Title: Pandemic Exacerbates Wealth Inequality, Widening Racial Disparities
In a sad revelation of the pandemic’s impact on wealth inequality, new data from the New York Federal Reserve Bank indicates that white individuals have experienced greater gains in net worth compared to their Black and Hispanic counterparts. According to the findings, the gap between racial and ethnic groups has significantly widened during the pandemic period, further deepening existing disparities.
From the first quarter of 2019 to the second quarter of 2023, white individuals witnessed a staggering 30 percentage point increase in net worth compared to Black individuals. The wealth gap was also apparent when comparing white individuals to Hispanic individuals, with the former seeing a 9 percentage point increase. These statistics are reflective of the unequal financial impact of the pandemic on different racial groups.
The pandemic, marked by substantial government financial support and a strong job market, resulted in a low unemployment rate of 5.3% for Black Americans. Additionally, earnings for the typical Black full-time worker increased by 7.1%. While these developments offer a glimmer of hope, they have not been enough to bridge the wealth gap between racial and ethnic groups.
A major contributing factor to the difficulty in closing the wealth gap is the higher percentage of white households investing in stocks and mutual funds compared to Hispanic and Black households. The concentration of Black wealth in pensions rather than traditional investment channels played a role in the divergence in net worth between racial and ethnic groups.
Further exacerbating the problem, financial asset prices saw a significant increase in 2021 following the reopening of the economy. Although some declines occurred in 2022, the gains were not fully offset, thus widening racial wealth disparities even more.
The pandemic hit Black-owned businesses particularly hard, as they were concentrated in industries that were most severely impacted, such as accommodation, food services, retail, health care, and social assistance. This disparity in industry representation further deepened the wealth gap.
While economic conditions are showing signs of improvement for Black households, with rising employment rates, wages, and an increase in Black business ownership, Treasury Deputy Secretary Walley Adeyemo recognizes that more policy interventions may be necessary to effectively address the wealth gap.
It is crucial to note that the Charles Schwab Foundation supports the AP’s reporting on financial literacy but is independent from Charles Schwab and Co. Inc. The AP retains its editorial independence and integrity.
As we grapple with the aftermath of the pandemic, it is imperative that policymakers and society as a whole take a closer look at the structural issues fostering wealth and racial disparities. Unless swift action is taken to address these entrenched inequities, we risk perpetuating cycles of inequality that harm individuals, families, and communities for generations to come.