40% of Black Families Make Less Than $20,000/year

The COVID-19 pandemic has inflicted devastating furnishings on the U.S. economy, with task losses  particularly concentrated among women, minorities, and low-wage workers. Economists have described the uneven and diff economic recovery from the COVID-19 recession equally a "G-shaped" recovery, characterized by divergent recovery trajectories for the affluent relative to those of less means. While considerable attention has been devoted to examining the preexisting disparities in labor market outcomes that left some households more vulnerable than others to the COVID-19 recession, less attending has been paid to the role of wealth in determining a household's ability to buffer the pandemic'due south economic shocks.

Wealth (defined as the divergence between a household'southward assets and debt) provides a critical safety net to households during economic downturns. Wealth holds several advantages over wages every bit an economic resource: In particular, income from wealth is taxed at much lower rates than income from piece of work, and wealth can serve every bit a source of savings to absorb temporary setbacks such as a loss of employment income.

A previous Hamilton Project analysis revealed staggering inequalities in wealth held by white versus Black households. Using updated data from the Survey of Consumer Finances (SCF) for 2019, nosotros find that the Black-white wealth gap persisted heading into the COVID-19 pandemic, leaving Black households with far fewer resources to weather the storm.

Wealth Inequality Preceding COVID-19

In 2019 the median white household held $188,200 in wealth—7.viii times that of the typical Black household ($24,100; figure 1). It is worth noting that levels of boilerplate wealth, which are more heavily skewed by households with the greatest amounts of wealth, are higher: white households reported average wealth of $983,400, which is six.9 times that of Black households ($142,500; SCF). While median wealth is more reflective of the typical household, the scale of average wealth is indicative of the outsized levels of wealth held by the richest households.

The Black-white wealth gap today is a continuation of decades-long trends in wealth inequality, as shown in figure 1. Over the past xxx years, the median wealth of white households has consistently dwarfed that of Black households—ranging from a gap of $106,900 in 1992 to $185,400 in 2007 (both adjusted for aggrandizement to 2019 dollars). Furthermore:

• In the second quarter of 2020, white households—who account for 60 percent of the U.S. population—held 84 per centum ($94 trillion) of total household wealth in the U.S.
• Insufficiently, Blackness households—who account for 13.iv percentage of the U.S. population—held just 4 percent ($4.vi trillion) of full household wealth.

Buffering Economical Shocks during Downturns

The ability of wealth to buffer economic shocks can provide critical support to households during economic downturns—notwithstanding non all households have equal holdings of wealth at their disposal. The Blackness-white wealth gap serves every bit an important gene in understanding how economic recoveries tin become uneven and unequal beyond demographics. Black and white households both experienced a reduction in median wealth from 2007 to 2010 during the Peachy Recession. Despite white households property college levels of wealth than Black households throughout the Great Recession, the decline in median wealth for white and Blackness households was nearly equal during this period: the median white household experienced a 27 percent decline in wealth from 2007 to 2010 compared to a 28 percent decline for the median Blackness household (effigy 1; authors' calculations).

Yet in the aftermath of the Great Recession, white households began to recover the wealth they had lost: wealth for the median white household rose by ane percent from 2010 to 2013. By contrast, wealth for the median Black household continued to fall—declining past 23 pct during this period (figure i; authors' calculations). These divergent changes in wealth in the years immediately post-obit the Bang-up Recession illustrate how recoveries from recessions do not necessarily benefit all households equally. In fact, the Cracking Recession exacerbated the Blackness-white wealth gap and left Black households more vulnerable to the current COVID-19 recession.

The Intersection of the Black-white and Gender Wealth Gaps

In addition to the Blackness-white wealth gap, a gender wealth gap (and its intersections with race) reveals some other dimension of wealth inequality. We use microdata from the 2019 Survey of Consumer Finances (SCF) to analyze how the Blackness-white wealth gap varies past gender throughout the life wheel. Because the SCF is a household-level survey and the vast majority of householder respondents within married couples are men, our analyses involving gender are limited to single households. In single households, male person and female person respondents are each representative of their personal holdings of wealth.

Figure ii shows that single white men commencement with the highest median wealth, which continues to outpace that of unmarried white women and single Black men and women throughout the life wheel. The median wealth of single white men nether the age of 35 ($22,640) is three.v times greater than that of unmarried white women ($6,470), xiv.6 times greater than that of unmarried Black men ($1,550), and 224.2 times greater than that of single Black women ($101). Past the historic period of 55 and older, single white men concur ane.three times more wealth than single white women and 8.ane times more wealth than single Blackness men. The median wealth of single Blackness women trails slightly backside that of single Black men until the age of 55, when single Black women hold $twoscore,760 in median wealth compared to single Black men with $27,100.

Evaluating wealth gaps by race also every bit gender provides clear testify of the relatively meager resources that women—Black women, in item—have to withstand the economical shocks of the COVID-xix recession. Labor market information show how women have been striking particularly during the COVID-19 recession: of the 1.1 million people who left the labor market in September 2020, over 860,000 were women. Black women have faced particularly large job losses; the share of Black women with a chore decreased past eleven.0 percent points from February to April 2020 compared to a 9.9 percentage point reduction in the share of white women with a chore and a ix.2 per centum bespeak decline in the share of white men with a job.

Information technology is important to annotation that these racial and gender wealth gaps cannot simply be attributed to differences in household savings patterns or cashflow direction challenges; rather, they are the outcome of public policy decisions spanning centuries throughout U.S. history. For example, landmark progressive laws, ranging from the New Deal to the formation of Social Security, excluded many occupations (such as domestic workers) widely held past Blackness women—the majority of whom remain excluded from Social Security today. Accordingly, it is imperative to evaluate wealth gaps past both race and gender to fully understand the depth and breadth of continued wealth inequality in the U.S. today.

Inherited Wealth

Though wealth accumulates with age, the persistence of wealth gaps at every stage of the life cycle farther reflects disparities in the intergenerational transfer of wealth via inheritances. White households are substantially more likely to wait and receive inheritances than Black households. Figure 3 shows that in 2019, 17 percent of white households expected to receive an inheritance compared to just 6 percent of Black households. These differing expectations of inheritance receipt comport with disparities in the actual occurrence and magnitude of intergenerational wealth transfers: 30 per centum of white households received an inheritance in 2019 at an boilerplate level of $195,500 compared to ten per centum of Black households at an average level of $100,000. Considering inheritances are lightly taxed, inequalities in inheritances play a pregnant role in perpetuating a Black-white wealth gap that spans generations.

The Black-White Wealth Gap Intensifies the Effects of Labor Market place Disparities

Racial disparities in wealth tin intensify the severity of income shocks, as households with lower levels of wealth accept fewer resources available to temper the adverse economic impacts of task loss. For Black households who have reported disproportionately high levels of unemployment—and even more than and then during the COVID-19 recession—this means the Black-white wealth gap can exacerbate the effects of the negative labor market outcomes that Black households are more probable to face.

When comparing the labor market distress of Black families relative to white families, it is important to consider trends in both united nationsemployment and underemployment rates. Unemployment—the number of people who do not have a job and are actively seeking work—is a common indicator of labor market place strength. However, an equally important measure is underemployment, defined as the number of people who currently piece of work part-time simply would rather have a full-time chore and people who desire and are able to take a job but have not sought work in the final four weeks. Underemployment can more broadly capture the share of the population that is ready and willing to work more if employers were hiring.

Rates of unemployment for Blackness individuals—whether measured past the traditional, narrower metric of unemployment ("U-3") or the broader metric of underemployment ("U-6")—have been consistently higher than unemployment among white individuals in every year since 1994 (authors' calculations). Effigy four focuses on unemployment and underemployment rates showtime in January 2019 through September 2020 of the COVID-19 recession. At the onset of the pandemic, unemployment and underemployment rates for Black and white Americans more than doubled from March to Apr 2020. Unemployment and underemployment peaked in Apr 2020 for both groups, but these rates were significantly higher for Black Americans. More than one quarter of Blackness Americans were classified as underemployed at its peak—one.5 times the underemployment rate for white Americans. Notably, even the narrower measure out of united nationsemployment for Black Americans surpassed the broader measure out of underemployment for white Americans since June 2020. As of September 2020, the unemployment charge per unit of Black Americans was however 5.five percentage points college than that of white Americans, while the underemployment rate of Black Americans was 7.ii percentage points higher than that of white Americans.

One reason that labor market outcomes in the COVID-19 recession have been worse for Black workers is that they are more probable to be employed in industries hitting hardest by the COVID-19 recession. Three of the hardest-striking industries by the pandemic in terms of chore loss—retail trade, transportation and warehousing, and leisure and hospitality—are amidst the top ten employers of Blackness workers. When information technology comes to outcomes for Blackness-endemic businesses during the COVID-xix recession, the statistics are likewise grim: analysis by the Economical Policy Institute found that 28 percent of Black-owned businesses were in industries with the largest full task losses relative to just 20 percent of white-endemic businesses. Although Blackness-owned businesses only represent a minority of all businesses, they are disproportionately probable to operate in sectors most severely affected past the COVID-nineteen pandemic and associated shutdowns.

Blackness Households Face Higher Rates of Distress during COVID-xix

With lower levels of wealth prior to the pandemic, compounded by continued labor market disparities during the pandemic, access to emergency savings and other assets are crucial for Black households to withstand the COVID-nineteen recession. Yet black households have substantially less emergency savings than white households: the average value of liquid avails among white households was $8,100 in 2019 compared to $one,500 for Black households. Furthermore, 72 percentage of white households say they could go $three,000 from family or friends compared to 41 percent of Blackness households.

Racial disparities between Black and white households are nowadays in holdings of nonliquid assets every bit well. In 2019, 73 percentage of white families compared to 42 per centum of Black families owned a domicile. Black families are non just less likely to ain a habitation, only their homeownership too yields lower levels of assets. In 2019 the typical white families' home value was $230,000 compared to $150,000 for Black families. Similarly, of the $thirty.8 trillion in total real estate assets reported in the second quarter of 2020, white households held 78 percentage ($23.ix trillion) compared to v per centum ($1.6 trillion) held by Black households.

With fewer nonliquid avails to borrow against or sell, Black households were particularly vulnerable to economical shocks heading into the COVID-nineteen pandemic. For some Blackness households, this has led to taking extraordinary measures to stay afloat. Leveraging data from the Survey of Household Economic science and Decisionmaking (SHED) forth with the SCF, we can observe how families accept been utilizing their retirement assets to weather the COVID-19 recession.

Despite holding lower levels of retirement assets, young Blackness families were more likely to borrow from or cash out their retirement savings during the electric current crisis. Among households with positive retirement disinterestedness, figure five shows that the median value of retirement disinterestedness for households with a household head nether the age of 35 in 2019 was $5,000 for Black Americans compared to $7,500 for white Americans. Although Blackness households tended to hold lower levels of retirement equity at this historic period, 14 percent of Black Americans under the historic period of 35 borrowed from or cashed out their retirement savings compared to just iv percent of white Americans under the age of 35 in July 2020 (SHED; authors' calculations). Figure five shows that the median value of retirement equity among white households with a household head at least 55 with retirement avails was 2.4 times that among Black households—yet only ten percent of white Americans over the historic period of 55 borrowed from or cashed out their retirement savings compared to 22 percent of Blackness Americans over the historic period of 55 (SHED; authors' calculations).

Decision

In the brusk-term, renewed fiscal support is needed to curb the economic pain many households  are experiencing because they are unable to absorb the economic shocks of the COVID-19 recession. More than specifically, policies aimed at providing income back up and strengthening the condom cyberspace, along with implementing automatic stabilizers that trigger expansions of economic aid during fiscal crises, are critical during this time.

Withal while a stronger safety cyberspace and additional income support tin provide families with immediate protection against economic crises, it is unlikely to provide them with the long-term stability to prepare for future shocks in the same way that wealth can. Appropriately, when designing policies to reduce the Black-white wealth gap, avoiding the conflation of income with wealth is imperative. In fact, our previous Hamilton Project analysis showed that the Black-white wealth gap remains even among households of similar incomes. Neither differences in income nor differences in educational attainment, indebtedness, or a host of other demographic and socioeconomic indicators tin can fully business relationship for the persistence of the Black-white wealth gap.

Indeed, endmost the Black-white wealth gap volition require that the deep and systemic economic disparities brought about past centuries of discriminatory policies are addressed through meaning structural changes beyond a range of policy areas. As discussed in a previous Hamilton Project assay, these policies range from redlining and the denial of fiscal services to minority communities, to the Jim Crow Era's "Black Codes" strictly limiting opportunities in many southern states—all of which contributed to the disproportionate accumulation of wealth held by white households while exacerbating the economic fragility of many Black households. Overcoming the furnishings of these policies volition necessitate substantive and systemic changes in education, small business, healthcare, broadband access, tax reform, and broader place-based policies.

The COVID-19 pandemic underscores the importance of the Blackness-white wealth gap and its bear upon on the power of households to weather the economical shocks acquired by recessions. By expanding policymakers' focus non simply on strengthening the safety net and income supports, but also on the inclusion of systemic and structural public policy changes beyond a range of areas to shut the Black-white wealth gap, disparities in the ability of Blackness and white households to weather the next economic storm will be profoundly reduced.

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Source: https://www.brookings.edu/blog/up-front/2020/12/08/the-black-white-wealth-gap-left-black-households-more-vulnerable/

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