Posts Tagged "race"

Unbalanced scales

Social Security Eases Racial Disparities

Social Security is a major source of income for most retirees. It is even more important to blacks and Hispanics in a nation that is becoming increasingly diverse.

Social Security is helping to even out the racial and ethnic inequities in income and wealth that exist in the working population and continue in old age, according to a study by the Center for Retirement Research for the Retirement and Disability Research Consortium.

The researchers estimate how much Social Security reduces this inequality by comparing retirement wealth for white, black, and Hispanic-Americans.

Wealth is defined broadly to include obvious things like home equity and financial assets such as 401(k) retirement accounts, certificates of deposit, and money market accounts. In addition, the researchers converted the income that workers get from Social Security and defined benefit pensions into wealth by estimating the total value today of their future benefit checks.

The estimates of wealth, when Social Security is excluded, reveal enormous disparities. The typical white worker in his early- to mid-50s can expect to have about $177,000 in non-Social Security wealth in retirement, compared with just $24,000 for blacks – about a 7 to 1 ratio. Hispanics have $35,000 – or a 5 to 1 ratio.

These ratios improve dramatically, dropping to roughly 2 to 1 when Social Security is added in. The white worker has $378,000 in total wealth, compared with $173,000 for blacks and $186,000 for Hispanics.

Social Security’s progressive benefit formula reduces retirement inequality by replacing more of the income of lower-paid workers. The program also provides nearly universal coverage, whereas many workers do not have access to retirement plans at work. These features help black and Hispanic workers, who tend to have lower incomes and are also less likely to have retirement plans.

“Social Security is the most equal form of retirement wealth and the most important source for most minority households,” the researchers conclude. …Learn More

Our Financial Status: Race Really Matters

Racial differences in workers’ finances are nothing less than shocking: whites have roughly six times more wealth than Latinos and black-Americans and double the income.

These age-old disparities will be as familiar to readers as they are to economists. But a clear and updated picture of their magnitude was presented in a recent study.

In 2016, U.S. household wealth, regardless of race, still had not rebounded to 2007 levels. But whites made a lot more progress climbing out of the hole created by the plunging stock market and housing crash that ushered in the 2008 recession.

The researchers examined changes in each group’s net worth over a decade. Pre-recession, white households had five times more wealth than blacks; this ratio grew to 7-to-1 in 2016. The white-Latino wealth ratio doubled from 3-to-1 to nearly 6-to-1.

 
The 2016 data are the most recent from the Federal Reserve’s triennial survey of American households’ personal finances.

The earnings picture isn’t as dire but the gap is still large. White households are earning slightly more than they did in 2007, and blacks and Latinos are not. In 2016, white Americans had two times more income than either minority group.

Many factors, notably education, influence how well someone does. But, clearly, race does matter. …
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