Equal opportunity shouldn’t be an empty promise, but it often is. The corresponding assumption is that when you do the right thing and play by the rules, you will get ahead. That’s often not the case. Latina women and Latino men work as hard or even harder than whites, but they have persistently less wealth than whites . They then have a much harder time getting ahead. Having a job is clearly not enough. It also matters whether those are well-paying, stable jobs with good benefits.
Families build wealth 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 health care and other emergencies. Yet, wealth is highly unequally distributed, for example, by race and ethnicity. In a new report, my co-author and I find that white non-retiree families had a median wealth of $142,180 in 2016, whereas Latinx families only had $20,765 then.
This wealth gap has persisted for decades. It has actually grown in the wake of 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. In the wake of the Great Recession, Latinx wealth has shrunk to less than one-sixth that of whites.
Breaking down the wealth data into different asset and debt categories shows that Latinx families have a lot fewer assets, not more debt than is the case for whites. Between 2010 and 2016, less than one-third—29.3%—of Latinx families had any retirement account – 401(k) or IRA, compared with 64.1% of white families. Furthermore, only 47% of Latinx families owned a home, compared with 73.7% of white families. And only 6.6% of Latinx families owned a business, compared with 18.9% of white families. Importantly, when Latinx families own any of these assets, those assets are worth a lot less than those of whites.
The difference in wealth between Latinx families and whites doesn’t all of a sudden disappear when we consider wealth gaps among subpopulations. The data still show wealth gaps even by education, marital status and income. For example, the median amount of wealth held by college-educated Latinx families was $91,800 in 2016, which is closer to the $81,650 owned by white families without a college degree than the $$325,600 owned by whites with a college degree.
These wealth differences occur while Latinx people have somewhat stronger labor force attachment than whites. They are employed at similar rates as whites. But they are more likely to hold full-time jobs. Importantly, Latinx workers are more likely to work for somebody else than whites—75 percent of Latinx workers versus 70.8 percent of white workers – which should in theory give them more access to employer-sponsored retirement plans. And, Latinx couples are more likely to have two earners than white couples. In particular, 89.7 percent of Latinx couples include two earners, compared with 85 percent of white couples. This again should make it easier to handle unexpected events and save for the future
Yet, the link between jobs and wealth is weaker for Latinx workers because they have substantially worse jobs . They earn lower wages, have fewer benefits on the job and enjoy a lot less job stability. Each of these factors makes it harder for people to save. Lower earnings means that people have less money to put away. It also means that they have fewer tax incentives to do so. Less access to employer-sponsored benefits means mainly fewer retirement benefits and thus less help, for example, from an employer match in a 401(k) to save for the future. And less job stability means that Latinx families have a harder time qualifying for benefits at work, for instance, due to frequent job changes.
The bitter irony is that Latinx families actually face greater financial demands. They have larger families and are more likely to support family members not living with them. As a result of higher demands and fewer resources, Latinx families have to make hard choices. They are, for example, less likely than whites to be able to afford necessities such as health care and to save. Moreover, their more precarious job situation requires more emergency savings to smooth over unexpected events. Yet, it also makes it harder for people to save.
It will require serious policy steps, starting with a focus on the labor market, to address the wealth gap between Latinx and whites. Policymakers can improve workers’ pay through higher minimum wages and making it easier for people to join a union. Workers can get access to better benefits by at least protecting Obamacare and Social Security, but also by supporting state efforts to increase retirement plan access at work. And more job stability will require more union membership and larger-scale efforts such as a federal jobs guarantee. Without serious policy interventions, the wealth gap by race and ethnicity will persist. The promise of equal opportunity will be an empty promise for a growing share of the population.