Black households have never recovered from the Great Recession, according to a just-released report from the University of Wisconsin–Madison on racial wealth gaps.
One of the worst economic declines in U.S. history, the Great Recession occurred between December 2007 and June 2009. During the Great Recession, the country experienced the a collapse in the housing market.
Because of the financial vulnerability of Black Americans at the time, the Great Recession hit them harder than other Americans. The unemployment rate, for example, peaked at 10 percent in 2009, for all Americans, but for African-Americans, it surpassed 16 percent. Unemployment for whites in 2009, was just under 9 percent, The Conversation reported.
The new University of Wisconsin–Madison report illustrates how much the Great Recession increased racial wealth gaps.
Authored by University of North Carolina at Chapel Hill professor Fenaba R. Addo and Duke University Professor William A. Darity Jr., “Racial Disparities in Household Wealth Following the Great Recession” uncovers why Black and Latino households remain behind white households in wealth and income statistics.
Among the report’s key findings:
- For households in the bottom 20% of the income distribution, white households held a median average of $26,340 in assets compared with $1,900 in the assets of Black families.
- By 2019, white working-class households had nearly three times the median wealth of Black professional-class households (and almost six times the wealth of Black working-class households).
- On average, Black heads of households with a college degree have only two-thirds of the net worth of white heads of households who never graduated from high school.
- Before the Great Recession, the net worth of white households was eight times that of Black households. Following the “recovery” period, white households had a net worth 10 times the net worth of Black households.
College Debt also Weighed Heavily on Black Households
“Part of the reason young Black professionals are less likely to be doing well is because they had to go into debt to finance their college education,” Tim Smeeding, a distinguished economics and public policy professor at UW-Madison, explained to the Milwaukee Journal Sentinel. “They were less likely to have their college paid for by parents and grandparents.”
On the contrary, working white households are more likely to receive financial help from family and less likely to be jailed or imprisoned for criminal offenses, Smeeding pointed out.
Locked Out of Homeownership
Homeownership remains one of the major drivers of wealth. The housing crash affected Black households disproportionately. The targeting of Black and Latino households for subprime mortgages led to a more significant loss of homeownership.
Black households, which have historically lagged in homeownership, have never recovered from the Great Recession decline in homeownership.
“To be thinking about homeownership, you’re going to need a decent credit rating, some sort of a job history, and you can’t have a lot of debt,” Smeeding said. “If you’ve got student loan debt, which you have to repay, and this is your first good job, you’re much less likely to get well-rated, and it will be more expensive to buy a home.”