Racial Wealth Inequality Increased During the Pandemic

A recent government research claims that during the COVID-19 pandemic, racial disparities in income rose in the US. The study was conducted and the report was published by the New York Federal Reserve Bank. It said that a portion of the increase might be attributed to the stock market’s significant gains in 2021 and the financial markets’ outstanding performance. According to the research, white people’s net worth increased by 30% relative to black people’s. Hispanics were outnumbered by whites by nine percentage points. The research encompasses 2019 and the first half of 2023.

 

There was a lot of financial assistance from the government at this time, and the employment market was unexpectedly robust. Black Americans currently have a record low unemployment rate of 5.3%. The rate of unemployment as a whole is 3.7%. Black full-time workers’ earnings have increased by 7% on average since before the pandemic. It is particularly challenging to close the racial wealth gap as a far greater proportion of white families invest in mutual funds and equities. According to a different Federal Reserve research, over 66% of white households have stock assets as of 2022. Comparatively, 39% of Black households had stock. Hispanic households were found to invest significantly less in stocks, at only 28%.

 

According to the analysis, government assistance—such as expanded unemployment benefits and COVID-linked payments to citizens—played a role in averting a recession. Yet, as the economy reopened through 2021, the price of financial assets surged so swiftly that racial wealth disparities grew. Following a hike in interest rates by the Federal Reserve in 2022, the value of those assets decreased. However, the authors of the paper stated that “those declines did not fully offset the earlier rises.” The study found that compared to equities, mutual funds, and exchange-traded funds, or ETFs, Black households have a greater amount of money in their pensions.

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