Older black millennials are less wealthy than their baby boomer parents at this comparable age, and also lag far behind their white and Hispanic millennial peers in building net worth, a recent study shows.
Economists at the Federal Reserve Bank of St. Louis looked at the wealth accumulated by millennial black, Hispanic and white families between 2007 and 2019, then compared those numbers to the wealth these groups were expected to acquire during that time. Wealth was calculated by taking the dollar value of what a family owns – their house, car, and retirement accounts, for example – minus the amount of debt they have on mortgages, student loans. , credit cards and other financial obligations.
By 2019, white millennial families had accumulated total wealth of around $ 88,000, compared to $ 22,000 for Hispanic millennial families and $ 5,000 for black millennial families. None of the groups reached the expected level of wealth the researchers predicted, but “black families were 52% below expectations for wealth,” said Ana Kent Hernández, senior researcher at the St. Fed. Louis, in his article. Analysis Datas. In the study, Fed researchers paused before predicting if – or when – black millennials would ever catch up with the previous generation.
A series of interrelated factors may help explain why black millennials lag behind in household wealth creation, Fed researchers have found.
“One of the possible reasons is the growing burden of student debt on this group,” Hernández wrote.
Other reasons may include low homeownership rates among black millennials, getting paid lower wages than their white counterparts and has difficulty obtaining bank financing when starting a business. For many Americans, the preferred method of creating wealth is to buy a home, but black Americans are also lagging behind in this area. fed The data show that 41% of black families owned their homes in 2019, compared to 47% of Hispanic households and 73% of whites.
The racial wealth gap doesn’t surprise financial expert Deborah Owens, who guides black women on how to build wealth. Low wages, mountains of student debt and inadequate retirement savings have all suppressed wealth creation for people of color, she said.
Black millennials entered the workforce during the Great Recession of 2008 with thousands of dollars in student debt, Owens noted. They also graduated with more debt than their white classmates, according to a Brookings study. Many black professionals found themselves with few job prospects at the time, so they enrolled in higher school, Owens said. They paid tuition fees and most of their daily expenses with student loans while in school, she added.
A decade later, many black millennials have student debt well in the six figure, Owens said. “They’ve had to deal with the residue of the recession, and a lot of it has caused them to take on more student loan debt than the baby boomers have ever had to,” she said. .
More student debt, less than 401 (k) dollars
Federal Reserve The data show that student debt is than any other racial group. This is in part because black Americans have relatively lower incomes and cannot spend as much money on payments, the 2019 study showed.
Black millennials are also more likely work in low-paying jobs in the odd-job economy that don’t offer employer-sponsored retirement accounts as white or Hispanic workers. Poor access to 401 (k) and retirement plans prevents black adults from saving for the future, Owens said. About 68% of white Americans had a retirement account compared to 41% of blacks and 35% of Hispanic households, according to the 2019 Economic Policy Institute The data.
Widening inequalities in the United States over the past decades, including racial and gender gaps in wealth and income, are hurting the economy as a whole, Owens said, noting that the generation Y now constitutes the majority of the middle class.
“The middle class is the engine of consumption and the growth of every business,” she said. “And the fewer people we have in the middle class, the less overall economic growth we have.”