Blacks and the American Economy 2000-07

[Excerpt from "Reversal of Fortune: Economic Gains of the 1990s Overturned for African-Americans from 2000-07" (PDF) by Algernon Austin]

On all major economic indicators—income, wages, employment, and poverty—African Americans were worse off in 2007 than they were in 2000. Although the American economy has grown significantly since 2000, African Americans have not shared in America’s prosperity. Th e current economic downturn and the subprime mortgage crisis bode ill for the immediate future for African Americans.

The overall social well-being of African American communities depends upon strong job growth. The historical evidence shows clearly that strong job and wage growth are the keys to reducing black poverty. Without reductions in child poverty, we can expect continued lower educational achievement, higher rates of teen pregnancy, and a higher than average rate of crime in black communities.

All Americans are hurting from the failure of recent strong productivity growth to translate into wage growth for average workers. All Americans will benefit from a more equitable distribution of the wealth of American society. African Americans, in particular, need policies that will attend to their low employment rates, low wages, and high poverty rates.

A decade ago, the economic outlook for African Americans was quite different. In 1999, the journalist Ellis Cose wrote, “It’s the best time ever to be black in America. Crime is down; jobs and income are up” (Cose 1999). The tight labor market of the 1990s produced increasing employment, higher wages, and a historic drop in the poverty rate for blacks. Home ownership, the major source of wealth for most Americans, was on the rise for African Americans. By 2000, the median black household income had climbed to its highest level ever, while black unemployment and poverty rates had declined to their lowest levels on record. If these trends had continued, African Americans would have made significant advances in closing economic gaps with whites.

These trends did not continue, however. The recession of 2001 brought African American progress to a halt and reversed the gains blacks made over the 1990s. The jobless recovery that followed brought no significant economic progress for African Americans.

The U.S. economy regularly goes through cycles of upswings and downswings, but the recent cycle—including the expansion—has been a particularly bad one for the country (Bivens and Irons 2008) and especially so for African Americans. Job growth since the 2001 recession has been extremely weak. In the 2000s business cycle, employment increased at one-third of the pace of the 1990s cycle (Shierholz 2008).

For most of the 20th century, increased productivity led to increased wages. Since the 1970s, with the exception of the 1990s, increased productivity has not been matched by comparable increases in wages (Mishel et al. 2008). From 2000 to 2007, although American workers were 19.2% more productive on average, the weekly wages for prime-aged workers declined by $1. The weekly wages for prime-aged African American workers declined by $3. The wealth created by the American economy has been going overwhelmingly to the richest Americans.

Overall, the economic condition of African Americans has worsened since 2000. Wage growth for the median black worker has stagnated, incomes and employment have declined, and poverty has increased. This Briefing Paper shows:

• African American median family income declined by $404 or 1% between 2000 and 2007. This is the first decline in black median family income in a business cycle of this length since World War II. Single, African American, male-headed families saw the largest percentage decline—9.1%—in median family income.

• Worker productivity grew 19.2% between 2000 and 2007, but wage growth for American workers generally and African American workers specifically has stagnated. For black workers 25 to 54 years old, the median black weekly wage fell 0.6% from 2000 to 2007.

• The African American unemployment rate increased by 0.7 percentage points between 2000 and 2007, while the employment rate shows a 2.4 percentage-point decline, or three times the number not working indicated by the change in the unemployment rate.

• The black home ownership rate, after increasing to 49.1% in 2004, dropped to 47.2% in 2007. Because the foreclosures from the housing crisis have continued into 2008 and will likely continue into 2009, the African American home ownership rate is also likely to decline into 2009.

• The tight labor market of the late 1990s led to the largest decline in African American poverty since the 1960s. From 1989 to 2000, the black family poverty rate fell by 8.5 percentage points. In contrast, from 2000 to 2007, the African American family poverty rate increased 2.8 percentage points.

• Crime and criminal justice policies are increasingly entangled with the economic outcomes of African Americans and particularly of black men. If one adjusts the employment rate of African American men by counting men in prison as non-working, the already low African American male employment rate drops by about 3 percentage points.

[Read the full report. (PDF)]