Monday, July 11, 2011

"The Housing Crisis and African-American Wealth"

"The Drive for Economic Equality…Stuck in Neutral," by Christian Dorsey and James Lin:

The 40th anniversary of Dr. Martin Luther King’s assassination has caused many to ponder our progress in achieving his vision of economic equality. While income inequality between whites and blacks is a commonly referenced statistic, it tells an incomplete story. Wealth, or net worth, serves as a better indicator of a family’s ability to achieve economic security and upward economic mobility. When seen in this light, the gap between black and white is incredibly wide.

In 2004, blacks held $11,800 in net worth, or about 10% of the $118,300 held by whites (see Chart). When home equity is subtracted, blacks held, at the median, only $300 in net financial assets, or less than 1% of the $36,100 held by whites. Contrary to conventional wisdom, the picture has not improved in recent years. The wealth gap was narrowest in 1992, and even then, median total wealth for blacks was a mere 16% of their white counterparts.

It is unclear how the housing crisis will affect the wealth gap. However, with most black wealth concentrated in home equity, and with the disproportionate number of foreclosures in black households,1 the wealth divide may continue to widen. Four decades after Dr. King’s death, African Americans will have achieved little in the way of shared and equitable prosperity.
Policy makers can develop policies aimed at building wealth in low-wealth households to guard against income shortfalls and provide them with the means to invest in education and appreciating assets—keys to economic growth. Addressing the wealth gap directly will not only alleviate an acute symptom of racial inequality, it will better position the U.S. economy to reach its full potential. (Economic Policy Institute)

The importance of saving America's middle class has become part of the nation's dialogue, but as you point out, there isn't "one" middle class.

Oliver: People have talked about this a lot. There's a hollowing out of the middle of the class stratum in American society. There are more people who are doing quite well, and there are more people who are doing quite worse. There are fewer people in the middle than before. And it is this middle that keeps society going.

What characterizes a third-world country is extremes of rich and poor. America has always been a country with a strong middle class, and we're seeing that diminution. The black middle class has always been a very vulnerable group and when I talk about the three legged stool -- income, wealth and transfer payments -- they're not doing that well now. They didn't have a lot of wealth, and that's close to being gone. (source: Saint Louis Beacon)

From Oliver and Shapiro’s acclaimed book: Black Wealth, White Wealth: The relationship between residential segregation and the gross differential in Black Wealth and White Wealth.(Remember: Net Worth included all assets minus debts, including house you own and car, Net Financial Asset is the same without house and car)

"The Housing Crisis and African-American Wealth"

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