The Black American Political Economy: Cycle of Black Economic Inequality

(Tim Smart, US News)

This article explores the concentration of stock ownership in America. It is widely known that there exist income and wealth inequalities in our economy, but this paper examines to what degree they do so as it relates to stock ownership. Are whites are more likely to own stocks than black and Hispanic families for example. Here you will find various statistics on how widespread inequality in stock ownership is, through various socio-economic indicators including age, income, and race. Also, you will see that while stock ownership in America may be growing, it is heavily concentrated among the wealthy and white people.

(Sheila D. Ards, Inhyuck Steve Ha, Jose-Luis Mazas, Samuel L. Myers, Jr., The Review of Black Political Economy)

One of the key aspects of inequality identified within the credit economy is the access to attaining financial capital. One metric used to understand the picture is loan denial rates. Typically the difference between approval or rejection of a loan request is mostly dependent upon one's credit score. For reasons yet to be understood and extensively debated over, loan denial rates are much higher for Black people than for white people. Conventional wisdom tells us that high loan denial rates among the different ethnic and racial groups are a result of racial disparities in creditworthiness. For example, it is commonly assumed that blacks are denied for loans at higher rates because their credit scores are worse. On the flipside, the lesser prevalent perspective poses the notion that higher loan denial rates result from a pattern of racial discrimination among mortgage lenders. This article offers a unique assessment of these two competing claims, through the lens of a Stratified Economics framework. They aim to answer questions like the following: Are wide disparities in loan denial rates among the different racial/ethnic groups merely a result of poor credit scores? Does there exist some pre-existing market mechanism that reinforces systemic economic inequalities? Stratified economics analyzes economic issues through a framework more cognizant of the systemic and racial imbalances rooted in the structure of the economy, and particularly the Black American Political Economy.

(John Young, The Review of Black Political Economy)

"Do African American banks possess adequate financial viability to serve their communities?" This article details the depicts the life of African American community banks over the last few decades. Using a very detailed, but descriptive-oriented approach, they show figures relating to the rise or fall in number of African American community banks from 2006 to 2017. In 2017, only 23 African American community banks remained in existence. Are those remaining banks sufficiently equipped to have long-lasting and positive impact on their communities? Young poses that commonly used indicators of bank performance such as their efficiency ratio (ER), are outdated, and often do not tell the entire story. He provides evidence of external variables, specifically non-interest expenses, that disproportionately impacts the performance of African American community banks compared to their peer community banks. Despite popular belief, African American community banks perform well, and often outperform their peers, on various key indicators of bank performance, e.g., revenue as a percentage of assets. While this has been the case, Young shows that African American community banks are still headed in the opposite direction of the peer community banks, and have been on this decline for a long time.

(Neil Bhutta, Andrew C. Chang, Lisa J. Dettling, and Joanne W. Hsu, The Fed)

The research presented here provides a discussion on various long-standing and substantial wealth disparities between various racial and ethnic groups. Income and wealth of Black households lag significantly behind that of white households, and while median wealth has slightly grown from 2016 to 2019 for all races and ethnicities, Black household have still not recovered from the pre-Great recession levels. Wealth accumulation, wealth holdings, emergency savings, are some of the major issues explored in this article, and depict an alarming signal for the future of the Black economy.

(Heather Long and Andrew Van Dam, Washington Post)

Constructed at the height of the Black Lives Matter movement in June of 2020, this article brings to the forefront a plethora of economic inequalities that disproportionately impact Black and Brown households in the same way they did in 1968. The reflection of the Black American political economy today mirrors the 1968 economic landscape, examined through the Fair Housing Act of 1968 and other legislation pertaining to civil rights enacted to combat unequal treatment of African Americans in the United States. Since 1968, not much has changed, white wealth continues to soar while Black wealth largely stagnates. This also includes a discussion of the economic effects of COVID-19 on Black Americans compared to white Americans. Service industries were hit hard during the pandemic, leaving more than half of all Black adults unemployed at the height of the COVID-pandemic. During the same time frame, unemployment rates for White and Hispanics also increased, but not nearly as much as it did for Black Americans. Equally as important, Black-owned businesses and self-employed Black Americans were forced to shut down at alarming rates–over twice the rate of white businesses. Further, during the pandemic Black families were three times as likely to report that they often do not have enough food and four times as likely to miss a mortgage payment in comparison to that of White households. Even prior to the COVID-19 pandemic, Black Americans were still significantly disadvantaged compared to their White counterparts. Although America in 2018 boasted an all-time high in middle-class income, median income of Black Americans in 2018 was $2000 less than in 2000. Over the same time period, Asian, White and Hispanic Americans each managed to surpass their peaks. In addition to wealth and income, Black Americans also face both capital as well labor market inequalities. Blacks were more likely than Whites to face workplace discrimination, or having their loan applications approved for example.

(Paul Yakoboski, Annamaria Lusardi, and Andrea Hasler, TIAA Institute)

Financial literacy and wellness among African Americans are just a few of the economic consequences of the COVID-19 on many American households that influencing the decline in their capacity to cope with a financial shock. Financial literacy, according to the authors, is a primary reason for which the financial well-being of African Americans has lagged. Financial literacy has been deemed as the key engine of sound financial decision making and active management of personal finances. Personal finance knowledge among African American adults fall significantly behind compared to their white counterparts. Furthermore, financial literacy varies greatly by race, education, income, and age. The TIAA Institute–GFLEC Personal Finance Index (P-Fin Index) also suggests a lack of financial resiliency more strongly associated with African Americans than with White people in 2019. This is indicated by self-reporting of one's confidence in their ability to to cope with emergency expenses.

There is a strong link between financial literacy and financial wellness. For African Americans this is of utmost importance as financial literacy better enables you to plan and save for retirement, have non-retirement savings, and to better manage debt. This analysis provides a more in-depth and concise understanding of the financial literacy among African Americans. This could prove most effective and informative in forming initiatives to improve financial well-being of the economy, and more particularly the Black American Political economy. Ideally this can help influence increased financial literacy and lead to improved financial capability and decision-making among all Black households.

(William R. Emmons and Bryan J. Noeth, St. Louis Fed)

There are many benefits to having a higher education in the U.S... Statistics show that higher education is typically associated with higher levels of income and wealth among families in the U.S., and this is true for all racial groups. Median income for whites and Asians is estimated to be two to three times much larger than that for Blacks and Hispanics. It is also the case however, that college-educated Blacks, and Hispanics, whites, and Asians in 2015 had a median income of anywhere between two to three times as much as that of their less educated counterparts (Emmons, 2015). The income-boosting effect of a higher education applies equally across all races, however this article presents evidence that with the college-degree, the income disparities actually grow larger. In evaluating the disparate impact of a college-degree on income and wealth, the ""protective"" effect on income and wealth of a higher education does not apply for Blacks and Hispanics. This article attempts to evaluate why that is, mainly citing debt-to-income ratio as the missing link to fully understanding the disparate impacts.

(Valerie Wilson and William M. Rodgers III, Economic Policy Institute)

This study extends research done on the Black and white wage gap from the 1960's through the 1990's. A more in-depth analysis of the various income, wealth, and earnings trends since the late 1990’s is provided here. The Black-White wage gaps are wider than they were in comparison to 1979, and to best depict the changes, they identified three significant time periods across that stretch. The wage gap expanded during the 1980’s, only to narrow again during the late 1990’s amongst both men and women, and since 2001, wage gaps have widened further, even more so during the years surrounding the 2008 financial crisis. The magnitude of these wage gaps has varied by gender, experience, educational attainment, and geographical US residency–hence making it reasonable to conclude that there exists no one African American labor market narrative. Although this may hold true, the primary driver of the expansion and narrowing of these wage gaps has been changes in workplace and hiring discrimination, unobservable skills, or a unique combination of the two. Post 2000, discrimination, and unobservable skills have been greater than the effects of the economic recession of 2008, as equality in the labor market remained in the imbalance of political and financial support. Another factor that has consistently contributed to the expansion of wage inequality has been growing earnings inequality in simple terms. Aside from race, gender, and labor market participation, the wages of most US workers–especially wages of work deemed less-skilled–have stagnated even as firm productivity has increased. In sum, this trend contributes to the widening of the Black-White wage gap since the typical Black worker is paid the wage of a low to moderate skilled White worker.

(Dennis H. Sullivan and Andrea L. Ziegert, Review of Black Political Economy)

Two poverty measures are compared here to determine how Black households are affected by poverty in comparison to White families and why. The initial measurement–official poverty measure (OPM)–uses calculations of income, threshold, and family to estimate what percentage of the population is poor. Opposingly, the anchored supplemental poverty measure (SPMa) takes an alternative view such that it accounts for contemporary social and economic realities coupled with government policy. This measurement considers more aspects of life, especially from the 1980’s to now, so the SPMa is largely drawn upon as opposed to the OPM–hence different from existing literature. The poverty differential has declined in more recent years, but this explores the convergence of Black and White parents' educational attainment and success in the labor market, convergence of family demographic traits including marriage or family size, and changes in tax and transfer policies that served to narrow the racial differential in families’ ability to evade poverty. These factors are observed across the following time periods: 1980-1992, 1992-2002 and from 2002-2014.

The reduction of poverty through higher wages requires changes in the labor market that offer more plentiful and better job opportunities with flexibility and benefits for parents especially. Also, it is evident that anti-poverty benefits of low unemployment rates can be enhanced by deregulating the earned income tax credit (EITC) and by making the childcare tax credit refundable. Moreover, it is important to note that higher income earnings and higher labor force participation are not sufficient to eliminate poverty. Research suggests that even families with high income earnings need benefits, thus only effective if benefits are adequately generous and fully funded.