Despite increases in income, wealth disparities by race widened during the pandemic, report shows

NEW YORK (AP) — A strong performance in financial markets, particularly a big gain for the stock market in 2021, helped reinforce existing trends in wealth inequality during the pandemic, new data released this week shows. Is.

According to a report from the New York Federal Reserve Bank, from the first quarter of 2019 to the second quarter of 2023, the real net worth of white individuals became 30 percentage points and 9 percentage points higher than that of Black and Hispanic individuals, respectively.

This period featured remarkable levels of government financial support and a surprisingly strong job market after the initial shock of the pandemic. The unemployment rate for Black Americans in particular is now 5.3%, near a record low, while the overall unemployment rate is 3.7%. Earnings for the typical Black full-time worker have increased 7.1% compared to before the pandemic.

The wealth gap is more difficult to close because a large number of white households traditionally have money in stocks and mutual funds. A separate Fed survey shows that by 2022, about 65.6% of white households had invested in stocks, compared with 28.3% for Hispanic households and 39.2% for Black households.

“The study really shows a gap between making a profit in terms of income and closing that gap in terms of wealth,” said Janelle Jones, vice president of policy and advocacy at the Washington Center for Equitable Growth.

While government support like increased unemployment benefits and stimulus checks helped prevent a COVID-induced recession, financial asset prices soared as the economy reopened through 2021 that racial wealth disparities widened. And while market-linked assets declined in 2022 when the Federal Reserve sharply raised interest rates, “those declines did not fully offset earlier gains,” according to the New York Fed.

“Much of the difference in net worth by race and ethnicity since 2019 can be attributed to divergence in the real values ​​of financial asset holdings” – including the fact that Black households own more of the stock, the report’s authors wrote. In comparison, more wealth is concentrated in pensions. Mutual funds and exchange-traded funds, or ETFs.

The New York Fed found that more than 50% of dark financial assets are invested in pensions. Less than 20% of black money is stored in private businesses, corporate equities and mutual funds. In contrast, less than 30% of white financial wealth is invested in pensions, while about 50% is invested in businesses, equities and mutual funds.

“Black workers are still more likely to be unionized, which could play a role in the pension story,” Jones said. “But how people are exposed to the ability to invest in the stock market — whether it’s something they grow up doing — we know that for white families it’s different than it is for people of color.” Black family members are less likely to receive an inheritance, he said.

During the pandemic, the real value of Black-held financial assets fell below 2019 levels in 2022 and continued to decline, while the real value of Hispanic-held financial assets fell below 2019 levels in 2022 and stabilized . Neither group’s real financial assets have returned to 2019 values.

Owning a business is another component of financial wealth, and disparate data shows that Black-owned businesses faced a harder time during the pandemic.

While less than 10% of all U.S. business owners are Black, Black-owned businesses were also more concentrated in those industries when COVID first spread, according to an Economic Policy Institute analysis of government data. In April of 2020, more than 40% of Black business owners reported they were not working, while only 17% of white business owners reported.

The industries with the highest total job losses at the beginning of the pandemic were also sectors where more Black-owned businesses were concentrated — housing, food services, retail, health care and social assistance. According to the Bureau of Labor Statistics, approximately 28% of black-owned businesses are found in these industries, while white-owned businesses account for just under 20%.

Still, Treasury Deputy Secretary Walley Adeyemo said Wednesday that economic conditions for Black families have improved since before the pandemic, citing rising employment and wages for Black Americans and increases in Black business ownership and stock market participation. Improvement is taking place.

Adeyemo suggested that some “policy prescriptions” may be needed to balance the distribution of financial wealth in the US.

“The gap between black and white wealth in America is still huge,” he said.

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