Economic Condition, U.S.

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Economic Condition, U.S.

Despite the impression of economic progress and success conveyed via the media by talk-show host Oprah Winfrey, basketball legend Michael Jordan, and business mogul Robert Johnson, the general economic status of African Americans in the United States is best characterized as a condition of persistent disparity. Relative economic outcomes for black Americans consistently lag behind those of whites collectively and most other nonblack segments of the U.S. population.

Most of the U.S. population, approximately 80 percent of the total, self-reports its race as white in recent decennial censuses. This, however, masks major variation in economic outcomes among them. In Census 2000, for example, white males ages 25 to 64 who declared Irish ancestry reported annual mean earnings of $37,029, white males who declared English ancestry reported annual mean earnings of $37,995, and white males who declared Russian ancestry reported annual mean earnings of $48,176. All of these reports were at least $10,000 higher than the $26,637 annual mean earnings reported by black males ages 25 to 64.

All groups of men reporting a white racial identity and European ancestry earned more than black males. In fact, virtually all of the thirty-five white, European ethnic groups in the 1980, 1990, and 2000 censuses reported earnings outcomes at or above the national mean.

For females, racial disparities in annual earnings were not as large, but generally white females with European ancestry still earned more than black women. White females who declared Irish ancestry reported annual mean earnings of $27,376; white females who declared English ancestry reported annual mean earnings of $27,405, and white females who declared Russian ancestry earned $34,586. For 25- to 64-year-olds, black women's mean annual earnings were $23,809.

Coupled with lower earnings when at work, blacks in the United States suffered far greater exposure to joblessness. Racial differences are pronounced, even when educational attainment is taken into account.

In 2004 the Bureau of Labor Statistics (BLS) estimated that annual unemployment rates for white men and white women 16 years of age and older were 5 percent and 4.7 percent respectively. In contrast, for black men and black women in the same age category the rates were more than twice as high, 11.1 percent and 9.8 percent respectively.

The gap for teens was even greater. In 2004 white males 16 to 19 years of age had an unemployment rate estimated at 16.3 percent by the BLS; white females 16 to 19 years of age had a rate of 13.6 percent. But for black males ages 16 to 19 the unemployment rate was 35.6 percent, and for black females it was 28.2 percent.

Data from 2002 is the most recent available from BLS that provides information for education-adjusted unemployment rates by race for persons 25 years of age and older. For whites with less than a high school degree the unemployment rate was 7.5 percent, with a high school degree it was 4.5 percent, with some college education it was 4.2 percent, with an associate degree it was 3.5 percent, and with a bachelor's degree it was 2.7 percent. Again, in contrast, in 2002 for blacks 25 years of age and older with less than a high school degree the unemployment rate was 13.6 percent, with a high school degree it was 8.8 percent, with some college it was 8.8 percent, with an associate degree it was 6 percent, and with a bachelor's degree it was 4.2 percent.

Thus, a black college graduate had almost the same odds of exposure to joblessness as a white high school graduateand greater odds of exposure to joblessness than whites with some college education or an associate degree. And blacks with some college education had a greater likelihood of being unemployed than whites with less than a high school degree.

The racial disparity in education-adjusted unemployment rates suggests that discriminatory practices remain central to maintaining black disadvantage in U.S. labor markets. Evidence of the ongoing significance of discrimination in employment is compelling. The best available statistical inquiries indicate that there was a dramatic decline in labor market discrimination affecting both earnings and occupational status in the decade immediately following passage of the Civil Rights Act of 1964. Thereafter, however, black men have continued to suffer fairly stable 12 to 15 percent losses in earnings due to labor market discrimination relative to all men in the United States. Correspondingly, they also have incurred 8 to 10 percent losses in occupational status, measured by the Occupational Score (OCCSCORE) index, from 1980 through 2000.

Although the statistical procedures used by economists generally do not detect discriminatory losses for black women in earnings relative to all women, those procedures do find evidence of 5 to 6 percent discriminatory losses in occupational status again measured by OCCSCORE between 1980 and 2000. Furthermore, direct tests of discrimination via audit studies and résumé controlsutilizing both trained actors seeking jobs and utilizing correspondence tests, where race is signaled to prospective employers by the use of namesconsistently expose significant levels discrimination against both black men and black women.

So even if blacks attain equivalent or superior credentials as whites, whites are still beneficiaries of racial privilege in U.S. labor markets. Higher levels of educational attainment improve an individual African American's labor market position vis-à-vis other African Americans, but they do not insulate him or her from labor market discrimination. Indeed, there is some preliminary evidence that indicates that the magnitude of discriminatory deficits in earnings and occupational status rises as black educational attainment increases.

The historical record is revealing in this regard. Between 1880, a mere fifteen years after the end of slavery in the United States, and 1910, African Americans under went a spectacular increase in literacy. The black literacy rate rose from less than 30 percent in 1880 to close to 70 percent by 1910. As literacy rose, the magnitude of discriminatory losses in occupational prestige also grew substantially. Thus, the consolidation of Jim Crow practices went hand-in-hand with improved black skills. Discrimination began to function more intensively to exclude blacks from white terrain as the skills basis for exclusion eroded.

Far more pronounced than racial differences in earnings are racial differences in wealth. The Survey of Income and Program Participation provides data from 1988 that demonstrates that the mean net worth of white families was $127,237, while mean black family net worth was only $31,678. This would constitute a black-white mean wealth ratio of 25 percent. During the same year the black-white household income ratio was 63 percent. According to Thomas Shapiro (2001), even taking "the average black household and [endowing] it with the same income and age and with comparable occupational, educational, and other attributes as the average white household still [would leave] a $25,794 racial gap in financial assets."

At every income/education level blacks have significantly lower levels of wealth than whites. The racial gap in wealth is so vast that it renders it misleading to treat black and white families with similar income, educational, or occupational status levels as equivalently middle class. The black middle class is decidedly wealth poor in comparison with the white middle class.

By 1993 black median net worth was only 9.7 percent of white median net worth ($4,418 versus $45,740). A study conducted by the Pew Hispanic Center found that by 2002 the median net worth of a black household was $6,000, while median white wealth was $88,000, barely an 8 percent ratio.

Why does this matter? Wealth provides the capacity to take advantage of windfall opportunities, to pursue the option of self-employment, to ensure that one's offspring receive a quality education especially if public schools are unsatisfactory, to protect one's family in times of emergency, and to have access to homeownership, the major source of equity for most American families.

The racial gap in wealth is not attributable to greater black profligacy in spending. If anything the most recent research on consumption behavior indicates that, after adjusting for income, the black savings rate is at least as high as the white savings rate. The major source of personal wealth today is intergenerational transfers, in the forms of in vivo (transfers of wealth made by living relatives) transfers and inheritances; these transfers constitute large, non-merit sources of pecuniary resources.

While inheritances among those who have the capacity to provide them are larger, in vivo transfers are vital for maintaining and increasing wealth because of the timing of such transfers during the course of the life cycle. Major in vivo transfers occur at graduation, marriage, the birth of the child, or as down payments at the initial purchase of a home.

The magnitude of in vivo transfers and inheritances made by blacks are much smaller than those made by whites. M. O. Wilhelm (2001) has estimated not only that a much smaller proportion of blacks receive inheritances than whites (6 percent versus 24 percent) but also that the mean black inheritance is $41,985, while the mean white inheritance is $144,652. The racial incidence of in vivo transfers in a given year is similar at about 20 percent, but, according to Wilhelm, the black mean transfer is $805 while the white mean transfer is $2,824.

Blacks provide smaller inheritances and in vivo transfers because blacks have less wealth in the first place. Thus, the wealth gap is a cumulative product of intergenerational racial inequality. It originates with the failure of the nation to provide ex-slaves with an initial foundation in land ownership with the abrogation of the commitment to provide each freedman family of four with forty acres. The commitment evinced in General Sherman's Special Field Order No. 15, the first Freedman's Bureau Act, and the Southern Homestead Act went unfulfilled. Indeed, as Joe Feagin has observed in Black Commentator, the homestead legislation provided white families, including new immigrants, with access to public land and wealth between the 1860s and 1930s. Forty-six million white Americans received 246 million acres of land; only four thousand African Americans acquired land under the Homestead Act.

The commitment to forty acres per family of four would have provided 4 million ex-slaves with 40 million acres of land. By dint of their own determination and perseverance, blacks accumulated 15 million acres of land by the start of the twentieth century, still a shortfall of 25 million acres from the original promise. But the seizure of black-owned property by theft, fraud, and outright land taking by white terrorists became the norm throughout the first half of the century to such an extent that by the 1980s black land ownership had declined to 1 million acres. Some prosperous black communities literally were exterminated in white massacres, for example, Wilmington, North Carolina (1898), Tulsa, Oklahoma (1921), and Rosewood, Florida (1923).

Western Migration

After the Civil War, Reconstruction began social, but not economic, reform in the South. By the 1870s African Americans still seemed to be facing a bleak future despite Emancipation having been declared a decade earlier. Southern legislatures passed laws forbidding blacks to own land and other measures to restrict the freedoms of African Americans. Hate groups such as the Ku Klux Klan formed during this time as whites feared retribution for years of slavery, thus producing an environment even more hostile to blacks. Some African Americans began to feel that true freedom could be gained only through emigrating out of the South.

As a result, many African Americans went westward. African American laborers worked as cattlemen, cleared the land, built homes and raised crops and livestock.

One of the most well-known African-American westerners is Bill Pickett, whom some dub "the greatest cowboy of his day." He was born in Texas in 1870 and left school in the fifth grade to become a ranch hand. With his four brothers, he started the Pickett Brothers Bronco Busters and Rough Riders Association, performing rodeo shows all over the United States and Canada.

Oklahoma became a popular destination for African Americans during the late nineteenth and early twentieth centuries. Several all black towns were established after the Civil War, including Boley, Oklahoma, with more than 5,000 residents by 1905. Early settlers here were accorded the privileges of owning their own businesses, governing their own communities, and owning homes without the threat of white hostility present in the South.

From the beginning of the U.S. migration westward, African Americans were part of it either as freed people or as slaves. Along with everyone else immigrating to the west, emigrating free blacks were looking for a better way of life. The West provided hope for more freedom and diminished racial tension.

eric linderman

The systematic denial of access to wealth and the systematic deprivation of wealth accumulated created the conditions in which blacks collectively have had fewer resources to endow upon subsequent generations. This is what has produced and sustained the gap in wealth, the most palpable and virulent dimension of racial economic inequality in the United States. A serious commitment to addressing the economic condition of black Americans will require contemplation of substantive procedures for engineering a racial redistribution of wealth.

See also Education in the United States; Entrepreneurs and Entrepreneurship; Literacy Education; Politics; Reparations


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william darity jr. (2005)

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Economic Condition, U.S.

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Economic Condition, U.S.