Black Middle Class Economically Vulnerable

Dawn Turner Rice, Chicago Tribune, October 7, 2012

{snip}

For months, the presidential candidates have been trying to court the middle class, extending offers of tax cuts, lower gas prices and better schools. The message: America does well when the middle class does well. The corollary: We feel your pain.

But much less attention has been given to the black middle class, which since the recession and slow recovery has suffered massive decreases in wealth and high rates of home foreclosures. Blacks overall are experiencing a 13.4 percent unemployment rate, according to figures released Friday, much higher than the national rate of 7.8 percent.

The Pew Charitable Trusts’ Economic Mobility Project recently released a report projecting that 68 percent of African-Americans reared in the middle of the wealth ladder will not do as well as the previous generation.

In August, the National Urban League’s State of Black America 2012 report found that nearly all the economic gains that the black middle class made during the last 30 years have been wiped out by the economic downturn.

“This is a very dire situation,” said Valerie Rawlston Wilson, an economist with the National Urban League Policy Institute. “Even for blacks who have college degrees, we’ve seen a doubling of their unemployment (rate) between 2007 and 2010.”

{snip}

From 2005 to 2009, the average black household’s wealth fell by more than half, to $5,677, while white household wealth fell 16 percent to $113,149, according to the Pew Research Center. In 2009, 24 percent of black households had no major assets other than a vehicle, compared with 6 percent of their white counterparts.

“For every $20 whites have in wealth, blacks have just $1,” said Paul Taylor, director of Pew’s Social and Demographic Trends project. “And in many cases, households get a boost because they inherit wealth from parents and grandparents. Blacks for most of history haven’t been able to accumulate that type of wealth.”

{snip}

Saving money for the future is especially difficult for blacks living paycheck to paycheck. The median annual household income for blacks declined by 11.1 percent (from $36,567 to $32,498) from June 2009 to June 2012, according to an analysis of Census Bureau data by Sentier Research. The decline for whites was 5.2 percent and for Hispanics 4.1 percent. Both groups started with higher incomes than blacks.

“A generation of wealth and assets are evaporating, and the presidential candidates aren’t making a peep about it,” said Keeanga-Yamahtta Taylor, 40, a doctoral candidate in African-American studies at Northwestern. “We’re talking about historic changes in manufacturing, and these are systemic changes in the economy and in the midst of this, people are being left behind.”

{snip}

Historically, many blacks have made it into the middle class via public-sector and union jobs. But since 2008, the public sector has shed about 600,000 positions.

{snip}

After the housing bubble burst in 2006, everyone was affected, but blacks were hit particularly hard. About one-quarter of blacks have lost their homes or are seriously delinquent and at risk of losing them, according to the North Carolina-based Center for Responsible Lending.

The center also found that African-American borrowers with good credit scores received subprime, predatory loans associated with high foreclosure rates three times as often as white borrowers with comparable credit scores.

Earlier this year, the Woodstock Institute, a Chicago-based nonprofit research group focused on fair lending issues, found that although 25 percent of homes in the Chicago area were underwater, about 40 percent of homes in predominantly black neighborhoods were.

The average equity for mortgaged properties in communities that are more than 90 percent white is about $108,000. In communities that are 80 percent or more black, the average is $6,800.

Spencer Cowan, Woodstock’s vice president, said the institute didn’t break the research down by income range.

“But the disparity is so great that it would almost be impossible for even a black middle-class neighborhood to have significantly more equity, so that the wealth disparity wouldn’t be on that order or magnitude,” said Cowan.

Home values and equity are a huge deal because homes accounts for about 60 percent of black wealth.

“For whites at the upper-income levels, their home is a component of their wealth, but they may have a 401(k) and other assets,” Cowan said. “But for most black middle-class folk and those at the lower rungs, it’s all about their homes.”

{snip}

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  • If you remember Q.D.’s Great Mortgage Rant of 2011 on AR, and you didn’t fall asleep while reading it, then it will be easy for you to respond to this.

    Otherwise:


    “For every $20 whites have in wealth, blacks have just $1,” said Paul Taylor, director of Pew’s Social and Demographic Trends project. “And in many cases, households get a boost because they inherit wealth from parents and grandparents. Blacks for most of history haven’t been able to accumulate that type of wealth.”

    And they “haven’t been able to accumulate that kind of wealth” because some “afawete” releases a new $300 pair of shoes every few months.


    Historically, many blacks have made it into the middle class via public-sector and union jobs. But since 2008, the public sector has shed about 600,000 positions.

    Proving that much of the “black middle class” is an illusion constructed by affirmative action.


    The center also found that African-American borrowers with good credit scores received subprime, predatory loans associated with high foreclosure rates three times as often as white borrowers with comparable credit scores.

    This paragraph is Clintonesque, because it haggles on what the definition of “good credit score” is.  What might be a “good” score to open a line of revolving credit at a furniture store won’t be that good when trying to draw a $200,000 mortgage.  Also, there are gradations of “good.”  A “good” score on the high end of “good” will get more favorable loan terms than a sore on the low side of “good.”  It’s like IQ:  85-100 is considered “low average,” but 99 IQ is a lot smarter than 86 IQ.  Too, there are other factors in mortgage lending decisions than just the credit score.  Household income is one of the crucial ones.  Two people walk into a bank, both have 740 credit scores, the high end of “good.”  One person has an income of $40,000, the other person has an income of $90,000.  The latter person is simply going to get better loan terms than the former person, and that’s notwithstanding that the latter person will be pre-approved for a mortgage amount higher than the former person just based on pure algebra of the compound interest formula.


    The average equity for mortgaged properties in communities that are more than 90 percent white is about $108,000. In communities that are 80 percent or more black, the average is $6,800.

    That’s because even controlling for income, blacks give up on their payment books sooner in the mortgage sooner than whites.  If you look at an amortization schedule of a typical 30 year fixed, you’re not going to draw down on your principal balance for the first several years of the mortgage.  If you have 108k of equity in your house, this means you’ve been faithful with the payments for (educated guess off the top of my head) 10-15 years.  Another factor in “equity” of the homeowner is that the house might have appreciated in value.  A house in a white neighborhood will appreciate just because it’s in a white neighborhood, a house in a black neighborhood won’t much appreciate or actually go in the other direction.  Your equity equals its market value minus your remaining principal on your amortization schedule.  In a white neighborhood, market value may be higher than the initial principal on the loan.  In a black neighborhood, it will probably be less.  This article is not clear whether it considers “equity” to be starting with market value as a base or initial loan principal as a base.

    • Puggg

      You’re making it too complicated.

      Einstein is rumored to have said that compound interest is the most powerful force in the universe.  A person that doesn’t have the ability to understand compound interest is consigned to a life of hand-to-mouth eking out an existence, at best.

      To wit:  Our darker low-IQed brethren.

  • The Pew Charitable Trusts’ Economic Mobility Project recently released a report projecting that 68 percent of African-Americans reared in the middle of the wealth ladder will not do as well as the previous generation.

    Regression towards the mean

    Historically, many blacks have made it into the middle class via public-sector and union jobs. But since 2008, the public sector has shed about 600,000 positions.

    Thank goodness. Just about all public sector jobs need to go away (especially those in education). Unfortunately, those don’t seem to be disappearing any time soon.

  • jedsrael

    White Middle Class Up North Is Economically Vulnerable,

    because BARAK OBAMA IS JEFFERSON DAVIS’ REVENGE.

  • The__Bobster

    The last time I checked, 50% of  white collar black females and 75% of white collar black males worked for da gubmint. Without da gubmint, there is no black middle class.

    • Wow. Didn’t know it was that high. I know 20% of them employed in general are working for the government (14% for whites) but would you mind sharing where you got those figures about white collar black workers? They are very intriguing.

    • JohnEngelman

      That might be true, but an assertion like that should be documented. 

      • The__Bobster

        MIGHT be true? I document 99+% of my statements, and I don’t use libtarded sources like The NY Slimes, The Washington Compost or NPR, like you always do.

        I don’t feel like wasting my time on you this time, so do what nettle said and prove me wrong by researching it yourself. Then get back to me.

    • IstvanIN

       I read a while back that although NJ’s population is only 13% black fully 25% of public employees in NJ are black.

      Once YT stops paying taxes the black “middle-class” goes by-by.

  • ed91

    won’t waste my time reading it but I can state from experience that if you can’t plan ahead a bit, then a good paying job or two won’t be the solution.

  • crystal evans

    It is true that blacks have a lower net worth than whites do. 

    • The__Bobster

      That’s a hate fact. You can be jailed in Australia for making such statements.

  • Capitalism like reality is racist.  

  • Ulick

    “Saving money for the future is especially difficult for blacks living paycheck to paycheck.”

    If they left off “living paycheck to paycheck” the sentence would tell the true story — saving money for the future is especially difficult for blacks.  How many black pro athletes and entertainers have we seen, most of whom make more money is one year than most of us will make in our lifetimes, go bankrupt a short time later.  And it’s not exceptions.  It’s the majority…

    “60% Of NBA Players Go Broke 5 Years After Retirement”

    http://articles.businessinsider.com/2011-11-29/sports/30453521_1_retirement-landscape-athlete-challenge-2#ixzz28kpBCycH

  • The Black Middle Class better be careful because they are now working their way into a one way airplane ticket to their favorite African homeland.  They were forced to come here against their will and maybe they can be urged to do the right thing this time.

  • APaige

    It was NOT predatory loans…the problem was predatory borrowing. Civil Rights groups, community organizations and the government pressured banks to loan to ‘under-served areas’. Even banks mergers were approved based on part on how much money the banks loaned to these areas. Do not put money into an area you would be afraid to drive through.

  • libertarian1234

    It’s obvious this black woman doesn’t understand that she’s highlighting the fact that blacks can’t succeed in a first world country.

    She thinks she’s pointing out  injustices, as if the system or whites are somehow to blame for the low economic status of the black population, but she’s really verifying what everybody already knows which is that blacks, as a group, are failures.  Nobody is responsible for lack of black achievement but blacks.

    She’s whining about blacks being treated differently than whites in home mortgages….which is inaccurate, unless she wants to consider that blacks were generously given mortgages strictly in order to get them into homes even though they weren’t qualified, as being treated differently. 

    Maximum Mouth Waters, Barney Fwank, Chris Dud and every other leftist dreg in Congress pressed viciously hard to force the banks to award loans to unqualified buyers, most of whom were black.  Unless I missed it, nowhere did this black reporter mention that it was the mass failure to repay these loans that brought about the near-collapse of the entire financial apparatus in this country, which resulted in a lowering of equity status for blacks everywhere. 

    So, the bottom line is that assigning priviledged treatment for blacks is the cause of their present plight, right along with their inability to compete on an equal basis with non-blacks.

    Can these people EVER discuss anything without whining about being subjected to imagined injustices?

    Will they ever understand….and admit….. that nobody is to blame for all the things they complain about but themselves?

  • KenelmDigby

    There is only one reason why an individual, any individual hasn’t accumulated wealth during his lifetime, to put it bluntly they cannot have worked many years on average throughout their working lifetimes – any other excuse simply doesn’t wash.
    Even a worker in a low-paying job who is dilligent and attends that job for day after day, year after year will, by the law of accumulation. amass quite a nest-egg from his earnings if he is sensible with managing his finances.

    • Ed_NY

      Blacks can not manage their finances.  It’s all about instant gratification and they spend it faster then they earn it.

  • With multiple government agencies tripping over each other to
    see who could get the most food, drink, and shelter to the blacks of New
    Orleans after its storm, the streets were still too dangerous to walk through.

     

    I can imagine a time when these government agencies become
    either unable, unwilling, or forbidden to burn vast quantities of post-crisis resources
    in an attempt to sustain the urban biomass.

     

    That would be one exciting week.

    • TheTruthHurts4

       We don’t need those people. We would be better off without them.

  • Bon, From the Land of Babble

    “Blacks overall are experiencing a 13.4 percent unemployment rate, according to figures released Friday, much higher than the national rate of 7.8 percent.”

    When times are lean, companies cannot afford to carry dead weight.

    Blacks also tend to save less, over spend and buy stupid things that don’t hold value well such as clothes, shoes, jewelry and fancy, overpriced cars. I’ve seen what they buy on teachers’ salaries and it is unbelievable

    This is because blacks do not have the gene for future orientation that we Whites possess.

    Anyone here seen ESPN’s Broke?

    I rest my case.

    Bon

    • JohnEngelman

      Evolution in an agricultural environment encourages the propensity to plan for the future, and defer gratification. Farmers need to plan for the next growing season, the next harvest, and so on. No matter how hungry they get they cannot eat their seed corn, or butcher all of their farm animals. 
                
      Whites began agriculture over ten thousand years ago in the Near East. Blacks only adopted it about three and a half thousand years ago. 
                
      I do not know as much about Australian Aborigines as I wish I did. I do know that they never adopted agriculture. My guess is that they are even less prone to plan for the future and defer gratification than are blacks of African descent. 

    • saxonsun

      And terribly big dinners at Red Lobster!

  • TheTruthHurts4

    The so called “black middle class” was never anything more than the artificial result of affirmative action and useless make work jobs with the government that did not require high scores on civil service exams.
        
    Those government jobs are nothing more than elaborate welfare schemes to take the hard earned tax money whites earn in the private sector and give it to blacks who ought to be janitors and shoe shine boys like their fathers and grandfathers were.
         
    President Woodrow Wilson had the right idea when he excluded blacks from professional positions in the U.S. government.
     
    Without affirmative action blacks cannot rise. Without welfare checks they cannot live. When t he U.S. economy was growing we could afford to carry blacks on our backs. Now that economic growth has come to an end the weight of those people is too heavy to bear.

  • Maybe they should invest their money in stead of buying shiny things.

  • Detroit_WASP

    Black household wealth dropped so much because real estate prices in urban areas was vastly inflated.

    When the real estate crash brought us back to reality, they lost “wealth”

  • saxonsun

    Escalades being the vehicle of choice.

  • The initial Federal legislation that laid the groundwork for the subprime circus was the CRA (Jimmy Carter).  It was slightly expanded in the very early 1990s (Bush 41).  Bill Clinton’s regulatory agencies heavily pushed regulatory code and threat of lawsuits on lending institutions to force subprime lending.  However, the straw that really stirred the drink was Bush 43’s demand that down payment requirements be scrapped, because they have a disparate impact on blacks and to a lesser extent Hispanics (because they don’t have the saving discipline).  Like I explained in The Great Mortgage Rant of 2011 here in AR (not reposting it), dropping down payments was the prime catalyst to real estate values soaring out of control (especially in what Steve Sailer terms “sand states,” but true everywhere), because housing prices no longer had the governor of the ability of people to save money.  Since income verification was mostly ignored and percentage-of-income requirements mostly set aside, this is how, for instance, the average selling price in the San Fernando Valley went from 150 in 1997 to 600 in 2006.

  • The__Bobster

    Citibank was sued by Obongo of behalf of ACORN to force them to give mortgages to worthless Zulus.

    Do you want a link for this statement, too, John?

  • MikeofAges

    A great failure of whites in America is the failure to establish intergenerational wealth. The Americans who came her from the European and British Isles artisan and working classes assumed that if they provided their children with either education or a strong work ethic, one or the other of these would provide for their children. Particularly this was the case with the World War II (“greatest”) generation. Often, these men were the first in their family tree to enjoy higher education and at least a degree of affluence. They failed, however, both to provide for their children beyond the idea of providing education and to inculcate the idea of family wealth. The progeny of the “greatest” generation have become easy pickings for the tendentious leftist movement in America.