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Wealth Share of Hispanic Population May Triple by 2025

Tuesday, July 1, 2014

The wealth of Hispanic families would triple in inflation-adjusted terms by 2025 if wealth-building trends observed during the past two decades resume, according to new research from the Federal Reserve Bank of St. Louis’ Center for Household Financial Stability.

Hispanic families accounted for only 2.2 percent ($1.4 trillion) of the U.S.’s total net worth in 2010, despite representing 16.3 percent of the population. This is due to average wealth per household being only $108,871 for Hispanic families, compared to $543,702 for non-Hispanic families.

Their share of wealth, however, could be on the rise. In the latest issue of In the Balance, Senior Economic Adviser William Emmons and Policy Analyst Bryan Noeth, both with the St. Louis Fed, estimate that Hispanic families will own between 2.6 percent ($2.5 trillion) and 3.2 percent ($4.4 trillion) of U.S. wealth by 2025. Two main factors are at play for this growth:

  • Faster population growth
  • Faster growth of average household wealth

Regarding growth of average household wealth, Emmons and Noeth gave two potential scenarios for how rapid this growth will be:

  • Assumption 1: Average wealth levels of Hispanic families (and of families overall) will revert to following their trend line for the period 1989-2010.
  • Assumption 2: Average wealth levels will grow according to the average rate observed over the period 1989-2010, meaning wealth losses leading up to 2010 would be permanent in the sense that no “catch-up” period occurs.

Both assumptions would likely lead to considerably faster growth of wealth for Hispanics than for the overall population, based on census projections of population growth through 2025. Assumption 1 would lead to total wealth for the Hispanic population of $4.4 trillion in 2025, a cumulative increase of 216.6 percent from 2010 numbers. Assumption 2 would lead to total Hispanic wealth of $2.5 trillion in 2025, a cumulative increase of 79.8 percent from 2010.

However, both of these assumptions are also based on the projection that the Hispanic population would grow faster than the population at large. This faster growth is actually the bigger factor in the growth of overall total Hispanic wealth. The Hispanic population is expected to grow at an annualized rate of 2.3 percent per year through 2025, according to census data, versus a 0.4 percent annualized rate for the non-Hispanic population. If the Hispanic population grows at the same rate as everyone else, their share of U.S. wealth in 2025 would be 2.4 percent (or $3.3 trillion) under Assumption 1, but only 2 percent (or $2 trillion) under Assumption 2.

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Posted In Financial  |  Tagged bryan noethhousehold financial stabilitywilliam emmons
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