Don't Let the Wealth Gap Become a Weapon

While the U.S. government continues to wrestle with the issue of raising the debt ceiling, a report from the Pew Research Center — an independent American think tank organization — announces that the downfall of the U.S. real estate market and the resultant recession have widened the wealth gap in American society to the greatest extent in the past 25 years.

Due to economic crises, the number of middle-class households has decreased dramatically in all three racial groups in America: whites, people of color and Hispanics. According to the report, Hispanics have suffered the most, with the upper class population dropping by 2/3 on average during the period from 2005 to 2009, compared to a corresponding reduction of more than 50 percent among people of color and 16 percent among whites. At present, the gap between the rich and poor in America is at its largest ever since the U.S. government began to publish data about this subject 25 years ago and more than twice the size of the previous gap prior to the recession of 2007 through 2009.

If in 2005, a typical Hispanic household in America was able to earn over $18,000 per year, then in 2009, this number plummeted to only $6,325 annually. Household incomes of people of color have declined by 53 percent, from roughly $12,000 per year in 2005 to $5,677 per year in 2009. Following this downward trend, white households are the least affected with a fall from $134,992 per year to $113,149 per year.

Pew bases the affluence of a household on the total value of such assets as homes, cars, savings, credit card accounts, stocks, pensions and other investments, minus the sum of debts, which include mortgages, car loans, and credit card balances. Pew’s conclusions indicate that plunging housing values have formed the basic cause for the decline in Americans’ assets.

According to the Standard & Poor’s Case–Shiller Home Price Indices, real estate pricing in America shrunk 27.3 percent within the period between the fourth quarter of 2005 and that of 2009. States like California, Florida, Nevada, and Arizona that are home to the highest numbers of Hispanic people have also experienced the steepest declines in housing values. This phenomenon helps explain why Hispanics have had to endure the most damage as the storm of financial tumult is sweeping through America. In addition, growing long-term unemployment and unstable income sources due to the economic recession contribute to the asset deterioration.

According to the U.S. Department of Labor, over the past six months, 16.2 percent of people of color have become unemployed, while 11.6 percent of Hispanics and 8.1 percent of whites have suffered the same fate. A large number of Hispanics do not have stable jobs. However, according to a different study that Pew issued in 2010, even people who are employed cannot keep a stable income. The same reason applies here: The deteriorating economy causes business owners to reduce work hours, thus resulting in diminished earnings for employees.

Daniel Costa, Immigration Policy Analyst at the Economic Policy Institute of America, claimed that the wealth gap can only be improved if U.S. leaders focus on developing the economy, creating jobs in effective ways, and investing in endeavors that support communities most severely shaken by the financial turmoil. According to Costa, Pew’s analysis once again reminds the U.S. government to pay more attention to the needs and aspirations of American citizens and, at the same time, warns the national administration not to let the wealth gap become a destructive weapon dividing the country in two.