The American Dream, or a Nightmare for Black America?

Thirty years after the civil rights era, middle-class African-American families face a grim reality: their kids are far more likely to experience downward mobility in today's economy than they are to move up.

For both black and white families, America's vaunted upward mobility is largely a myth, and research suggests that Americans actually enjoy less upward mobility than people in many other wealthy countries. (I discussed this phenomenon at some length in a recent article.) But the outlook is different for white and black families.

A new study by Julia Isaacs, a fellow with the Brookings Institution, paints a dark picture for black families, and especially for the large group of African-Americans who moved up and into the middle class following the hard-fought gains of the 1950s and 1960s.

Isaacs looked at a unique set of data, one that allowed her to compare the incomes of people in their 30s in 2004 with their parents' generation in the mid-'70s (this allowed her to compare people at the same general stage in their careers -- apples and apples).

While white men's incomes have been stagnant for the past three decades -- for both white and black families, most of the increase in family income was a result of women entering the work force rather than wages increasing -- the current generation of 30-something black men actually earn, on average, 12 percent less than their fathers did in the mid-1970s.

That trend toward downward mobility has an enormous impact on the black middle class. While children of middle-class whites tend to do better than their parents did at the same age, a majority of middle-class African American children do worse than theirs, both in income and in terms of their position on the nation's economic ladder. According to Isaacs, "only 31 percent of black children born to parents in the middle of the income distribution have family income greater than their parents, compared to 68 percent of white children from the same income bracket."

The key findings from the study are truly eye-opening:

  • Startlingly, almost half (45 percent) of black children whose parents were solidly middle class end up falling to the bottom of the income distribution, compared to only 16 percent of white children.
  • Achieving middle-income status does not appear to protect black children from future economic adversity the same way it protects white children.
  • Black children from poor families have poorer prospects than white children from such families. More than half (54 percent) of black children born to parents in the bottom quintile stay in the bottom, compared to 31 percent of white children.

Given these dynamics, it should come as no surprise that the black-white income gap has risen, not fallen, in the decades since legal, institutional racism ended in America. In 1974, black families earned, on average, almost two-thirds of what whites did; by 2004, that number had fallen to 58 percent.

But looking at income alone misses a crucial part of the story. The differences in accumulated wealth -- in net worth -- are far greater than the differences in income, and that impacts black families' prospects of moving up in a big way. In Being Black, Living in the Red, Dalton Conley, director of NYU's Center for Advanced Social Science Research, showed that white families, on average, had eight times the accumulated wealth of black families who earned the same, and that remained true even when you adjust for education levels and savings rates. It is, as Conley told me in an interview last year, "the legacy of racial inequality from generations past."

Crucial to understanding how that impacts economic mobility is the concept of "intergenerational assistance." That's just a fancy way of saying that your chances to advance economically are very much impacted by whether your family can help with tuition payments, a down payment on a house or seed money to start a business. Conley compares two hypothetical kids -- one from a family with some money and the other without. Both are born with the same level of intelligence, both are ambitious and both work hard in school. In a true meritocracy, the two would enjoy the same opportunity to get ahead. But the fact that one might graduate from college free and clear while the other is burdened with $50,000 in debt makes a huge difference in terms of their long-term earnings prospects.

And that's just one of the myriad ways that parents pass their economic status onto their children. Conley concluded: "When you are talking about the difference between financing their kid's college education, starting a new business, moving if they need to move for a better job opportunity -- [differences] in net worth might make the difference between upward mobility and stagnation."

America's limited and fraying social safety net also means that things like temporary job loss, illness or pregnancy can lead to drops in income -- opportunities to fall down the ladder -- that working families in other advanced countries don't face.

Education plays a crucial part in reproducing African-Americans' lower economic status in their kids. Schools are primarily funded through state and local taxes, which leads to dramatic differences in the education available to kids in wealthier and poorer communities. That goes a long way in explaining a phenomenon long observed in American education: Black children excel until the middle grades, and then their achievement levels begin to decline. At younger ages, large numbers of African American kids are enrolled in early childhood programs like Head Start, but by the middle grades, the picture changes. According to the Urban Institute's annual report on the state of black America, black children got 82 cents on the white education dollar last year. You get what you pay for, and twice as many black children as white kids are taught by instructors with less than three years of experience.

The wealth gap in America is the accumulated legacy of generations of institutional racism at work. Black kids are starting from behind and aren't afforded much chance to catch up. Isaacs sliced and diced the economic pie into five equal parts. While nearly one in four white kids are born into the top fifth, the number of black children in that group doesn't even register on the scale. Three times the percentage of whites are born into the next tier as blacks. Conversely, almost two-thirds of all black children are born into the bottom fifth, while fewer than one in seven white kids face that daunting prospect.

But these factors alone don't fully explain the disparity seen in white and black families. The Urban Institute's annual study of black attainment, which looks at five different measures of success in the African-American community, found that the greatest divide between blacks and whites in America is not in political participation, health or social justice, but in the economic realm. Clearly, racism still plays a significant role in black America's extraordinarily insecure economic status (this should be obvious, but it isn't). Studies have shown that whites with criminal records are more likely to be hired than blacks with identical backgrounds and no criminal past, and that fake resumes with "black-sounding names" get fewer calls for interviews than others. A study of more than 300,000 auto loans in 33 states even found that black buyers "consistently paid more than white customers, regardless of their credit histories."

This is a story with little good news on the horizon. As bad as the economic divide between black and white families is now, the subprime lending crisis is going to fall particularly hard on people of color and make matters far worse. In a study the Boston Globe called a "smoking gun on race," University of Massachusetts researchers found that black and Latino home buyers were more than four times as likely as their white counterparts to take out a subprime mortgage. The research backs up findings in other U.S. cities.

There's an old saying that white folks keep their wealth in the bank and black folks keep theirs in their houses. Given the degree to which wealth and opportunity intersect, and with an estimated half-trillion dollars worth of low-cost "teaser loans" ready to reset next year, black families in America are likely to face even more opportunities to fall down the economic ladder.

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