In 1998, the net worth of white households on average was $100,700 higher than that of African-Americans. By 2007, this gap had increased to $142,600.
The net worth. On average. Was $142,600 higher. $142,600 would be high for an average net worth anyway. Remember, net worth is assets minus debts. If I went and bought a condo right now my net worth would be in the negative six figures, because I'd owe a couple hundred thousand in mortgage. But this demographic has a net worth that's not just $142,600, but is $142,600 more than another sizeable demographic!
I'm not an economist, so I tend to assess economic things like this by extrapolating from my own situation. My income is close enough to the national household average, so I can do this. I know we're talking about another country here, but our dollars are close to par and the US household average in US dollars is close enough to the Canadian household average in Canadian dollars that I think it's safe to extrapolate from my own situation just to get a general idea of how life works. And when I extrapolate from my own situation, I can see acquiring a net worth of $142,600 eventually, if everything goes well and I don't lose my job or suffer any major disasters. A particularly ill-timed job loss could eliminate that possibility forever. However, I don't have any of the money-sucks that the average North American has - no children, no car, no mortgage, not carrying student loan debt. (And, since we're comparing with USians, no medical bills.) Given the percentage of the population that has a house, car, and children and is carrying some debt, I cannot imagine how enough people would have enough money that the average is well over $142,600.
Some people might say there's a difference in income tax rates. Some will loudly support this, some will loudly refute it. Here's a US income tax calculator, here's a Canadian income tax calculator (both from the "first useful google result" school of research). [Update: a non-USian friend thinks the US calculator might be federal tax only, and there might be state tax in varying amounts on top of that amount. We aren't sure about this and don't know enough about how US taxes work. Can any USians confirm or refute this?] Do your own math. In my case, the US amount is less than 1% higher than the Canadian amount.
So what's going on in that country that such a large number of people managed to acquire so much wealth?
8 comments:
I think you might have overlooked a small detail: it says white Americans are $140 000 ahead of black Americans, but it's not necessary to assume that either of those numbers are necessarily in the positive range. I'm pretty sure the white Americans' average is, but to create that kind of discrepancy, I have to think that the average for black Americans might be either around $0 or in the negatives. Otherwise the math doesn't make any sense to me.
And this means the statistic might be horrifying for another reason: a huge segment of the population whose average net worth is negative.
Hmmm, I never thought of that! One one hand, it totally makes the white number feasible. On the other hand, could society and the economy even work if such a large portion of the population (and I think in some places it's a discrete community?) has net worth that's far enough into the negative numbers to make the white number feasible? I can't explain why, but it seems like it just...wouldn't work with so much negative net worth.
I think it's even scarier if it's significant positive vs. significant negative divided along racial lines.
Interesting discussion, but as for your example of purchasing a condo, your net worth wouldn't actually change as a result. Sure, you'd acquire a big mortgage (a negative on your net worth calculation) but you'd also acquire an asset of at least the same value. And after you make your first mortgage payment, your net worth would go up (assuming the value of the condo doesn't drop).
Really? I always thought the bank owned the part you haven't paid off. If that's the case, $142,000 is more workable, although still higher than I would have guessed.
I suspect that the reason is that America is the home of Free Enterprise. Perhaps more white americans own their own business than others. According to the Federal Reserve Board the 2007 'median' net worth of those working for someone else is $350,100. and the median net worth of those who are self employed is $1,961,300. And for those not working, $124,100. The median averages all of those in that category, so as has been noted, many have a negative net worth, but those with higher net worth raise the 'median' average.
slavery: $7 billion profit for whites
federal mandated Whites Only housing loans: bargains on houses -> ^ wealth -> ^ $$$
2 of many reasons.
To the person with the link problem: I removed your link as requested. However, I also removed your comment because it contained a link to the same website and would generate the same Google crawl problem.
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