The American Dream on Hold: Economic Challenges Facing the Black Community

Monday, November 9, 2015
The Cook Center

On Oct. 30, William Darity, Jr. director of the Samuel DuBois Cook Center on Social Equity, provided expert testimony to the Congressional Joint Economic Committee and the Congressional Black Caucus on economic challenges facing the African-American community. Darity joined two panels of experts that addressed representatives Carolyn Maloney (D-NY), ranking Democrat on the Joint Economic Committee; G.K. Butterfield (D-NC), current chairperson of the Congressional Black Caucus; Yvette Clarke (D-NY), vice-chair of the CBC, and Hakeem Jeffries (D-NY), both representing Brooklyn; and Charles Rangel (D-NY), the long-time congressional representative of Harlem.

See full remarks below.

Testimony presented to the Congressional Forum on "The American Dream on Hold: Economic Challenges Facing the Black Community"
October 30, 2015
New York, NY

The depth and breadth of the economic challenges facing black America is epitomized by marked racial disparities in unemployment and in wealth (or net worth). The racial gap in unemployment is a profound index of the degree of employment discrimination in the nation’s labor markets. It is now customary to acknowledge that the black unemployment rate consistently has been twice the white rate since comprehensive employment statistics first were gathered some 75 years ago. What is less widely recognized is the fact that the 2-to-1 ratio holds at every level of educational attainment, and, most striking, the unemployment rate for blacks who have completed some college or who have an associate’s degree have a higher rate of unemployment than whites who never have finished high school.

Data from the American Community Survey demonstrates that the black-white unemployment ratio is even greater than 2-to-1 in New York City where the local unemployment rate for whites in 2014 was 5.5 percent while it was 12 percent for blacks. Moreover, New York City was one of the two sites where sociologist Devah Pager conducted her field experiment audits that demonstrated that black males with no criminal record are less likely to be called back for a job and less likely to be offered a job than white males with a criminal record.

While the persistence of employment discrimination constitutes a critical barrier to black economic well-being, the most important barrier is associated with the racial wealth gap. Differences in wealth accumulation are important to examine because wealth, unlike income, provides longer term security, particularly "insurance" against the expenses of a medical or legal emergency or against job loss. It enables families to purchase high quality schooling for their children, whether in a private school or via the purchase of a home in a neighborhood with a high cachet public school. Wealth facilitates influential participation in the American political process. Wealth – whether invested in a debt-free education, small business creation, a home purchase or improvement, or retirement savings – generates opportunity and improves well-being. In addition, wealth provides the freedom to innovate. Starting a business, inventing a new product, making land productive, undertaking vocational training, and making investments all beget greater wealth – but they require an initial endowment to get started. In sum, wealth provides people with the start-up capital to purchase appreciating assets, which in turn, iteratively generates more wealth. Accumulated wealth  also can be passed on to children, yielding still more wealth and opportunity across the generations. 

Racial disparities in wealth are staggering.* During 2011 the racial wealth gap exceeded $100,000. Data from the Survey of Income and Program Participation (“SIPP”) indicate that during that year median white family wealth was $111,740 while median black wealth was a mere $7113. Thus, median white family net worth was 15 times that of the median black family in 2011. It would take the average black family at least three years of consuming none of their income to close the gap through personal saving.

When blacks do "the right thing" it has an imperceptible effect on racial wealth inequality. Note that there are huge racial gaps in wealth at each level of employment, income, and education. Blacks who were unemployed in 2011 had zero family net worth; whites who were unemployed had a net worth of $21,892, nearly twice as high as the family net worth for blacks working full time. In each quintile of the income distribution, there are enormous gaps in wealth. In the highest quintile (families with incomes greater than $93,000), black median net worth ($138,200) was 40 percent of white median net worth ($320,400) in 2011. The proportion falls as we move down the quintiles. In the lowest quintile (families with incomes less than $18,400), white median net worth was $15,000 while it was zero for blacks. With respect to education, the most striking statistic is the fact that blacks with a college degree have $10,000 less in median wealth ($23,400) than whites who did not finish high school ($34,700).

In New York state alone the 2011 Panel Study of Income Dynamics shows that median black household net worth is about $13,000 while it is $121,000 for white household. SIPP data for 2011 reveal that white households where the head has a high school degree have a similar level of wealth ($108,884) at the median for black households where the head has an advanced degree beyond the BA ($110,800). Households headed by black BA recipients actually have close to $72,000 less in net worth than households headed by white high school graduates. Unfortunately, we do not have access to a satisfactory set of data on New York City specifically; it would be valuable to conduct a survey similar to those undertaken in Boston, Tulsa, Miami, Los Angeles, and Washington DC under the aegis of the National Asset Scorecard on Communities of Color (NASCC) project in New York City.

It is also noteworthy that the black commitment to higher education is so strong that black parents attempt to support their sons’ and daughters’ efforts to attend college with far fewer resources than white parents. The median net worth of black parents who seek to provide financial assistance for college education is a mere one-third of the median income of white parents who do not.

Racial disparities in wealth are explained primarily by the markedly greater ability of whites to transfer substantial resources to the next generation via inheritances and gifts than by racial differences in savings behavior. The best available evidence indicates there is no significant difference in savings rates nor appreciation on assets held between blacks and whites after socioeconomic status has been taken into account.

Patently these huge gaps are not attributable to black cultural deficits or self-defeating behaviors. These gaps are due to structural conditions that enable white racial advantage to be passed successively from one generation to the next. There are three transformative policies that would enable the nation to address the economic challenges imposed upon black America. First is a program of reparations that would provide compensation not only for slavery but, perhaps more important, 100 years of Jim Crow practices and ongoing racism and discrimination. Second is a program that would guarantee employment for all Americans parallel with the Works Progress Administration (WPAP and the Civilian Conservation Corps (CCC) during the Great Depression. The program I envision, unlike the WPA and the CCC, would be permanent and universally available to any adult American who wants to take advantage of the public employment option. Third is a program that would provide each newborn infant a government trust fund or endowment with the amount depending upon the wealth position of their family – a fund that they could access when they reach adulthood.

These programs are described in greater detail in the article linked below:

Deep structural inequalities require bold structural policies to bring about the needed change.

*The data presented here is drawn from research undertaken by the NASCC project located at Duke University’s Samuel DuBois Cook Center on Social Equity. The research team includes Darrick Hamilton, Yunju Nam, Rebecca Tippett, Khai Zaw, Anne Price, and William Darity, Jr.

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