When a Job Is Not Enough
Introduction and summary
Wealth—a family’s financial net worth—measures how well people are prepared for the future. It allows them to purchase a home, start a business, enjoy a secure retirement, and put their children through school. Wealth also provides security in the face of emergencies, for example, allowing people to pay for unexpected health bills or pay bills following a layoff. Wealth is essential to giving families peace of mind.
Unfortunately, the accumulation of wealth in America is highly unequal. Wealth is increasingly unevenly distributed by race and ethnicity.1 White families in America have a median wealth of $142,180, compared with $20,765 for Latinx* families. (see Table 1) This large wealth gap leaves Latinx families economically insecure with fewer opportunities for upward economic mobility.
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As this report documents, the gap between Latinx families and white families has persisted for decades and shows no sign of shrinking. Moreover, this wealth gap exists regardless of marital status, education, and income, suggesting that Latinx families encounter systematic obstacles to building wealth.
While Latinx communities face several obstacles to building wealth, their relationship with the labor market—the type of work they do and the kinds of jobs they hold—is a key contributor to their ability to build wealth. Despite having similar employment rates as whites and being more likely to have full-time work, Latinx individuals work in jobs whose overall quality is not ideal for building wealth. They are more likely to work in sectors with low-paying jobs that lack benefits essential to building wealth.
Simply put, Latinx families are caught in a precarious situation. Their inability to obtain higher-paying, more stable jobs means that they must rely on short-term savings to pay daily household bills. Yet at the same time, because of the low-quality of the jobs they hold, it is extremely difficult to save. Furthermore, Latinx families often have to stretch whatever little bit of savings they have paying bills instead of accumulating long-term savings.
While this report focuses on the wealth gap between Latinx families and white families, it is important to note that in 2016, the median wealth for black families stood at $17,600—lower than either of the aforementioned groups.2 In addition, while the disparity between white families and Asian American Pacific Islander (AAPI) families is often overlooked since, collectively, their average median wealth is similar, it is important to note that there is significant wealth inequality among different ethnic groups within the AAPI community, leaving many to struggle in retirement.3Using data on household wealth for Latinx and white families, this report lays out policy recommendations to specifically address the distinct issues that exacerbate the Latinx-white wealth gap, but which can also be used to inform solutions to tackle wealth inequality overall.
In order to determine the extent of the wealth gap between Latinx and white families, the authors looked closely at 2016 Federal Reserve data, which is highlighted throughout this report. Their findings include the following:
- Latinx families had less than one-sixth the wealth of whites. In 2016, the median wealth of Latinx households amounted to $20,765, compared with $142,180 for white households.4 Therefore, the typical Latinx family had only 14.6 percent of the typical white family’s wealth. (see Table 1)
- The Latinx-white wealth gap has persisted over time and widened after the Great Recession. In 2007, just before the Great Recession, Latinx families had a median wealth of $32,656, which equaled 17.3 percent—more than one-sixth—of white families’ median wealth, $188,756. (see Table 1 and Figure 2) After the recession, this share widened to less than one-sixth. (see Table 1)
- Latinx people have a somewhat stronger labor force attachment than whites. Latinx people are employed at similar rates as whites and are more likely to hold full-time jobs. Latinx workers are also more likely to work for somebody else than whites—75 percent of Latinx workers versus 70.8 percent of white workers. Furthermore, Latinx couples are more likely to have two earners than white couples; 89.7 percent of Latinx couples include two earners, compared with 85 percent of white couples. (see Table 3)
- Latinx workers hold substantially worse jobs than white workers. Relative to white workers, Latinx workers earn much lower hourly wages, are less likely to have health insurance and retirement benefits through their jobs, and work in jobs that are much less stable. As a result, Latinx individuals suffer from higher unemployment rates and shorter time with employers and therefore have less time to gain access to key benefits. They also face a greater chance of experiencing negative income shock, for instance, due to an unexpected cut in hours.
- Latinx families face greater financial demands. Latinx individuals tend to have larger families and are more likely to support family members not living with them. Therefore, they are less likely than whites to be able to afford necessities and save for retirement or emergencies.
- Latinx families have costlier debt than whites. Latinx families are somewhat less likely to owe money, but they encounter greater financial market obstacles, such as discrimination and product steering, when getting a loan. As a result, Latinx families face greater debt burdens relative to their income and outstanding debt than white families. Latinx families owe a median debt of $33,160, about one-third the median debt of white families, $103,111; however, Latinx families’ median debt payments relative to income are very similar to those of white families—16.9 percent compared with 17.3 percent. (see Table 6)
- The wealth gap reflects large differences in homeownership, retirement account ownership, and business ownership. Between 2010 and 2016, less than one-third—29.3 percent—of Latinx families had any retirement account, compared with 64.1 percent of white families. Furthermore, only 47 percent of Latinx families owned a home, compared with 73.7 percent of white families. And only 6.6 percent of Latinx families owned a business, compared with 18.9 percent of white families. (see Table 7)
- Latinx families own assets with much lower values, even when they own such key assets. Between 2010 and 2016, the median retirement account balance for Latinx households was $20,622, compared with $64,960 for white households. (see Table 7)
Considering the persistent wealth gap between white and Latinx families, and given that wealth is the best measure of a family’s economic well-being, policymakers at the federal and state level should enact measures to improve the financial outlook for Latinx families.
Read the full report here.