Connecting Black, Hispanic Layoffs to Retirement Wealth

Homeowners nearing retirement have 40 percent of their wealth tied up in their homes. But to what extent do racial disparities in employment affect workers’ ability to hold on to a home and build up that wealth?

This question is at the heart of an ambitious study of U.S. homeowners that digs into whether stable homeownership – or, rather, a lack of it – contributes to the longstanding gaps in retirement wealth between Blacks and Hispanics and wealthier White retirees.

The researchers find that the racial disparities in homeowners’ finances while they are working continue after they retire and start collecting Social Security. And Black and Hispanic workers’ employment histories, and specifically their higher chances of having been laid off, impact the ability to accumulate home equity. This has implications for their finances years later when they retire.

To connect the two required the researchers to link numerous sources of information on individual homeowners in eight states, including workers’ and retirees’ mortgage and sales data, employment histories, the demographic, income, and property data in the U.S. Census, and even the voter rolls that indicate whether a retiree has moved.

Start with their findings on job instability: Black and Hispanic homeowners quit or were laid off or fired from their jobs at much higher rates than Whites. Their jobs also were more often casualties of the subset of job losses that result from mass corporate layoffs, which mainly tend to occur during steep economic downturns.

Job instability during one’s working years can affect retirement wealth by making it more difficult for working-aged people to keep paying the mortgage and accumulating home equity than for the homeowners who worked continuously. And the researchers did, in fact, find that Black and Hispanic homeowners, in the first months after losing a job, were more likely to experience distressed sales through a foreclosure that wipes out their equity.

“The racial/ethnic disparities in wealth at retirement age are a direct result of racial/ethnic disparities in labor market experiences during working years,” the researchers concluded.

“An underappreciated aspect” of those wealth disparities, they said, “is job instability.”

To read this study by Francis Wong, Kate Pennington, and Amir Kermani, see “The Impacts of Racial Differences in Economic Challenges on Housing, Wealth, and Economic Security Among OASI Beneficiaries.”

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.