Monday, January 21, 2008

What a recession means for black America

As the author notes recessions hurt the poor and socially marginalized populations the most. It would be interesting to see what the figures are for lower income groups in general and other minority groups such as Latinos.
The recession will also impact heavily on those who are barely able to keep their heads above their debts no matter what income group they are in. Without increasing income their debts will become unpayable and their life standard unsupportable.




January 18, 2008 | EPI Issue Brief #241

What a recession means for black America
by Algernon Austin

Recessions hurt. And they hurt the poor and socially marginalized
populations the most. As we face the prospect of the second recession
of the decade and consider the merits of various stimulus packages,
it is useful to examine what a recession would mean for black America.

The late 1990s produced a full employment economy and significant
absolute and relative economic gains for blacks. This Issue Brief
contrasts the benefits of a national full-employment economy with the
harm caused by the 2001 recession and the weak job growth that
followed.

Black America's permanent recession

In the best of times, many African American communities are forced to
tolerate levels of unemployment unseen in most white communities. The
2001 recession pushed the white annual unemployment rate up from a
low of 3.5% in 2000 to a high of 5.2% in 2003. During the same
period, the black unemployment rate shot up from 7.6% to 10.8%.
National recessions take African Americans from a bad situation to a
worse one.

In 2007, the black unemployment rate was 8.3%. This figure is still
above the pre-recession low and more than twice the white
unemployment rate. Goldman Sachs estimates that a new recession would
increase the national unemployment rate to 6.4% by 2009.1 For African
Americans, the unemployment rate would be expected to rise to 11.0%.2

African Americans lose income relative to whites

The low unemployment rates of the 1990s led to positive gains in the
black/white income ratio. In 1995, the median black family earned
60.9% of what the median white family did. By 2000, the ratio had
climbed to a record high of 63.5%. The effect of the 2001 recession
and the weak economic recovery was to undo all of those gains—and
then take away some more. By 2005, the median black household earned
only 60.2% of the median white household, 0.7 points lower than it
was in 1995. 3

But median family income does not tell the entire story. The 2001
recession and weak recovery hurt the poorest African Americans the
most. In 1995, the poorest fifth of black families only earned on
average 43.0% of what the poorest fifth of white families earned.
Again, the economic growth of the late 1990s was a significant boon.
The black/white average income ratio for the poorest fifth increased
to 49.9% in 2000. By 2005, it had fallen back to 43.4%. Among blacks,
the poorest black families lost the largest share of their income
gains from the late 1990s.4

Another recession will likely reduce the median family income for all
Americans by about 4%. However, for blacks, the decline would be
about 6%, leaving the average African American family $2,400 poorer.5
Again, this loss of income will hurt the poorest fifth of African
Americans the most.

Additional social costs

Associated with the strong economy of the 1990s, there were
significant declines in the black violent crime rate and the black
teen pregnancy rate. Between 1993 and 2001, the black violent crime
rate declined by 60%.6 Between 1990 and 2004, the black teen
pregnancy rate declined by 46%.7 These improving trends have ended,
and it is likely that the worsening economic conditions of African
Americans since 2001 have played at least a partial role.

At the community level, criminologists find a correlation between
violent crime rates and socioeconomic disadvantage.8 At the national
level, too, the black violent crime rate has recently been strongly
correlated with black poverty rates.9 Therefore, it is not surprising
that the historic crime decline of the 1990s ended with the reversal
of economic fortunes that African Americans experienced at the
beginning of the 21st century.

Based on a study of five countries including the United States, the
Alan Guttmacher Institute reports "across all of the focus countries,
young people growing up in disadvantaged economic, familial and
social circumstances are more likely than their better-off peers to
engage in risky behavior and have a child during adolescence."10
Given that socioeconomic disadvantage has increased for African
Americans since 2000, it is not entirely surprising that black teen
pregnancy rates have started to rise again.

Another recession would likely continue these negative trends. The
black violent crime rate and the black teenage pregnancy rate both
will likely rise. Once again, the negative effects of these trends
will hurt the poorest African Americans most.

What black America needs

Even when the national unemployment picture is good, the black
unemployment rate is more than twice that of the white unemployment
rate. This means that in what looks like good economic times
nationally, most of black America is still experiencing a recession.
When white America is in recession, black America is in an economic
depression.

Faced with the prospect of another recession, what black America
needs is what all of America needs: a stimulus package that will help
average Americans and those with the most insecure jobs. The lesson
from black America is that the poorest among us are most hurt by
recessions. Stimulus proposals based on tax cuts for the wealthy or
for business owners are not likely to provide immediate relief to
those still hurting from the 2001 recession, much less protect them
from the additional damage of a new one.

A better approach would be to boost the economy by 1) providing
targeted supports through expanded unemployment insurance and broad-
based tax rebates, 2) providing assistance to states to prevent tax
increases or spending cuts, and 3) directly stimulating job growth by
accelerating funding for infrastructure, particularity for bridge and
school repair. (See EPI's Strategy for An Economic Rebound for more
details.)

While the discussion above is based on national data about African
Americans, it is important to remember that some black communities
are better off than average and some are worse off. Also, although
the discussion is about African Americans, the findings likely apply
to a degree to other poor minority communities and to the poorest
white communities, as well. For example, the violent crime decline
for whites has also stalled, and the teen pregnancy rate for whites
has also increased in the latest data from the National Center for
Health Statistics.11

Notes

1. U.S. Economics Analyst, Issue 08/02, January 18, 2008, p. 3.

2. Based on an analysis of historical economic data by Jared Bernstein.

3. Lawrence Mishel, Jared Bernstein, and Sylvia Allegretto, The State
of Working America 2006/2007. An EPI book. (Ithaca, N.Y.: Cornell
University Press. 2006) p.51.
http://www.stateofworkingamerica.org/

4. Author's analysis of tables F-3 white and F-3 black, 2005 dollars,
Historical Income Tables, U.S. Census Bureau, http://www.census.gov/
hhes/www/income/histinc/ineqtoc.html.

5. Based on an analysis of historical economic data by Jared Bernstein.

6. Author's calculations of violent crime rates from the Bureau of
Justice Statistics, http://www.ojp.usdoj.gov/bjs/glance/tables/
racetab.htm.

7. Author's calculations of birth rates for 15-19-year-olds from
Table 4, Health in the United States, 2006 (Hyattsville, Md.:
National Center for Health Statistics, 2006), p. 135.

8. Marc Mauer, Race to Incarcerate (N.Y.: The New Press, 2006), pp.
177-186.

9. For the years 1976 to 2005, the correlation between the black
poverty rate and the black violent crime victimization rate is 0.92.
Author's analysis of Census poverty rates for all people and Bureau
of Justice Statistics victimization rates.

10. Heather Boonstra, Teen Pregnancy: Trends and Lessons Learned, The
Guttmacher Report on Public Policy, February 2002, Vol. 5, No. 1,
http://www.guttmacher.org/pubs/tgr/05/1/gr050107.html.

11. See Teen Birth Rate Rises for the First Time in 15 Years,
National Center for Health Statistics, December 5, 2007, http://
www.cdc.gov/nchs/pressroom/07newsreleases/teenbirth.htm.

No comments:

US will bank Tik Tok unless it sells off its US operations

  US Treasury Secretary Steven Mnuchin said during a CNBC interview that the Trump administration has decided that the Chinese internet app ...