A widening gap between the mega-rich and the rest of society, documented in a recent congressional study, is likely to create even larger economic disparities between African-Americans and Whites. The Congressional Budget Office (CBO) issued a report that stated: “For the 1 percent with the highest income, average real after-tax household income grew by 275 percent between 1979 and 2007.”
By contrast, 60 percent of the population in the middle of the income scale (the 21st through 80th percentiles), the growth in average real after-tax household income was just under 40 percent. For the 20 percent with the lowest income, their after-tax income grew by only 18 percent over that same period.
The 47-page CBO report is titled, “Trends in the Distribution of Household Income Between 1979 and 2007.” It showed that the share of after-tax household income for the top 1 percent more than doubled over the period studied, rising from nearly 8 percent in 1979 to 17 percent in 2007.
The most affluent 20 percent of the population received 53 percent of after-tax household income in 2007, an increase of 10 percent over 1979. Put another way: The top 20 percent earned more after-tax income in 2007 than the combined income of the other 80 percent of Americans.
These figures are fueling the heated debate over the Occupy Wall Street movement that has spread throughout the country and around the world. But that discussion has virtually ignored the plight of Blacks, who have already seen the wealth gap widen during the most recent recession.
A State of the Dream report issued earlier this year by United for a Fair Economy chronicles African-Americans’ stalled economic progress.
“In 1947, Blacks earned 51 cents to each dollar of White median family income,” the report recounts. “By 1977, Blacks were earning 56 cents on each dollar in White income, a gain of five cents. Most of those gains were made in the 1960s.
“Then, as the backlash took hold, progress slowed – and stopped. By 2007, Blacks earned slightly over 57 cents (57.4 cents) to each White dollar, a gain of just one penny in thirty years. Two years later, as the Great Recession set in. Blacks lost a half-cent, ending at 57 cents to each White dollar of median family income.”
Such erosion has led to the widest wealth gap on record between Blacks and Whites.
In July, the Pew Research Center issued a report that stated, “The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households.” It explained, “These lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago and roughly twice the size of the ratios that had prevailed between these groups for two decades prior to the Great Recession that ended in 2009.”
The bursting of the housing bubble in 2006 and the high unemployment rates have devastated communities of color.
Median home equity for Whites declined by 18 percent between 2005 and 2009, from $115,364 to $95,000. Meanwhile, Blacks lost 23 percent of their home equity, from $76,919 to $59,000.
Black long-term unemployment was also higher than that of Whites, which is usually the case during a recession. Black unemployment increased from 8.6 percent to 15.6 percent during that period; White employment rose from 3.7 percent to 8 percent.
Black wealth, already much less than Whites, worsened.
“From 2005 to 2009, inflation-adjusted median wealth fell by 66 percent among Hispanic households and 53 percent among black households, compared to just 16 percent among white households,” the Pew report stated. “As a result of these declines, the typical black household had just $5,677 in wealth (assets minus debts) in 2009, the typical Hispanic household had $6,325 in wealth; and the typical white household had $113,149.”
The $5,677 in Black wealth in 2009 was less than half of the $12,124 in Black wealth just four years earlier.
In order to get ahead in the future, clearly African-Americans will need to diversify their financial holdings beyond housing. As the Pew report noted, “Whites and Asians are much more likely than Hispanics and blacks to own financial assets. More than 80 percent of whites and Asians own interest-earning assets in financial institutions, compared with about 60 percent of Hispanics and blacks. Whites and Asians are also three to four times as likely as Hispanics and blacks to own stocks and mutual funds shares…A sizable minority of U.S. households own no assets other than a motor vehicle. In 2009, that was true of 24 percent of black and Hispanic households, 8 percent of Asian households and 6 percent of white households.”
The racial and ethnic wealth gap was already horrendous. Reports of a wider economic divide between the haves and have-nots have shown that the problem is getting even worse. •