(22) Economic fights highlight wealth gap for Hispanics | TheHill

http://thehill.com/latino/305820-economic-fights-highlight-wealth-gap-for-hispanics

Economic fights highlight wealth gap for Hispanics

Hispanics chasing the American Dream have seen their fortunes rise steadily over the years, except when it comes to the measure that might be most vital: accumulating wealth.
 
The most common gauge of economic well-being is income. But wealth is a far more comprehensive measure, taking into consideration things like home ownership, investments, businesses and savings, while subtracting any debts. It's a better barometer of how well families are able to weather emergencies, fund higher educations, start businesses and pass assets down to their children, thereby growing the fortunes of younger generations.
 
When all those things are considered, Hispanics are at an enormous disadvantage: Their wealth, relative to whites, is 8 cents on the dollar. And the divide has only grown over the years. 

Experts point to numerous factors driving the growing discrepancy — some cultural, some economic and some political. But while there's a general consensus that public policy plays a major role, there are sharp disagreements about which reforms would provide the more effective fix.

Many liberal economists point to housing disparities as the primary culprit behind the widening gap. Researchers at Demos, for instance, found that just 45 percent of Latino households own their homes, versus 73 percent for white households. Eliminating that imbalance would reduce the wealth gap between the two races by almost a third.

Reforming the tax code, liberals say, could push benefits that high-wealth families currently enjoy down the economic ladder. That would mean decreasing the dollar-for-dollar value of tax deductions and credits of those at higher tax brackets, but would allow the less wealthy to catch up.

"If I have a very wealthy pension plan, why would I continue to get a benefit from the government to incentivize my savings? It doesn't incentivize my savings; I'm already doing that. That's not working as a tax benefit, so why should we give that away?" said Eric Rodriguez, vice president of the National Council of La Raza (NCLR).

There's also been a strong push from Latino advocates to boost the minimum wage. While that move wouldn't necessarily lead to higher participation rates in pension plans and financial investments, by sheer virtue of increased revenue, it would help the lowest-earning Latino families close the gap.

The minimum wage debate played a big role in the presidential contest amid the populist outrage over growing income inequality and heightened calls for economic justice. Trump tapped into that working class angst, and sent signals on the campaign trail that he's open to a minimum wage hike.

Congress is unlikely to hike the minimum wage next year, as the Republicans who control both chambers have long opposed the idea. But there's a growing trend among state and city governments to boost the wage on the local level, as the residents of Arizona, Washington, Colorado and Arizona voted to do last week.

Conservative reformers have other plans.

Grover Norquist, president of Americans for Tax Reform, said the chief driver of wealth disparities is, ironically, a program meant to eliminate them: Social Security. When the government takes that payroll tax out of workers' paychecks, he said, it steals cash individuals could otherwise invest in private accounts. Unlike Social Security, those accounts would not only accrue interest, but could also be passed down to heirs.

"The biggest damage the government does is it has nationalized, not savings for rich people, but savings for low-income people," he said Friday. "If you can save 12 percent of your income ... you would have a lot of money when you retired even if you're poor, even if you have a low-income job all your life. Well-to-do people can say, 'OK, go ahead and take my 12 percent and I'll save anyway, on top of that.'"

The wealth gap for Hispanics has been on the rise.

In 1983, the median white household was worth roughly $102,000 and the median Hispanic household about $9,300 — a gap of roughly $92,700, according to the Urban Institute. By 2013, the divide had grown to $120,500.

The median age for Hispanics is 27, 10 years younger than the population as a whole. Latinos, especially second- and third-generation Americans, are overwhelmingly seeking better opportunities by going to college, so debt levels are rising in the demographic.

But even with college educations, Latinos are not reaping the same benefits as their white counterparts.

"First, the premium on post-secondary education is much greater for Latinos, and they have much more debt. The other is that white workers have things that others don't," said Rodriguez. "They have networks that really help lift them up. It's a safety net of sorts."

Many Latinos come from homes without a family history of using financial services and institutions, so they tend to concentrate most of their wealth in homeownership.

"When housing crashed, Latinos lost more wealth, while others weathered the storm because they had financial holdings," said Rodríguez.

Subtle prejudices in other federal policies might also help explain why the wealth gap is growing.

Examining the recent housing crash, researchers at Harvard University discovered that, among minorities and whites of similar incomes, mortgage lenders targeted minorities more often for sub-prime loans, even when they were eligible for more secure arrangements.

Disproportionate employment in certain industries can also slow down Hispanic wage accumulation.

The leisure and hospitality industry, for example, has the lowest employer retirement costs of the service industries. Employers typically spend 24 cents per hour on retirement benefits for hospitality employees, compared to $1.27 per hour on average in the private sector as a whole, according to the Bureau of Labor Statistics.

Several factors play into that cost, among them the number of employees participating in available plans.

Lower-wage workers typically have less access to retirement plans, and even when those plans become available, workers tend to opt-in less often than their higher-paid peers.

Retirement benefits are available for 42 percent of the bottom 25th percentile of wage earners, and 52 percent choose to participate. For the second-lowest 25th percentile, those numbers jump to 65 percent availability and 69 percent participation.

Latinos also tend to have larger families and to care for their elder relatives at home, accentuating the need for liquid income over long-term investments.
 
And for upwardly mobile families, intangible benefits like at-home financial education can be non-existent.
 
"If your parents had lots of experience with investments and entering into financial markets, you pass a lot of that down to your kids," said Rodriguez.