Americans at an economic disadvantage – there are financial habits that can be changed to build wealth from income.

"We fail to realize that a majority of minority communities have financial beliefs and habits that are passed down through generations.” Jones told The American. “We must make asset-building – that is, saving money for emergencies and retirement – attainable in low- to moderate-income families.”

Differences in average age and educational attainment explain very little of the wealth gaps across race and ethnicities, according to the study. In fact, the disparities were starker when comparing only older and better-educated groups – groups that generally are wealthier – across those demographics.

White and Asian families generally have stronger balance sheets than Hispanic and black families, researchers found. “In particular, white and Asian families typically hold a much higher share of their assets in cash or other highly liquid assets than Hispanic and black families,” the report stated, “which buffers the former families from financial emergencies and reduces their recourse to high-cost loans or costly defaults.”

White and Asian families also typically own a broader array of assets, including stock and bond investments and small businesses, in addition to houses and vehicles. “Finally, white and Asian families use much less debt to finance their assets,” the report stated, “improving their cash flow and reducing their exposure to large losses of wealth in the face of declining house or other asset prices.”

Census data show that the black homeownership rate continued to fall through the end of 2014, according to the report. If a black family has any debt, it is likely to be burdened by it, spending a relatively large fraction of its income on debt service.

Their analysis is based on data collected between 1989 and 2013 through the Federal Reserve’s Survey of Consumer Finances. More than 40,000 heads of households were interviewed.

This report is the first in a series titled, “The Demographics of Wealth: How Age, Education and Race Separate Thrivers from Strugglers in Today’s Economy.” The series will explore what race, education and age mean in terms of a family’s ability to thrive financially.

“Other researchers have examined the potential effects of current and/or historical discrimination, cumulative disadvantage, early childhood learning experiences, genetic characteristics, prenatal environments and other factors on levels of wealth in adulthood,” the reporters note. “These explanations, however, fall beyond the scope of our expertise and our ability to assess them based on the Fed’s Survey of Consumer Finances.”

For the full race and ethnicity report and a video summarizing the findings, visit https://www.stlouisfed.org/household-financial-stability/the-demographics-of-wealth/essay-1-race-ethnicity-and-wealth.

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