Wealth Inequality along Ethnic Lines In America

Wealth Inequality along Ethnic Lines In America

Wealth inequality is the unequal distribution of resources among the citizens or residents of a nation or society. Wealth included personal valuables, homes, investments, businesses and automobiles among others. In America, the gap between the rich and the poor has widened in recent times. In the short story, “Harrison Bargeron”, Kurt Vonnegut writes that everybody was finally equal after the government intervened. He wrote, “All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution” (Vonnegut 1). He tends to show that total equality can only be achieved if the government intervenes by enacting and enforcing laws that ensure there is total equality. There are major differences in wealth acquisition among the different ethnic groups existing in America. Wealth inequality has widened along the racial and ethnic lines in America.

Some factors are responsible for the widening gap. One of the factors is discrimination along racial lines. In their study “The sociology of discrimination”, Page and Hana have reviewed the racial discrimination in employment, housing, credit, and consumer markets. They define racial discrimination as “unequal treatment of persons or groups by their race or ethnicity”.  This definition focus on behavior making discrimination distinct from racism (ideologies), racial stereotypes (beliefs) and racial prejudice (attitudes) (Page and Hana 4)

Surveys have been done to identify the discrimination in the workplace along racial lines. Page and Hana (5) conclude that 20% of Asians and Hispanics as well as 33% of blacks reported to have been passed over for a job promotion or a new job just because of their race or ethnicity. It is intriguing to note that the discrimination frequency does not decrease among those higher in the social hierarchy. Discrimination based on ethnicity is experienced along all classes in the society. With this kind of discrimination existing, one ethnic group is bound to increase in wealth as opposed to the others. In America, the white Americans are favored to their counterparts. The whites are more likely to be promoted as opposed to the blacks, Asians, and Hispanics. This has only led to the widening gap between the whites and other ethnic groups.

Racial discrimination can only end with the intervention of the government. Kurt Vonnegut in the short story describes the existence of total equality. The government has enacted amendments to the Constitution that has enabled total equality. He described how society had changed from the days when everybody competed with each other. Everyone one is now happy and equal. There is no stronger, pretty, smarter or even faster. The government using capabilities limiting equipment controls those with advanced capabilities. Practically, it would be inhuman to control one’s mind and looks. However, Kurt Vonnegut is describing what would happen if the government decided to control everything with the aim of restoring equality. There would be no discrimination based on one’s looks, capabilities, strength, smartness, and prettiness. This is similar to discrimination based on ethnic lines. Nobody would recognize the color or ethnic group of the other thus making people equal.

During the great recession, household wealth of American families dropped dramatically. The family’s wealth decreased by 39.4% from the year 2007 to 2010. In the year 2013, typical American families had a net worth of $81,400, which is almost the same as 2010 (Kochhar 2). The financial markets and housing crisis that led to the great recession had a great effect on the net wealth of all American families. As the economy recovered, the prices of assets and investments increased. However, families are not benefiting alike. According to data analyzed from the Federal Reserve’s Survey of Consumer Finances in the year 2013, white household wealth was 13 times the wealth of black households. The wealth of white households was also 10 times more than the wealth of Hispanic household as compared to 9 times in the year 2010 (Kochhar 2).

Throughout the fall of the year 2008, phrases such as credit crisis, the mortgage crisis, and bank collapse and government bailout were headlines that appeared frequently. In this period, most of the major financial markets lost about 30% of their value.  It ranks among the most horrific period in the U.S. financial market (Kosakowski 1). Most of the families in America lost their savings and investments. At this period, subprime mortgages increased. These mortgages targeted borrowers with less-than-adequate savings and less-than-perfect credit. These were mostly the minority groups in the society.  This increased had started in 1999 as the mortgage association endeavored to make home loans accessible. The borrowers were considered high risk thus; the loans had high-interest rates and variable payments. However, many argued that this was a disaster (Kosakowski 3).  To add to the mortgage risk, total consumer debt continued to increase during this period.

With the inequality in wealth that existed before the recession, those who lost much were the minority groups’ households. Most of the borrowers with less-than-adequate savings and less-than-perfect credit were the blacks and Hispanics. These groups lost their savings and houses as opposed to white households who just lost their investments (Kochhar 3). Therefore, in the recovery process, it was only natural for the different groups to benefit differently.

As noted by the Federal Reserve, some factors are responsible for this widening gap. A major reason is the minority households are not saving as much as the white households are after drawing out their savings during the recession period. In addition, white households are more likely to own stocks indirectly or directly through retirement accounts (Kochhar 3). Thus with the end of the recession, stocks recovered in value benefiting the white households more than the minority households.

A study was done by Brown (2016) to investigate the racial inequality in wealth increase between middle life, and late life revealed that wealth trajectories differ by race/ethnicity. Brown (38) found out that by middle life, a white household has accumulated a net worth of $105k as compared to $5k and $39k for the black and Mexican American families. As the whites advance in life, they tend to accumulate more wealth as compared to other groups. As mentioned by Kochhar (3), white households are more likely to indirectly or directly through retirement accounts. This is consistent with Browns findings that the white households accumulate more wealth by late life. After retirement, they invest in stocks, which increase in value with time. By late life, these investments will have grown by high rates. The lack of wealth among the minority groups has an impact on the economic security of the families of the minority groups. Brown (38) found out that the minority groups have insufficient retirement assets to help them sustain a comfortable standard of living in their life span. Thus, such households are forced to delay their retirement and even after retirement; the retirement benefits cannot be enough to sustain them and invest.

Racial residential discrimination is another cause and consequence of the wealth inequality. Discriminatory practices such as racial steering and unequal financial resources of households and their extended are the cause of sorting of families to different neighborhoods (Brown 38). In the low opportunity neighborhoods, the minority groups are over-represented. In addition, the minority groups are less likely to be living in high opportunity neighborhoods with good schools, rising home values, low crime rate and employment opportunities as opposed to white households. In the low opportunity neighborhoods, the home values appreciate at a lower rate as compared to the high opportunity neighborhoods. Since home value is included in the measure of wealth, it represents a major source of the inequality between the whites and the minority groups.

Another issue is the Institutional racism. In the criminal justice system, there are a high number of the blacks and Latinos who are imprisoned. Imprisonment leads to loss or reduced income to their families. This, in turn, compromises the functioning of the family, increases isolation and stress and in the worst case the health of the households (Brown 39). Other discriminatory practices such as lenders targeting the minority groups contribute to ethnic wealth gaps. Latinos and blacks have a higher likelihood of receiving high-interest loans like in the case of the housing crisis, which led to the great recession. Studies have shown that Latinos and blacks are unfairly treated in the housing market 20% and 16% of the times respectively (Brown 39). Though, the probability of being discriminated in any transaction is modest, applying such odds in the number of possible economic transactions in the course of one’s life factoring in the time value of money negatively affects opportunities for Latinos and blacks to accumulate wealth.

From the historical racial discrimination in America, there arose a gap in wealth inequality between the different racial groups in America. With the great recession of 2008, most of the households lost their savings and investments. After the end of the recession, the increase in the value of investments has benefited households differently. Thus, the wealth inequality between the racial and ethnic lines has increased. In addition, a discriminatory practice such a high number of minority groups being imprisoned affects the income of their households. Greedy lenders take advantage of the low-income minority groups and lend them high-interest loans. This hinders such households from growing economically. Discrimination is the major reason wealth inequality has widened along the racial and ethnic lines in America. With government intervention, however, equality can be achieved as Kurt Vonnegut describes in his story.


Work cited

Brown, Tyson H. “Diverging Fortunes: Racial/Ethnic Inequality in Wealth Trajectories in Middle and Late Life.” Race and Social Problems 8.1 (2016): 29-41.

Kochhar, Rakesh, and Richard Fry. “Wealth inequality has widened along racial, ethnic lines since end of Great Recession.” Pew Research Center 12 (2014).

Kosakowski, Paul. “The Fall Of The Market In The Fall Of 2008 | Investopedia.” Investopedia. 03 Nov. 2008. Web. 07 Apr. 2016. <http://www.investopedia.com/articles/economics/09/subprime-market-2008.asp>.

Pager, Devah, and Hana Shepherd. “The sociology of discrimination: Racial discrimination in employment, housing, credit, and consumer markets.” Annual review of sociology 34 (2008): 181.

Vonnegut, Kurt. “HARRISON BERGERON.” Harrison Bergeron. 1961. Web. 08 Mar. 2016. <http://www.tnellen.com/cybereng/harrison.html>

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