Latinos’ Net Worth Shrinking Despite Boom Times
Today’s record-setting economic boom has enriched most members of every major ethnic group except one--Latinos.
The Federal Reserve’s most recent survey of household finances shows that whites, African Americans and Asians have all gained ground during the expansion.
By contrast, from 1995 to 1998--the most recent period studied--the median Latino household net worth fell by a whopping 24%. For this group, median net worth (half of households have less, half have more) was $12,170 in 1995 but only $9,200 three years later.
Experts outside the Federal Reserve offered two principal explanations: an accelerating influx of poor immigrants and a population singularly ill-equipped to profit from the information revolution.
Even as the wealth of the median Latino household was falling, the Latino community’s total wealth was rising. That was reflected in data showing that average Latino household income (total wealth per household) rose from $61,000 in 1995 to $86,000 in 1998.
This indicated a growing income gap within the Latino community. Even as Latino neighborhoods were filling up with more and more poor families, the richest families were accumulating enough new wealth to pull up the overall average.
Net wealth consists of a household’s assets--houses, cars, investments, bank accounts and the like--minus its debts. The figure does not necessarily move in tandem with household income.
And in fact, the median Latino household income rose by almost 16% during the same period that Latino wealth was falling. The Fed also discovered that Latino homeownership, a conventional sign of financial well-being, increased during the period.
The Fed data make clear that indebtedness was not the culprit behind the wealth decline. Latino households reduced their debt burdens in the late 1990s from a household median of $7,847 to $3,600.
“This is generally regarded to be one of the best surveys out there on anything, including wealth,” said Kirk Johnson, policy analyst at the conservative Heritage Foundation’s Center for Data Analysis. “I would immediately discount any concerns that there are problems in the data.”
Experts said that, no matter what the cause of the declining median Latino net worth, the implications are large, ominous and--to a great extent--unnoticed amid the general rejoicing over rising Latino incomes.
Latinos are the fastest-growing ethnic group in America, now making up about 11.5% of the U.S. population. They are increasingly targeted by marketers selling all manner of upscale products.
“If this group’s wealth is truly lagging behind the rest of society, then it’s a matter of concern,” said Steven A. Camarota, director of research at the Center for Immigration Studies and a specialist on the links between immigration and poverty.
Not only would shrinking median wealth mean less resources for the bulk of the Latino community, Camarota said, but the trend would also make Latinos “different” from the rest of U.S. society, increasing the likelihood of cross-cultural misunderstandings and political disenfranchisement.
“If Latinos live a life that’s so different from the rest of the population, then it’s hard to communicate across the distance,” Camarota said.
Ed Wolff, a New York University economist who specializes in savings and investment trends, said that wealth could be a more potent measure of long-term well-being than income, because the size of a family’s wealth measures its degree of protection against shocks and hard times.
“Wealth is what you draw on if you lose a job, or have a family break-up, or get sick,” Wolff said. “What [the Fed report] is saying is that, even if Latinos are doing better in terms of income, they’re not saving anything. If a recession hits and these people become unemployed, they have nothing to fall back on.”
Statisticians regard median income as a better indicator of a group’s well-being than average income, which can be inflated by a few very rich households.
Some analysts said that large numbers of Latino households with no assets appeared in the Fed’s survey from 1995 to 1998, pulling the median down. “I suspect that immigrants are what’s pulling down this number, but I can’t be sure,” said Camarota.
Camarota said that each year’s new class of Latino immigrants is, on average, poorer and less well educated than the previous year’s.
Although there was no known sudden spurt in immigration from 1995 to 1998, Camarota said, it was possible that the growing universe of impoverished Latino immigrant families in America finally had reached such great numbers that their poverty had dragged down the median for the entire Latino community.
As of 1999, immigrants constituted nearly half of the 31 million Latinos in America. The Fed survey, however, did not differentiate between immigrants and U.S.-born Americans of Latino ancestry, nor did it attempt to break down the highly varied Latino population into separate nationalities or to differentiate between legal and illegal immigrants.
Other analysts said that the changing composition of the U.S. economy might be a factor behind the Latino wealth decline.
In the past, new immigrant families in California could get jobs in aerospace plants or the apparel industries, said Fernando Torres-Gil, professor of social welfare and policy studies at UCLA. Now, though, many of those jobs have either moved offshore or disappeared and much of the state’s new wealth is being created in the information industries. Those jobs are far beyond the reach of impoverished and poorly educated new immigrants.
“Overall, Latinos do very well in California by the second generation,” Torres-Gil said. “But now you get so many immigrants starting off at the bottom that you have a gap between those who are doing very well in the New Economy, and those who are just holding their ground.”
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Assets Allocation
The net worth of a median household, in inflation-adjusted 1998 dollars:
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1995 1998 All races 60,534 72,100 Whites 81,243 95,610 Blacks 10,620 15,000 Latinos 12,170 9,200 Other 32,710 42,800
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Source: Federal Reserve
