• print
  • decrease text sizeincrease text size
    text

Tag: racial wealth gap

Biden’s big challenge: A growing racial wealth gap

Posted on by Renuka Rayasam
Share this post

When he takes office on Jan. 20, Joe Biden will face a gap between Black and white wealth that has grown into a yawning chasm during the past 10 months.

The pandemic has shuttered tens of thousands of businesses and left millions out of work. And communities of color have borne the brunt of the economic devastation, particularly Black-owned businesses that have failed at a far greater rate during the pandemic than white-owned businesses. Many that remain may not survive the current pandemic wave without significant help from the federal government before effective vaccines finally arrive.

Biden’s presidency may rise or fall on his ability to execute policies — possibly with a GOP majority in the Senate — that address systemic economic inequality, which often leaves Black families and businesses far more vulnerable to economic shocks. Black families have faced a well-documented pattern of financial discrimination that has stymied their ability to accumulate wealth at the same rate as white families, forcing them to live in neighborhoods with fewer resources. For example, they are denied loans at much higher rates than white families with similar credit profiles — and face higher interest rates when they do qualify.

Biden won the White House with enormous help from African American voters, which he acknowledged in his victory speech: “The African American community stood up again for me. They always have my back, and I’ll have yours.”

Now, his supporters say, he must deliver.

“Had it not been for Black people it would have been difficult for [Biden] to win,” said Ron Busby, president, CEO and founder of the U.S. Black Chambers. Busby said the pandemic exposed inequalities that have long existed: Black people were more likely to get the virus and die from it, more likely to be forced to go into work and less likely to be eligible for federal stimulus programs designed to prop up the economy.

“We’ve got to fix that and hold this administration accountable so we can provide opportunities for our own,” he said.

People close to the Biden transition team say targeting the higher rate of Black-owned business failures — and the racial wealth gap more broadly — will be a central focus of the new administration. Early measures to target the problem will likely include language in any new stimulus package aimed at making sure money from the Paycheck Protection Program, which is focused on aiding small businesses, goes to firms that may not have gotten access to previous funds, especially minority-owned businesses.

“The administration really needs to think creatively to make sure aid gets to some of these small businesses that have been hit so hard,” one person close to the transition said on condition they not be identified because they were not authorized to speak publicly. “We can’t leave them behind. It’s got to be better than what happened before.”

Despite Biden’s intentions, he’ll face significant roadblocks, including a divided Congress, a range of pressing priorities and a problem that has deep historical roots. New census data out this week showed white households with median wealth of $171,000 compared with $25,000 for Hispanic households and $9,567 for Black households in 2017. That gap has only widened among people with college education: Families headed by a college-educated Black person saw their wealth decline by nearly half compared with families headed by a college-educated white person between 1989 and 2016, according to the Federal Reserve Bank of St. Louis.

“The Biden administration can certainly begin to do this work and begin to support policies that will eliminate racism and discrimination in our economy,” said Rep. Maxine Waters, (D-Calif.) who chairs the House Financial Services Committee. Waters said that more banks and other financial institutions have been receptive to addressing the wealth gap and ending lending discrimination since George Floyd’s death in May. “But it certainly is not something that in a few months or a few years, all of a sudden, he’s going to be able to wipe away all the instances and ways by which inequality has grown and developed.”

Many federal government programs created in the stimulus package are set to expire at the end of the year including an eviction moratorium, enhanced unemployment benefits and the Paycheck Protection Program. Black business owners and worker groups say they were largely shut out of the $2 trillion CARES Act.

From April to June of this year, 13 percent of jobless Black workers received unemployment benefits, compared with 22 percent for Hispanic workers and 24 percent for white workers, according to analysis from Nyanya Browne and William Spriggs at Howard University. (Their analysis was based on survey data from the National Opinion Research Center at the University of Chicago.)

Spriggs, also chief economist at the AFL-CIO, said Black people are more likely to work in service industry jobs not covered by unemployment assistance programs and live in Southern states that were slow to roll out benefits. He said that to address the imbalance Congress and the new administration would have to redesign unemployment insurance programs instead of just renewing the current program when it lapses at the end of this year.

“We are going to have a long period of a very disrupted labor market,” Spriggs said. “They have to think, ‘Am I just going to patch this up? Or do I conceive of something different.’” If all they do is put it back together, Spriggs said, they’ll just end up replicating existing inequities.

In addition PPP funds haven’t reached Black businesses owners, which have been especially hard hit because of pandemic related shutdowns and a drop in demand. Between February and April of this year, 41 percent of Black-owned businesses closed, compared with 17 percent of white businesses, according to the New York Federal Reserve.

That’s likely because Black-owned businesses often have thinner financial cushions. According to Goldman Sachs, 43 percent of Black-owned businesses expect cash reserves to be gone by the end of this year without more stimulus from Washington. Overall, that number is 30 percent.

But the problem with using PPP is that the program relies on banks as intermediaries to distribute capital. And Black-owned businesses often don’t have relationships with banks participating in the program.

“There are things implicit in PPP that are detrimental to Black businesses,” said Darrick Hamilton, founding director of the Institute for the Study of Race, Stratification, and Political Economy at The New School. “Using banks as an intermediary won’t help if you don’t have a strong relationship with a commercial bank. It’s a justice issue. Black people should have the same access to capital as white people.”

Hamilton suggested the administration focus on direct grants to heavily impacted minority-owned businesses, either through new legislation or through the Small Business Administration.

Breaking up big companies is another area progressive economists want the Biden administration to pursue. Outside of going after big tech giants the president didn’t like, the Trump administration did not prioritize legally targeting some of the nation’s largest and most dominant companies such as Amazon and Facebook. But those who study the racial wealth gap suggest that the concentration of growth in a smaller number of very large companies is a critical factor in driving inequality.

“For small businesses to thrive you need to have a robust antitrust agenda,” said Heather Boushey, president and CEO of the Washington Center for Equitable Growth. “It’s a super important and under-recognized factor. There is lots of empirical evidence that these things are connected.”

The Biden administration can also take steps to address the wealth gap even if Congress doesn’t cooperate. One way to tackle it is through federal contracting. Federal officials could reverse a Trump administration policy of not sharing which firms get federal funds and reinstate an Obama administration policy of paying suppliers upfront for contracts.

John Rogers, co-CEO of Ariel Investments, said there should be more transparency around how federal funds are spent. The federal government should track contracts by race and category to ensure that Black-owned businesses are getting deals for professional services — and not just contracts forjanitorial or other low-margin industries. What’s more, Rogers said, the administration should use their bully pulpit to ensure private companies are doing the same.

When the state of Illinois mandated diversity in company boards, more Black executives benefited from new opportunities, Rogers said.

“A lot of companies had a Jackie Robinson moment,” he said. But even forcing companies to be transparent about who gets contracts and sits on boards can create more diversity.

“Then pressure builds to move into the 21st century,” Rogers said. “And do the right thing.”

This blog originally appeared at Politico on November 18, 2020. Reprinted with permission.

About the Author: Renuka Rayasam covers Texas politics, policy and health care for POLITICO. Rayasam grew up outside of Atlanta, Ga. She studied political economy and German at the University of California, Berkeley and has a Master of International Affairs from Columbia University.


Share this post

Mounting unemployment crisis fuels racial wealth gap

Posted on by Megan Cassella
Share this post

Black workers are more likely to be out of a job, to have lost income or to have left the labor market altogether, economic data and surveys show.

The economic meltdown that has devastated the country amid the coronavirus pandemic has proven uniquely damaging for black Americans, threatening to exacerbate an already staggering racial wealth gap and fueling nationwide protests focused on racial justice.

Black workers are more likely to be out of a job, to have lost income or to have left the labor market altogether, economic data and surveys show — and less than half of black adults are now employed. More than 1 in 6 black workers was out of a job in May, the Labor Department reported Friday, and the black unemployment rate continued to rise even as the overall rate ticked downward.

Black workers are also more heavily represented in frontline industries that leave them more likely to be exposed to the coronavirus — which has been killing disproportionate numbers of black Americans — and less likely to be able to work from home.

At the same time, black Americans have also historically earned lower wages, owned fewer homes and accumulated less wealth than their white counterparts, leaving them less able to weather an extended period of time with little or no income. And economists warn that long-term economic effects are likely to be more damaging for workers of color.

“Every corner of inequality has been exposed,” said Lisa Cook, an economics and international relations professor at Michigan State University who served on the Council of Economic Advisers during the Obama administration. “From the health care system, to wealth data, to income data, to occupational discrimination — all of it seems to be laid bare right now.”

The 16.8 percent jobless rate for black workers in May compares to 12.4 percent for white workers — a sizable gap but not a dramatic one for a statistic that is typically twice as high for black workers, even in strong economies. Still, it marks a stunning reversal for African Americans, who were finally starting to reap the benefits from a decade of economic expansion and hit their lowest-ever unemployment rate of 5.4 percent late last summer.

While it took 10 years for the employment rate for black workers of prime working age to climb 10 points, for example, those gains are likely to be wiped out in a matter of months, said Janelle Jones, managing director for policy and research at Groundwork Collaborative, an advocacy group promoting progressive economic causes.

“When the economy bounces back,” she said, “we know that it’s not going to bounce back as quickly for black workers.”

The composition of the labor market also leaves black workers at heightened risk of long-term unemployment compared to white workers. Workers of color are more heavily represented in jobs with higher risk of coronavirus exposure — customer service, food service and security, for example — which were hit first and hardest and are likely to be among the last to come back, according to a new analysis led by PolicyLink and funded by JPMorgan Chase.

Some of those concerns may have already begun to play out. The May jobs report showed an unexpected drop in the overall unemployment rate as the economy gained jobs in industries like hospitality and construction. But jobs in local government, where black workers are heavily employed, continued to drop sharply.

As a result, the white unemployment rate dropped nearly 2 percentage points — while the black unemployment rate rose 0.1 percentage point.

In other areas, too, black workers and families are bearing the brunt of the deep recession being felt across the country. More than 55 percent of black households report having lost employment income since mid-March, according to a Census survey released this week, as compared to 43 percent of white households.

And any signs of recovery could be just as uneven: More than 2 in 5 black households expect to continue losing income over the next month, the survey showed, while just over a quarter of white households reported the same.

“So you can imagine the financial strain that a lot of these families are under,” said Connor Maxwell, a senior policy analyst at the left-leaning Center for American Progress. “Even if they’re able to get jobs after this recovery, are they going to be able to bounce back economically the same way as a lawyer who has been working remotely for the past three months?”

Economists and analysts are increasingly calling on Congress to step in to boost recovery efforts, allocate more aid and ensure the funding that is available is being distributed evenly.

The Paycheck Protection Program, in its initial iteration, offered an early warning sign of how hundreds of billions in government-backed loans allocated to support small businesses could be less accessible for those with black owners, in part because they are less likely to have had relationships with major banks.

As a result, a Goldman Sachs survey from late April found only 79 percent of black business owners had applied for a PPP loan versus 91 percent overall. And those who did apply had more trouble earning approval: Only 2 in 5 black applicants were approved, Goldman found, compared to 52 percent of business owners overall.

In the same way that black Americans lost their homes at far higher rates than their white counterparts during the Great Recession — a factor that contributed to the uneven recovery — there’s concern that black business owners could now be more at risk of losing their livelihoods.

“This is a traditional entry point to the middle class,” Cook said. And if businesses are forced to close, “there will be another major setback to wealth accumulation in this country.”

That could worsen the already stark racial wealth gap: In 2016, the net worth of an average white family was 10 times that of an average black family — $171,000 versus $17,150.

Labor advocates and the AFL-CIO are also calling on lawmakers to extend the boosted unemployment insurance benefits that are currently set to expire at the end of July, noting that doing so would help all jobless workers but particularly minorities being hit the hardest. Democratic leaders in both chambers are also supportive of a push to automatically tie unemployment aid to the condition of the economy.

Jones of the Groundwork Collaborative noted lawmakers could go further and link benefits to regional unemployment rates, adding: “I don’t want to stop giving people help because New York and California have recovered but the South hasn’t.”

Others say Congress could take additional steps to provide rental assistance, given that people of color are less likely to own their homes, and provide hazard pay for essential workers, who are disproportionately workers of color.

“Congress knows that recessions hit black households harder, and it also knows that it has the power to take action that will weaken the recession and strengthen the recovery,” Heidi Shierholz, a senior economist at the Economic Policy Institute, wrote on Thursday. “If it doesn’t act, it will be yet another assault on black people.”

This blog originally appeared at Politico on June 5, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.


Share this post

Racial Inequality Is Hollowing Out America’s Middle Class

Posted on by Dedrick Asante-Muhammad
Share this post

America’s middle class is under assault. And as our country becomes more diverse, our racial wealth gap means it’s also becoming poorer.

Since 1983, national median wealth has declined by 20 percent, falling from $73,000 to $64,000 in 2013. And U.S. homeownership has been in a steady decline since 2005.

While we often hear about the struggles of the white working class, a driving force behind this trend is an accelerating decline in black and Latino household wealth.

Over those three decades, the wealth of median black and Latino households decreased by 75 percent and 50 percent, respectively, while median white household wealth actually rose a little. As of 2013, median whites had $116,800 in wealth — compared to just $2,000 for Latinos and $1,700 for blacks.

This wealth decline is a threat to the viability of the American middle class and the nation’s overall economic health. Families with more wealth can cover emergencies without going into debt and take advantage of economic opportunity, such as buying a home, saving for college, or starting a business.

A Growing Gap

We looked at the growing racial wealth gap in a new report for the Institute for Policy Studies and Prosperity Now.

We found that if these appalling trends continue, median black household wealth will hit zeroby 2053, even while median white wealth continues to climb. Latino net worth will hit zero two decades later, according to our projections.

It’s in everyone’s interest to reverse these trends. Growing racial wealth inequality is bringing down median American middle class wealth, and with it shrinking the middle class — especially as Americans of color make up an increasing share of the U.S. population.

The causes of this racial wealth divide have little to do with individual behavior. Instead, they’re the result of a range of systemic factors and policies.

These include past discriminatory housing policies that continue to fuel an enormous racial divide in homeownership rates, as well as an “upside down” tax system that helps the wealthiest households get wealthier while providing the lowest income families with almost nothing.

The American middle class was created by government policy, investment, and the hard work of its citizenry. Today Americans are working as hard as ever, but government policy is failing to invest in a sustainable and growing middle class.

To Do Better, Together

To do better, Congress must redirect subsidies to the already wealthy and invest in opportunities for poorer families to save and build wealth.

For example, people can currently write off part of their mortgage interest payments on their taxes. But this only benefits you if you already own a home — an opportunity long denied to millions of black and Latino families — and benefits you even more if you own an expensive home. It helps the already rich, at the expense of the poor.

Congress should reform that deduction and other tax expenditures to focus on those excluded from opportunity, not the already have-a-lots.

Other actions include protecting families from the wealth stripping practices common in many low-income communities, like “contract for deed” scams that can leave renters homeless even after they’ve fronted money for expensive repairs to their homes. That means strengthening institutions like the Consumer Financial Protection Bureau.

The nation has experienced 30 years of middle class decline. If we don’t want this to be a permanent trend, then government must respond with the boldness and ingenuity that expanded the middle class after World War Two — but this time with a racially inclusive frame to reflect our 21st century population.

Dedrick Asante-Muhammad directs the Racial Wealth Divide Project at Prosperity Now. Chuck Collins directs the Program on Inequality at the Institute for Policy Studies and co-edits Inequality.org. They’re co-authors of the new report, The Road to Zero Wealth.


Share this post

Here’s Some History to Help Understand the Racial Wealth Gap

Posted on by William Spriggs
Share this post

A company of 4th Regiment U.S. Colored Troops, (USCT) Infantry/Wikimedia

William Spriggs Next month is Black History Month. We will hear stories about black Americans and their successes in this country against the barriers (slavery, Jim Crow, poll tax just to name a few) thrown in their paths. Yet for every success story, there is still the nagging fact that the median net wealth of white households is 12.2 times greater than that of black households.

Because of well-documented gaps in unemployment rates, earnings, poverty and wealth, black working people are sometimes falsely seen as “bystanders” to America’s economy.  Unbelievably, there is a tendency to observe the gaps in economic success and blame African Americans for being disengaged and not trying to respond to clear economic realities; a lack of investment in education, skills, training and personal saving. This is patently absurd.

African Americans are fully aware of the barriers they face to success, and have been steadfast to struggle to remove them.  Indeed, Dr. Martin Luther King Jr. was assassinated during a campaign by black sanitation workers in Memphis, Tenn., to exercise their right to organize, strike and demand fair wages; a key theme of American worker advancement during the first 80 years of the last century and one repeated this past Dr. King Holiday by airport workers demanding a living wage.

The difference in wealth does not grow smaller when comparing white and black households headed by college graduates, or when controlling for differences in income.  Because the easy answers like education and income differences don’t explain the wealth gap—which measures accumulated savings over multiple generations—the fall back is often to blame the savings’ behavior of blacks.  And, here, old stereotypes of African Americans being profligate can easily substitute for documentation. But taking a closer look at history tells us the real story.

Those early years after emancipation are key in addressing the deep history of African Americans as their own agents.  During the Civil War, African American leaders, most famously, Frederick Douglass, campaigned hard to have black soldiers officially sworn into the fight to end slavery.  With issuing the Emancipation Proclamation, Lincoln also finally signed on that in 1863 not only would slaves in the rebellious states be free, but African American men would join the United States Army and Navy in quelling the Southern revolt.  Close to 180,000 black men signed-up as official members of America’s Armed Forces to defend the Constitution of the United States against all enemies foreign and domestic.  They became the largest paid workforce of African American men to that point in America’s history.

The issue quickly arose as to where could they deposit their paychecks?  A few fledgling efforts were made to start banks.  And, that effort culminated with the establishment of the Freedmen’s Savings and Trust by Congressional act in March 1865; the Freedmen’s Bureau bank.  Recently the U.S. Department of Treasury and Secretary Jack Lew dedicated an annex to honor the Freedmen’s Bureau Bank.

By 1870, the bank operated 37 branches throughout the South, with African Americans trained as branch managers.  In all, almost 70,000 African Americans made deposits in the bank, reaching savings of about $57 million.  Those facts stand to clearly demonstrate the efforts of a people, subject to slavery, freed with nothing from their previous labors to start anew having built wealth for others for free.

But, fate would intervene.  The accumulation of those savings came during a period when the federal government still stood in the way of restoring the South’s old hegemony of white southern planters.  And, it came when the nation’s banks were still conservative following the uncertainties of the Civil War.  Southern banking laid prostrate, devastated by the collapse of the Confederacy and the meaningless holdings of Confederate dollars, and the long mystery of the disappearance of the gold reserves that backed that currency on its desperate journey south from Richmond, Virginia in April 1865 as Robert E. Lee surrendered the fighting cause at Appomattox Court House under the vigilant eyes of 2,000 black men in seven units of the United States Colored Troops.

By the start of the 1870’s, the expansion west made possible by the Homestead Act and transcontinental railroad—both enacted during the Civil War—restored the nation’s prosperity and financial zeal.  The result was over speculation in railroading.  In Europe, financial pressures mounted from the Franco-Prussian War.  Germany refused to continue issuing silver coins.  This resulted in plummeting silver prices, and the eventual move by the United States to go from backing its currency in silver and gold, to use only the gold standard.  This led to the collapse of investments in silver mines in the western United States.  The result was a global financial collapse that swept Europe and the United States in 1873.  With it came the collapse of the U.S. banking system.

Sound familiar?  And, that collapse decimated the Freedmen’s Savings and Trust as well.  At a time of general financial collapse and no Federal Deposit Insurance Corporation—a creation learned from the Great Depression—many depositors lost their savings.  The millions in savings of the newly free went away, too.  Not too different than the 240,000 homes that disappeared from the African American community after the financial collapse of 2007.

In 1876, a compromise to resolve the Presidential election resulted in the removal of federal protection of African Americans in the South.  The end of reconstruction meant the restoration of southern white hegemony and the evisceration of voting rights for African Americans, the protection of the access to many occupations and the limiting of their equal access to education.  This too sounds familiar.

To accurately measure history, it takes measuring all the hills and valleys right.  Dedicating a building to the Freedmen’s Savings and Trust allows us to properly assess the toil and efforts of African Americans.  It shows the hard work and industrious nature of a determined people.  It reminds us of the mountains of betrayal as well.

This blog originally appeared in aflcio.org on January 22, 2016.  Reprinted with permission.

William E. Spriggs is the Chief Economist for AFL-CIO. His is also a Professor at Howard University. Follow Spriggs on Twitter: @WSpriggs.


Share this post

Subscribe For Updates

Sign Up:

* indicates required

Recent Posts

Forbes Best of the Web, Summer 2004
A Forbes "Best of the Web" Blog

Archives

  • Tracking image for JustAnswer widget

  • Find an Employment Lawyer

  • Support Workplace Fairness

 
 

Find an Employment Attorney

The Workplace Fairness Attorney Directory features lawyers from across the United States who primarily represent workers in employment cases. Please note that Workplace Fairness does not operate a lawyer referral service and does not provide legal advice, and that Workplace Fairness is not responsible for any advice that you receive from anyone, attorney or non-attorney, you may contact from this site.

Find an Employment Attorney