Americans who were left behind as the country pulled out of the Great Recession — African Americans, Hispanics and people without college degrees — saw large gains in net worth over the past three years, the Federal Reserve reported Wednesday.
But the improvements didn't narrow the inequality gap: The share of U.S. income held by the top 1 percent of households reached 24 percent in 2016, a record high, and the median net worth of white households, at $171,000, was nearly 10 times larger than for black households.
The findings suggest that although a robust economy has benefited all economic groups, the wealthiest and most educated have been in a position to benefit even more because they began with such a significant advantage.
“The gap between the haves and have-nots hasn’t closed in recent years. It still remains a gulf,” said Mark Zandi, chief economist at Moody’s Analytics. “These groups have a lot of financial catch-up to do.”
Even so, the gains of the past three years marked a significant shift from 2010 to 2013, when wealth fell for all racial and ethnic groups except whites.
Every slice of the United States — young, old, rich, poor, black, white — saw their incomes grow and the value of stocks, homes and other assets climb over the past three years.
Economists said the Fed report is an encouraging sign that the recovery from the devastating Great Recession and financial crisis of 2008 is picking up steam as more people are able to get jobs, pay off debt and invest more.
The Survey of Consumer Finances, published every three years, is considered a strong barometer of Americans’ household wealth because it queries more than 6,200 households about a wide array of assets, including salary, stock portfolios, and home and car ownership.
For the first time since the crisis, a majority of Americans have money in the stock market, the Fed reported. The tally includes all investments in stock, whether through a pension, a 401(k) retirement plan or a brokerage account
“We’re glad the recovery is spreading to a lot of households,” the report said.
Household wealth for African American and Hispanic families and Americans without college degrees or high school diplomas rose the fastest of all groups from 2013 to 2016, according to the Fed’s Survey of Consumer Finances, which surveys more than 6,000 households about their pay, debt and other finances.
Black households went from $13,600 in net worth in 2013 to $17,600 in 2016, a gain of almost 30 percent. Hispanic households went from $14,200 to $20,700 over the same time frame, a 46 percent increase, the Fed reported.
Net worth includes all the assets a family has: homes, vehicles, savings accounts, retirement funds, and other stock and bond funds.
The widespread gains were driven largely by people getting back to work. The unemployment rate has fallen substantially in recent years, from 7.5 percent to 5 percent last year.
As more minority workers found jobs, those families were able to save money and pay off debt. Many states also have raised the minimum wage in recent years, giving a boost to low-skilled workers in fast food and retail.
“The 2014 midterm elections ushered in a whole new era of higher minimum wages at the state and local level. Many of the increases kicked in starting in 2015,” said economist Diane Swonk, founder of DS Economics.
The construction sector also has been adding employees at a rapid rate in the past several years, said Ken Simonson, chief economist at Associated General Contractors of America.
“Many of these construction jobs are held by workers with a high school education,” Simonson said, and the wages are generally higher in construction than in sectors such as retail.
But despite the larger percentage gains, the median net worth of African American and Latino families remained below $21,000.
“White households had a head start in rebuilding wealth relative to black and Hispanic households,” said Valerie Wilson, director of the Economic Policy Institute’s program on race, ethnicity and the economy. “Black and Hispanic households see larger percentage gains simply because they were starting from a lower level.”
Among the factors that contribute to disparities in net worth: homeownership rates, retirement savings and student debt.
More than 70 percent of white families own their homes, compared with less than half of black and Hispanic families. Among homeowners, white families hold higher levels of equity in their homes.
Sixty percent of white families reported having retirement savings, double the rate of black and Hispanic families. White families are also twice as likely to own a business.
And black families were the most burdened by education loans, with 31 percent reporting having such debt, compared with about 20 percent of Hispanics and whites.
Fed economists offer other potential reasons for the racial wealth gap: White households are older, more highly educated, more likely to have received an inheritance, and less likely to be run by a single parent than their black and Hispanic counterparts.
But even among families headed by someone with a college degree, median net worth for white families is substantially higher at $397,100 — compared with well below $100,000 for black and Hispanic families.
“In dollar terms, blacks and Hispanics are continuing to fall further behind,” said Caroline Ratcliffe, a senior fellow at the Urban Institute who focuses on asset and wealth building.
The wealth gap also grew for those with college degrees and those without. Families led by someone with only a high school diploma went from $54,100 in net worth in 2013 to $67,100 in 2016, a 24 percent gain.
But people with college degrees have a median net worth of $292,100, over four times as much as those without bachelor’s degrees. Their wealth increased by only 2 percent over the past three years, but those households were already far ahead of people without higher-education degrees. The wealthiest and best-educated families continued to pull away from everyone else.
“Shares of income and wealth held by affluent families have reached historically high levels,” the Fed wrote in its report.
The report showed growing income inequality over the past three decades. In 1989, the top 1 percent held only 17 percent of the nation’s income. The bull market on Wall Street and surging prices for mansions around the world helped the super rich accumulate more wealth.
As the mega-wealthy have had their share of the total pie grow, the bottom 90 percent have lost ground. Last year, the bottom 90 percent took home less than half of the nation's total income for the first time since the Fed began calculating this statistic in the 1980s. In 1992, the bottom 90 percent captured more than 60 percent of the income. It has been a steady decline since.
Economists said the large financial gains made by blacks and Hispanics were largely explained by the fact that the two groups have far less money to begin with, compared with whites, and so any increase as a result of the nation’s economic recovery would appear to be disproportionately large.
“You’re looking at people with lower net worth, so when the economy recovers, you are going to see them benefit disproportionately as a percentage,” said Jeffrey Eisenach, an economist and managing director at NERA Economic Consulting, which released a study in December on Latino prosperity.
“If you’re poor and you go through a tough period, you use all your savings to get through it,” Eisenach said. “If you go from having very little to doubling that, you still may not have very much, but you see a big percentage gain."
