A study by the JPMorgan Chase Institute shows African American and Hispanic families have fewer resources available to weather income volatility and economic shocks.
The study, released this month, shows the racial gap in liquid assets is twice as large as the racial income gap. As a result, African American and Hispanic families have fewer options when dealing with economic instability. The study shows there is not only an income gap between white families and minorities in America, but also gaps by gender, age, and liquid assets.
In times of economic instability such as a job loss, for every $1 lost in income, African American families cut spending by $0.46 and Hispanic families cut spending by $0.43. White families cut spending by only $0.28. The study adds these cuts in spending can have negative impacts on well-being, adding stress to multiple family members.
To study the racial gaps, the institute used Chase banking records and self-reported race information for 1.8 million families in Florida, Georgia, and Louisiana. All three states had Chase branches and collect race information during voter registration.
African American and Hispanic families also increase spending after receiving a tax refund more than white families. African American and Hispanic families increase spending by 187% and 149%, respectively, relative to baseline, whereas white families increase spending by 77%. This could indicate minority families under-spending before receiving their return and using it to catch up on payments.
“As families face job loss and income uncertainty resulting from the COVID-19 pandemic, this report shows that Black and Hispanic families will bear the brunt of this economic crisis,” Diana Farrell, president and CEO of the JPMorgan Chase Institute said in a released statement. “While our findings are particularly relevant in today’s crisis, the research underscores the persistent racial wealth gap that exists across age, income, gender and geographies — pandemic or not. We hope this research will help inform the policy, business and community response to support vulnerable families through this uncertain time and beyond.”
Darrick Hamilton, executive director of the Kirwan Institute, believes the study should be used to make sure African American and Hispanic families don’t fall further behind the curve.
“This research underscores the reality that the racial wealth gap has positioned black and Latinx families far more vulnerable to precisely the types of economic events we are experiencing right now as a result of COVID-19 — income and job loss,” Hamilton said in a released statement, “Policymakers should consider these findings to address the needs of communities disproportionately impacted by COVID-19 and the racial wealth gap more broadly. The JPMorgan Chase Institute has assembled a novel innovative dataset that opens up a critically important lens into how families’ ability to weather income fluctuations varies by race. I look forward to the Institute’s continued work on this topic.”