[Dongle Dongle] Widening Wealth Gap Due to COVID-19... Who Got Rich in the US During the Pandemic?

Increase in Net Worth for Asian and White During Pandemic
Black and Hispanic Only Manage Debt Repayment
Homeownership Divides Asset Gap
Economic Slowdown Likely to Widen Racial Wealth Disparities

COVID-19 has brought about a significant wealth gap in our society. While many people were pushed into extreme poverty due to corporate restructuring amid the economic downturn, some made substantial profits through cryptocurrency and stock investments amid the abundant liquidity in the capital markets. This disparity was especially pronounced in American society, varying by income and race.

So, which groups actually gained the most wealth during the pandemic? Today, we will explore the bright and dark sides of COVID-19 by examining how the pandemic affected the financial situations of different social strata in the United States.

[Image source=Getty Images]

Asian American Net Worth Growth Rate at 43%... Black and Hispanic Households Busy Paying Off Debt

According to the Pew Research Center, a U.S. public opinion research organization, the median household net worth in the U.S. increased by 30% between 2019 and 2021, reaching $166,900 (approximately 218.74 million KRW) during the height of the COVID-19 outbreak. Reduced opportunities to spend money due to decreased outings during the pandemic, combined with government stimulus measures such as $1,400 per person payments and extended unemployment benefits, naturally increased household incomes.

Homeless people in New York lined up to receive free meals during the peak of the COVID-19 outbreak in 2020. [Image source=Reuters Yonhap News]

Among various racial groups, the net worth growth rates of White and Asian American households stood out. Asian American households recorded a net worth of $320,900, marking a 43% increase compared to before the COVID-19 outbreak. During the same period, White households saw a 23% increase, reaching $250,400 in net worth.

In contrast, the situation was different for Hispanic and Black households. During the same period, Hispanic and Black households had net worths of only $48,700 and $27,100, respectively. Among Hispanic households, only one in seven succeeded in reducing debt during the pandemic, meaning the other six households not only failed to accumulate assets but actually increased their debt. For Black households, only one in four managed to reduce debt.

Homeownership Drives Wealth Gap... Retirement Savings Also Play a Role

Why did the racial wealth gap widen despite the U.S. government distributing massive stimulus payments during the pandemic?

A for sale sign is posted on a house in Massachusetts, USA. [Photo by AP Yonhap News]

Experts explain that homeownership was a key factor widening the racial wealth gap. Even within the same low-income bracket, White households held 21 times more assets than Black households, a difference attributed to homeownership status.

During the pandemic, housing prices surged, and Whites and Asians, who had relatively higher homeownership rates, were able to rapidly grow their assets. According to the Wall Street Journal (WSJ), housing constitutes the majority of American household assets. As of 2021, 62% of Americans owned homes, with Whites having the highest homeownership rate, followed by Asians, while Hispanic and Black households had lower homeownership rates.

Therefore, even among low-income groups, White and Asian American households with higher homeownership rates were able to accumulate more assets than Black households. From 2019 to 2021, low-income White and Asian American households accumulated net worths of $4,700 and $8,900, respectively.

In contrast, Black and Hispanic households did not increase their assets during the same period but focused on paying off debt. Low-income Black households reduced their debt from $10,100 to $4,000 over two years, and Hispanic households paid off $1,100 in debt, ending the pandemic with zero net worth. Even within the same income level, the wealth gap widened sharply depending on homeownership status.

Moreover, WSJ noted that the higher retirement savings ownership rate, such as 401(k) plans, among Asian American households was another reason they were able to hold more assets during the pandemic compared to other races.

U.S. Economic Slowdown Increases Household Debt... Black and Hispanic Households Expected to Face Hardships

However, as the pandemic ends, it is expected that most Americans, regardless of race, will face difficult times for the foreseeable future. With pandemic-era stimulus payments discontinued and soaring wage growth rates declining, household incomes have noticeably decreased. Last year, U.S. household income fell by 9% compared to the pandemic period.

[Image source=Yonhap News]

Due to the Federal Reserve's aggressive tightening, interest rates have surged, and the number of people unable to repay debts has rapidly increased. In the third quarter of this year, the U.S. credit card delinquency rate reached 8.01%, the highest level in 12 years since 2011. Among these, the rate of long-term delinquencies (over 90 days) was 5.78%, up 2.09 percentage points from 3.69% in the same period last year. Household debt reached $17.3 trillion, increasing by $228 billion from the previous quarter.

However, Black and Hispanic households, which were busy paying off debts during the liquidity-rich period, are expected to face even tougher financial conditions compared to other races. Although the health crisis affected everyone equally regardless of race, age, or gender, the opportunity to build assets to prepare for the crisis was not equally provided. With robust consumer spending weakening and the U.S. economy expected to slow down, concerns are growing that the racial wealth gap within the United States will widen further in the future.