Blacks Narrow Wealth Gap

By Ann Brown
www.blackenterprise.com

African Americans are getting wealthier--but not as wealthy as the national average, according to a study by the Consumer Federation of America, a nonprofit association of pro-consumer groups, and BET.com.

According to the Federal Reserve data used in the analysis, the net worth of the typical African American household increased from $5,919 in 1989 to $19,010 in 2001. This is an increase of 221%. All households in the U.S. saw an increase of only 33% for the same period. However, black households are still behind the nationwide median average of $86,100 in 2001, according to Stephen Brobeck, executive director of the Consumer Federation. And while blacks have narrowed the "wealth gap," they still lag behind the rest of the country.

The study credits the boost for black households to a rising rate in homeownership. Census Bureau statistics for the third quarter of 2003 show that 48% -- almost half of all African Americans -- are homeowners, compared to the national average of 68.4%.

But BLACK ENTERPRISE economist Dr. William Spriggs and executive director of research and public policy at the National Urban League Institute for Opportunity & Equality, says other factors are influencing this important area of wealth building. "The increased value in homes--which stalled over 1998 to 2001 in the data--may have reflected the recovery of urban centers and the price increase from gentrification and the shift of African Americans to the inner suburbs."

Spriggs continues, "The huge difference [between black household income and the national average] has to do with both the value of whole holdings [insurance, stocks, and homeownership, etc],” where whites, he says hold a higher share and larger value for each type of asset. "This is the legacy of over 100 years of Jim Crow, and the limits placed on African American ownerships of urban land through racial covenants that limited African American homeownership until the middle of the 20th century."

The discrepancy also points to other differences between black and white households, says Brobeck, with black families having lower incomes and lower inheritance. But he remains optimistic, noting the significance of a more than 200% increase in net worth among Africans Americans.

But "It will be a considerable amount of time to close the wealth gap," says Spriggs. "The major way wealth is accumulated is over generations, not over lifetimes. [Until] there… [is a] more dramatic closing of the income gap," disparities will continue to exist.

So does this mean African American's will be disproportionately impacted by the housing downturn?

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Originally posted by lil_rattler:
So does this mean African American's will be disproportionately impacted by the housing downturn?

Yes. I have seen it here in St. Louis that Black communities where ahead of the curve (last summer) in getting hit with foreclosures. Since the stock market is holding and we have fewer of our assets in stocks, compared with housing which is falling like a rock, we MAY end up worse off than we were before, seeing that many will run up their credit cards and such while trying to save their homes.