How Secure is Today’s Black Middle Class?

Algernon Austin presents an excellent, concise, and wonderfully read scholarly examination of the complicated landscape of race, class and popular perception. Besides the prison industrial complex, black strides in education, poverty rates, crime and other indices contradict claims that blacks are “moving backward.”
--Jeffrey O. G. Ogbar, Director, Institute for African American Studies, University of Connecticut and author of Black Power: Radical Politics and African American Identity (The Johns Hopkins University Press), 2004 and Hip-Hop Revolution: The Culture and Politics of Rap (University Press of Kansas), 2007.

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[Will White Rap Fans Help or Hurt Black America?]

By a variety of measures, the American middle class is economically stressed and insecure. How insecure is today’s black middle class specifically? Dëmos finds a third of the black middle class at risk of falling out of the middle class. The Pew Research Center finds roughly similar levels of economic insecurity among the black middle class.

“Middle class” is actually a squishy concept. There are many ways that people define middle class. For example, the Black Directions report on the black middle class compares seven different ways of defining the middle-class-ness. Who is in the middle class and how large it is depends on how one defines it.

The Pew Research Center simply asked respondents to declare whether or not they were middle class. When one does this half of black adults say that they are middle class. This seems like a high percentage when one considers that about half of white adults also declare themselves to be middle class.

Isn’t the white middle class larger than the black middle class?

The key issue again is how one defines middle class. If one looks at the median family income of blacks and whites who say that they are middle class, the black median is nearly $10,000 less than the white median. By a subjective measure, the Pew data indicates that the black middle class is the same size as the white middle class. An objective, income-based definition of “middle class” could yield a black “middle class” that is smaller than the white “middle class.” Eight percent more whites than blacks say they are upper class however, and ten percent more blacks than whites say that they are lower class.

Source: The Pew Research Center.

From 24 to 40 percent of middle-class blacks are economically insecure depending on the measure. In the Pew survey, 24 percent of middle-class blacks struggle to meet expenses. Twenty-four percent are also afraid that they may face wage cuts or lose benefits in the coming year. Thirty percent are worried that they might lose their job. Forty percent experienced two or more financial difficulties in the past year (i.e., they could not pay bills, could not save or had to cut spending).

Dëmos has assessed the financial security of the black middle class using objective measures. They examined households making two to six times the poverty level (roughly $40,000 to $120,000 for a family of four). The head of the households had to be between 25 to 64 years old and not have more than $500,000 in assets.

Dëmos also defined specific criteria for being “financially secure,” “financially at-risk” and in-between. This “middle class security index” has specific asset levels, educational achievement, housing expenses, living expenses, and health insurance coverage to place households in one of the three categories. According to the Dëmos’ index, a third of the black middle class are at high risk for slipping out of the middle class.

It is now clear that the project of black socioeconomic advancement has at least three parts: (1) poverty reduction, (2) upward mobility and (3) securing the black middle class. The assumption had been that while the black middle class did not have as high incomes and were not as wealthy as the white middle class, they had nonetheless “made it.” New research suggests that for too many in the black middle class being middle class is merely a stop on the way to poverty.

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--Algernon Austin, Ph.D.

Copyright © 2005-2008 by Thora Institute, LLC. All Rights Reserved. Reprint this article in your newspaper or magazine. Contact the Thora Institute to purchase reprint rights.
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Two Economists Get Black Poverty Right

Note: White poverty estimates prior to 1980 include Hispanics. Data from 1980 to 2000 is of non-Hispanic whites. The 2006 estimate is of the "white alone, not Hispanic" population. Black poverty estimates include Hispanics. The 2006 black estimate is of the "black alone" population.
Source: U.S. Census Bureau.

Many people have been talking about black poverty, but few show that they have actually examined the poverty trends. The figure above shows the decade-by-decade change in poverty for blacks and for whites. Between 1959 and 1969, the black poverty rate declined by a tremendous 22.9 percentage points. The following decades showed relatively small declines until the 1990s. From 1990-1999, the black poverty rate declined by 8.3 percentage points. Since 2000, black poverty has increased slightly. Anyone really serious about reducing black poverty would try to understand these changes. Of particular interest should be the 1960s and the 1990s declines.

In recent years, Bill Cosby, John McWhorter, Juan Williams and others have argued that since the 1960s bad values have caused an increase in black poverty. The truth of the matter is that aside from some fluctuations, there has been no sustained increase in black poverty. In the 1990s, quite contrary to the popular claims, black America saw a sizable reduction in black poverty.

Further, it is clear that there are large economic forces affecting both black and white poverty rates. When black poverty declines, white poverty declines. When black poverty increases; white poverty increases. Any theory of black poverty has to explain why black and white poverty move in parallel. A theory of cultural problems that are unique to blacks does not explain the parallel trends for whites.

Most of the current crop of black public intellectuals have not examined the economic data with any care. They do not seem to understand that economic conditions and labor market practices affect black economic outcomes. It should not be a radical idea that economic factors have an important role to play in black poverty rates. The reason why black and white poverty rates move in parallel is because both blacks and whites are affected by the overall U.S. economy in similar ways. (There are differences for populations with large numbers of recent immigrants.)

Two black economists, Steven Pitts and William Spriggs, have issued a report, Beyond the Mountiantop: King’s Prescription for Poverty situating the discussion of black poverty in the dynamics of the America economy. The report pulls Martin Luther King Jr. into contemporary debates by presenting King’s views on the causes of poverty.

King does not side with the current generation of black public intellectuals. In 1967, King stated:
At that time [of the early 20th century] economic status was considered the measure of the individual’s abilities and talents. And in the thinking of that day, the absence of worldly goods indicated a want of industrious habits and moral fiber. We’ve come a long way in our understanding of human motivation and of the blind operation of our economic system. Now we realize that dislocations in the market operation of our economy and the prevalence of discrimination thrust people into idleness and bind then in constant or frequent unemployment against their will. The poor are less often dismissed, I hope, from our conscience today by being branded as inferior and incompetent. We also know that no matter how dynamically the economy develops and expands, it does not eliminate all poverty.
King understood black poverty, therefore, as a two-part problem: (1) a general failure of the economic system to distribute wealth, which would affect blacks and whites, and (2) the result of anti-black discrimination in the labor market. King explicitly rejects the culture-of-poverty-type ideas that are popular today, and sees those type of ideas as an out-of-date way of thinking not based on a good understanding of the economy.

Given these causes of black poverty, Pitts and Spriggs identify four policy goals:
  • generate full employment—everyone who wants a job should have one
  • fight discrimination
  • protect worker’s freedom and right to join a union
  • raise the minimum wage
  • .
Pitts and Spriggs point out that the reason there was a tremendous decline in black poverty over the 1960s was because all four of these goals were in place. The economy was at full employment. The U.S. government was still earnest about enforcing anti-discrimination policies. Unions were strong and growing. And the real value of the minimum wage was high.

During the 1970s and 1980s all of these policy goals were in decline or largely absent. During the 1990s, only one of the four policy items was really in place. The economy achieved full employment at the national level. But there was lax enforcement and weak support for anti-discrimination policy. Unionization rates were declining. And the real value of the federal minimum wage in 2006 was $2.33 less than it was in 1969. One is better than none, but it is clear that four is better than one.

In an era when so many people “get it wrong” about poverty in black America, it is refreshing to see some folks who get it right.

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--Algernon Austin, Ph.D.

Copyright © 2005-2008 by Thora Institute, LLC. All Rights Reserved. Reprint this article in your newspaper or magazine. Contact the Thora Institute to purchase reprint rights.
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Everyone’s Pessimistic, Not Just Blacks

D.C. Event

Policy Prescriptions for Growing Income Inequality in the United States

by Algernon Austin

A Presentation for the Labor and Employment Relations Association, Washington, D.C. Chapter

Wednesday, April 23, 2008

Woman's National Democratic Club, 1526 New Hampshire Avenue, NW, Washington, DC 20036

Please contact Lorenzo Di Silvio or by phone at (202) 822-2127 x119 to make a reservation for this meeting. Please make your reservation no later than 5:00 p.m. on Monday, April 21. Reservations are on a “first-come, first-served” basis, so please reserve your place promptly as space is limited. An e-mail response is preferred. Sign-in 11:45, luncheon 12:15, program 12:45. $20 for members with reservations, $10 for student members, $25 for non-members and members without reservations.

“Most Americans feel stuck in their tracks,” reports the Pew Research Center. “A majority of adults in this country say that in the past five years they either haven’t moved ahead in life or have fallen backwards. This is the most downbeat assessment of personal progress in nearly a half century of polling by the Pew Research Center and the Gallup Organization.”

This conclusion is based on the new Pew Inside the Middle Class survey that hones in on the views of the American middle class, although people from all class backgrounds were surveyed. Last year, the Pew Research Center released a report showing increased pessimism among blacks. That survey covered many different issues from the new one, so the two surveys are not completely comparable. However, there are some similar questions. The new Pew middle-class study suggests that at least part of the reason for increased pessimism among blacks is due to the fact that Americans generally are more pessimistic about the state of the country.

The average American household earned less in 2006 (the most recent year for Census data) than in 1999 and is in more debt. The American middle class feels that it has to strain more to maintain a middle-class lifestyle and middle-class adults are desperate for more free time. All of these factors lead Americans generally to be more pessimistic.

In some ways blacks seem more pessimistic than whites. This year 40 percent of all Americans said that their lives are better now than five years ago. Last year, only 20 percent of blacks said that blacks are better off now than five years ago. It is important to note that these are different questions. One asks for individuals to assess their own lives another asks for individuals to assess a group. It is also worth noting that both percentages have declined recently. From 2002 to 2008, the percent of Americans saying that their lives are better today declined by 8 percentage points. From 1999 to 2007, 12 percent fewer blacks stated that blacks are better off. It is quite possible that some blacks are saying that blacks are doing worse because they are actually doing worse personally.

In 1986, 57 percent of blacks surveyed stated that they believed that things would be better in the future for blacks. In 2007, the percentage had declined to 44 percent. Was this decline due to a perceived cultural crisis or to the economic downturn? Or both? The new middle-class survey suggests the downturn might be playing a significant role. The black response to the future of blacks matches the national response to the future of America’s children to a surprising degree. See the figure below. (Click on the image for a better view.) This might just be a coincidence, but it seems likely that people who are experiencing economic hardship would be pessimistic about things generally.

Source: Pew Research Center, Inside the Middle Class, p. 42 and Optimism about Black Progress Declines, p. 1.

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--Algernon Austin, Ph.D.

Copyright © 2005-2008 by Thora Institute, LLC. All Rights Reserved. Reprint this article in your newspaper or magazine. Contact the Thora Institute to purchase reprint rights.
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The Housing Crisis as Seen by Blacks and Whites

[This piece was originally published in
the Daily Voice.com.]

How the country responds or does not respond to the housing crisis could add to the long list of racial grievances. As Senator Barack Obama so effectively argued, race can play a big part in our perception of the world. My sense is that, to a degree, whites and blacks have very different readings of what happened to produce the housing crisis.

Of course, there is a diversity of views among whites and blacks, but in talking with people and reading articles, op-eds and reports, I've noticed certain tendencies. My evidence is anecdotal, so I could be wrong, but I would wager that in this issue, as in so many others, race matters.

The whites I've encountered have tended to be more sympathetic to the tough-love approach espoused by Senator John McCain. They have talked about people who irresponsibly sought to purchase more house than they could afford. Or people who thought their home values would rise forever and used their homes like a machine that printed money. In these narratives, people who are facing foreclosure do not deserve much sympathy. They made their bed and they should lie in it.

The blacks that I've heard from bring a very different perspective to the issue. They think of the history of racial discrimination by the Federal Housing Authority. They also think of the recent findings of racial discrimination in lending from paired-tester studies. When these blacks hear of the disproportionate negative impact of the subprime crisis on people of color, their first suspicion is that once again racial discrimination was at play.

Were borrowers facing foreclosure greedy and irresponsible, or were they exploited by racially-biased predatory lenders looking to bundle and sell loans?

It is very difficult to determine to what extent either of these positions is true. But it is very important that we do find out. If we were to bail out large numbers of greedy and irresponsible borrowers, that would be a bad. On the other hand, if we were to ignore the plight of large numbers of blacks who were taken advantage of by lenders, that would also be bad.

It is good to be aware that people have different perspectives on issues. These perspectives should be heard and understood. But, as difficult a time as the country has had in just acknowledging different perspectives, that acknowledgement is still the easy part of the problem.

The hard part is determining which perspective is right and getting everyone, or at least a majority of both sides, to agree on what is the right answer. Only when there is agreement on the right answer can a policy response be crafted that is seen as fair and appropriate by all and racial conflict avoided.

In the housing meltdown, it is quite possible that both positions are correct. It is possible that some people greedily pursued houses they could not afford. It is also possible that minority borrowers were exploited by lenders.

If we are going to bail out institutions involved in the crisis, the federal government should require that we learn exactly what went wrong. If lenders open their records to researchers at the Federal Reserve or the General Accounting Office, we can learn more about the people who borrowed and the homes they acquired. Were the homes extravagant or were the interest terms exorbitant and the deals shady?

It is clear that blacks were more likely to have subprime mortgages, but as lenders are quick to point out, this fact does not prove discrimination. Blacks tend to have more debt, lower incomes and much less wealth than whites, so it could be that blacks' generally worse credit scores placed them disproportionately in the subprime market. If the federal government commissioned a study with individual credit score data--used confidentially, of course--we could obtain very strong evidence on whether it was race or credit scores that placed so many blacks in the subprime market.

Armed with the findings of this research and with sensitivities to the long history of racial discrimination by financial institutions, the country could then move toward a sensible path to prevent us from ending up in this place again.

Recognizing that blacks and whites may come at issues like the housing crisis from different perspectives is an important insight. These perspectives need to be acknowledged and respected. But we can't end there. We need to figure out how we can get blacks and whites--and everybody else--to agree on a common vision of how we should move forward. That is the hard part.