Report reveals racial gap in wealth in Mass.
A new report on the financial stability of American households reveals stark disparities in net worth and asset ownership between whites and minorities in Massachusetts.
The “2009-2010 Assets and Opportunities Scorecard” was released last Tuesday by the Corporation for Enterprise Development (CFED), a national economic nonprofit organization. The report assessed all 50 states and the District of Columbia in terms of how well residents are faring when it comes to financial security.
The report calls the racial wealth disparity in the nation “truly stunning.” One of its key findings: For every $1 of net worth owned by a white-headed household in 2006, a minority-headed household possessed only 16 cents.
“Due to a variety of factors, including different initial wealth endowments and outright discrimination,” the report says, “minority households accumulate — at the median — fewer assets than white households.”
According to the report, Massachusetts ranks near the bottom in “home ownership by race,” with 70.2 percent of whites owning homes compared to 37.3 percent of minorities. In the nation as a whole, white and minority homeownership rates are 71.5 percent and 48.2 percent, respectively.
The report also shows nearly half of minority households in the state, including African Americans, Asians and Hispanics, are “asset poor,” meaning they lack sufficient net worth to subsist at the poverty level for three months in the absence of income. For whites, the figure is 20.6 percent.
“It’s generally thought that all people in Massachusetts are doing well, but a lot of people are not,” said state Sen. Jamie Eldridge, D-Acton, co-chair of a special commission founded to study asset development in Massachusetts. “The disparities are quite significant, based on race and income. It means that a whole large group of Massachusetts residents don’t have a shot at the American dream.”
Assets such as real estate, savings and stocks, and education or vocational training are crucial building blocks of net worth and wealth. But the report shows a wide racial gap in net worth, both here and across the nation.
In Massachusetts, the median net worth of white households is $213,755, while the median for minority households is just $6,694. Those figures put the state in 31st place in the nation in the “net worth by race” category. But overall, the report gave the state an “A” grade due to its high rankings in areas such as education and health insurance.
Even the best of states shows a sobering gap. The top-ranked state for net worth by race — that is, the state with the smallest disparity — is Nevada, but the figure for white households there ($109,343) is still more than twice that of minority households ($45,050).
Margaret Miley, executive director of the Midas Collaborative, a statewide alliance of nonprofit agencies offering asset-building and financial education programs, said the scorecard reveals a clear wealth distribution problem along racial and other lines in Massachusetts.
“In my view, it’s very compelling that we’re getting a grade of A and yet there are areas we’re very weak in,” Miley said. “We come in 31st in the country on net worth by race, 32nd for net worth by income, 32nd in net worth by gender. That suggests that we have a lot of wealth, but it’s very poorly distributed.”
The CFED report recommends that Massachusetts expand programs to help low-income households save money and build assets.
Eldridge has already filed two pieces of legislation this session with those aims. One bill would increase access to education and training assistance for low-income, low-skilled adults. The other would raise or eliminate the “asset limits” imposed by the state on people receiving support from Temporary Assistance for Needy Families programs.
Asset limits define how much savings or how many assets people can have and still remain eligible to receive assistance. Eldridge and others think the limits are too low, often restricting employment opportunities and discouraging savings.
“The asset limits keep people from saving money and keep them in a cycle of poverty,” said Eldridge.
Both bills received hearings last month before the state Legislature’s Joint Committee on Children, Families and Persons with Disabilities.
Miley also served on the Massachusetts Asset Development Commission co-chaired by Eldridge, which was formed in 2006 to study the economic challenges facing low- to moderate-income Massachusetts families. She agreed that asset limits are a problem, saying that what the state deems “too much” in assets is often quite little.
“For instance, $2,000 is the highest value [allowed] for a car,” said Miley. “Most of us know that a car valued at $2,000 or less will probably not get you through the winter. So people are really trapped.”
The data for the CFED scorecard was collected between December 2008 and April 2009, and most of the data reference the 2006-2008 time period. The full report can be seen at http://scorecard.cfed.org.