NEW YORK (AP) – The strong performance of financial markets, particularly the stock market's strong rally in 2021, helped entrench existing trends in wealth inequality during the pandemic, researchers announced this week. This is shown by new data.
From the first quarter of 2019 to the second quarter of 2023, the real net worth of white people exceeded the real net worth of blacks and Hispanics by 30 percentage points and 9 percentage points, respectively, according to a New York Fed report.
This period saw amazing levels of government fiscal support and a surprisingly robust job market after the initial shock of the pandemic. The unemployment rate for black Americans in particular is currently 5.3%, near an all-time low, compared to an overall unemployment rate of 3.7%. The typical Black full-time worker earned 7.1% more than before the pandemic.
Closing the gap between rich and poor is even more difficult because traditionally, significantly more white households hold their money in stocks and mutual funds. According to another Fed study, about 65.6% of white households will be investing in stocks in 2022, compared to 28.3% of Hispanic households and 39.2% of black households.
“This study really shows that there is a difference between taking advantage and closing the gap when it comes to income and wealth,” said Janelle Jones, vice president of policy and advocacy at the Washington Center for Equitable Growth. Stated.
Government aid such as increased unemployment benefits and stimulus checks helped stave off the coronavirus-induced recession, but as economies reopened through 2021 financial asset prices rose significantly, increasing the racial wealth gap. has expanded. And while these market-linked assets declined in 2022 when the Federal Reserve rapidly raised interest rates, “the decline did not fully offset the earlier gains,” according to the New York Fed.
“Much of the discrepancy in net worth by race and ethnicity since 2019 can be attributed to discrepancies in the real value of financial asset holdings,” the report authors write.–Black households This includes the fact that the company concentrates more of its assets in pensions than in stocks. Investment trusts and exchange traded funds (ETFs).
According to a study by the New York Fed, more than 50% of black people's financial assets are invested in pensions. Less than 20% of black wealth is held in private companies, corporate stocks, and mutual funds. By contrast, less than 30% of whites' financial assets are invested in pensions, and about 50% are invested in companies, stocks, and mutual funds.
“Black workers are still more likely to be unionized, which may be contributing to the pension problem,” Jones said. “But we know that how people are exposed to the ability to invest in the stock market, whether it's done from an early age, is different for white families versus people of color. I know that.'' Black families are less likely to inherit property, she says.
During the pandemic, the real value of financial assets held by Black people fell below 2019 levels in 2022 and continued to decline steadily thereafter, but the real value of financial assets held by Hispanics fell in 2022 below 2019 levels. It fell below the standard and stagnated. Real financial assets for neither group have recovered to their 2019 values.
Owning a business is another component of economic wealth, and separate data shows that Black-owned businesses have fared worse during the pandemic.
Less than 10% of all U.S. business owners are Black, while Black-owned businesses were hit hardest when the coronavirus first spread, according to an Economic Policy Institute analysis of government data. He was focused on the industry. As of April 2020, more than 40% of Black business owners reported not working, compared to just 17% of white business owners.
The industries with the highest total job losses early in the pandemic were also those with high concentrations of Black-owned businesses, including accommodations, food services, retail, health care, and social assistance. According to the Bureau of Labor Statistics, about 28% of black-owned businesses are in these industries, compared to just under 20% of white-owned businesses.
Still, Deputy Treasury Secretary Wally Adeyemo said Wednesday that employment and wages for Black Americans were rising even before the pandemic, and Black business ownership and participation in the stock market was increasing. He said the economic situation is improving.
Adeyemo suggested that some “policy prescriptions” may be needed to equalize the distribution of financial assets in the United States.
“The wealth gap between blacks and whites in America remains too large,” he says.
___
“The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. This independent foundation is independent of Charles Schwab Company and the Associated Press is solely responsible for its journalism.”
