Divided State of Black America: the Growing Racial Wealth Gap
Table of Contents
February 2021 Should Hit Different
I woke up to the same routine of tuning to Bloomberg Live on YouTube and found a strange emoji saying #BHM.
Took me a minute to realize that it meant Black History Month.
Soon came the usual calendar discussion about Black history, 90% civil rights leaders and some stragglers. I got it: the order of importance goes MLK, Harriet Tubman and finally the Obamas.
The nationwide protests in 2020 triggered a new string of White Guilt from companies whose staff tends to be majority White. Faux ally-ship goes hand in hand with fighting the patriarchy or something. However, after 500 years of slavery and servitude mixed with a heavy dose of corporal punishment and the frequent rape, I’m over the “we now understand”.
Most Blacks in the Americas can trace their genealogy to enslaved ancestors, forced into the trans-Atlantic slave trade that started in the early 17th century. From microaggressions in Brazil to colorism in Haiti, vestiges of the past still layer today’s subtext of Black Excellence. The C-suite dreams of the select few over the needs of the minimum wage many.
To this day, Blacks in the United States continue to face institutional barriers and discrimination, including a growing racial wealth divide. Black women did carry the election for the Biden-Harris Administration, however, as of February 2021, that has yet to translate into something tangible for Black communities (uniquely).
For me, I rather look at the numbers, to see record of progress as of late.
Cash flow, Income and Wealth Growth
Black Median Income – $45,438
In 2019, the annual median income of African Americans reached $45,438, which is below the national average of $68,703, and far below the White median income valued at $76,057. That part is simple, the less money you have the less moves you can make on the chase board and the greater the lead.
Black Median Net Worth – $17,150 and declining by 3-4% annually
The median net worth of black households in 2019 was $17,150, according to the Federal Reserve’s Survey of Consumer Finances. The median net worth of a white family at the same time was $171,000—nearly ten times as much.
According to a study commissioned by the National Endowment for Financial Education (NEFE), 96% of Americans face four or more “income shocks” during their lifetimes, which can reduce their retirement savings.
While more than “Half of Americans over 55 retire poor.”
Problems stemming from poor money management, credit card debts and family indebtedness, personal bankruptcy, under-funded retirement plan to dealing with aging parents, illness, even the sudden death of a spouse.
All of this way before the complexity of COVID-19.
44.3% drop post 2008
Black families’ net worth fell during the great recession by 44.3% and had yet to recover before 2020. In comparison, White families experienced a drop of 26%.
The difference is in investments in the stock market and the ability to weather the storm of instability for the long term. When things get bad, we eventually sell while it’s best to hold indefinitely to create generational wealth.
Only 8.7% of the wealth of White Families
The wealth divide is growing especially as the whole world recalibrates post-pandemic. Some jobs are not coming back and any disruption in wealth can set you back 4-6 years of growth.
Divided Outcomes – Joblessness and Structure Unemployment
Record Jobless Rate of 16.8%
When the pandemic hit, it took the black family under. By May 2020, jobless rate for black workers peaked at 16.8%. By comparison, sub 4% is critical for the wealth of any community in the long term. The Black community have been dealing with over 8% on average for decades.
There have been time when only two-thirds of educated Black men were employed, if not underemployed. In a reversal to the worst, the pandemic now means that Less than half of black adults currently have a job.
As of now, the Black community is stuck in a perpetual state of structural employment. How can you employ more Black scientists, engineers, accountants, and techs if there isn’t a pool of certified ones?
Virtual Brain Drain
The longer we stay home, the direr the knowledge divide grows. The environments that the kids are contending with vary greatly from lack of access to internet, no food, and no supervision.
Data show about 42 percent of all students between kindergarten and high school are in virtual-only schooling right now.
‘Disappearing’ students a big issue during pandemic”, South Florida superintendents say. “We literally have missing children,” Miami-Dade County Public Schools Superintendent Alberto Carvalho said. “Children who never showed up for the very first day of schooling in our communities. These are often referred to as ‘no shows.’”
Carvalho says Miami-Dade began the school year missing about 1,700 students, and despite the district’s efforts, they are still missing about a thousand.
“We’re seeing evidence and data now that suggests we’re looking at students who were behind losing another nine to 11 months. And these are students who entered into the pandemic…maybe one or two years already behind their peers in terms of learning,” says Christopher Morphew, Dean of the School of Education at Johns Hopkins University.
Divided in Ownership: Renters vs Landlords
Only 40% own their home
There are three pieces to wealth; education, marriage, and ownership. Unfortunately, we are struggling in the marriage department with unrealistic fantasies and second guessing education.
As of January 2020, 40% of Black families owned a home. Only 28% were current on their mortgages as of May 2020.
The eviction moratorium is a lifeline with no change in sight. If we learned, anything from the Great Recession is that Black families are hit in the worst way.
“The causes and consequences of the subprime boom (2005-2007), housing market collapse (2008), and financial crisis (2008-2009) hold tremendous significance for policymakers and activists seeking to ensure a strong and fair economy.
Coming out of the Great Recession, one of the most pressing economic problems is the widening racial wealth gap. In the lead-up to the financial crisis, economic opportunity remained deeply unequal across racial lines, but economic trends suggested that America was on a path toward narrowing the yawning wealth disparities between white and black families.
Deeply rooted economic inequality, however, fueled some of the most harmful lending practices, allowing financial institutions to engage in discriminatory and predatory lending that accelerated the financial collapse. Looking back, it is clear that racial discrimination played a pivotal role in the housing market crash.”
Impact of the US Housing Crisis on the Racial Wealth Gap Across Generations, Sarah Burd-Sharps and Rebecca Rasch, June 2015
The Divided Investors: Robinhood Dreams
Only 33.5% are in the game
Stocks are soaring, and most Black people are missing out
Nearly half of all U.S. households do not own any stocks, and a disproportionate number of them are from Black and other minority households.
Only 33.5% of Black households owned stocks in 2019, according to data released recently by the Federal Reserve. Among white households, the ownership rate is nearly 61%. Hispanic and other minority households also are less likely than white families to own stock.
Around 60% shut down of small businesses
Forbes reported that, “The Covid-19 Crisis Has Wiped Out Nearly Half Of Black Small Businesses”. By the time the dust settles, there will be 60% small black business closures to contend with.
The rate of permanent closures increased to 54% as of July 2020. While the retail sector struggled to move online, with permanent closures of 58%, out of 31,000.
Why? When also factoring in that Black-owned businesses “were less likely to enter the pandemic from a strong financial position than white-owned firms,” the New York Fed says the crisis “left Black firms with little cushion” to deal with the economic damage wreaked by COVID-19.
Based on criteria of profitability, credit score, and the use of retained business earnings to fund the business, only 42% of Black-owned enterprises qualified as “healthy or stable” going into the pandemic, compared with 73% of white-owned firms.
“Even the healthiest Black firms were financially disadvantaged at the onset of COVID-19,” the report notes.
Unfortunately those are the numbers that keep us divided
Either the Black community chooses to pivot or we fail. Post Pandemic is likely our last chance… ooh wait Kamala Harris is VP and Stacy Abrams is nominated for the Nobel Peace Price.
Empty victories lull a crowd.
No need to be alarmed back to regularly scheduled Tik Tok Challenges. Well, Happy BHM emoji month. As long as we can do comparison for likes, the wealth of a community will never amount to more than followers.
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