Earnings Gain, Wealth Loss

It comes as no surprise that when the economy is good and employment is up, African Americans benefit by having more money in their paychecks. Since the 1980s, black households have witnessed a decline in earnings during economic recessions, but more than made up for it during economic recoveries. In fact, blacks and whites realized strong gains in family income during the late 1990s, and earnings were at their highest level at the end of the economic expansion in 2000 for both groups. This is according to the report African Americans and the Color Line, which was published by the Russell Sage Foundation and the Population Reference Bureau. From 1994 to 2000, black family income grew at a rate of 24%, from nearly $25,000 to $31,000, a gain of about $6,000.

Employment rates rose dramatically for African Americans during the latter part of the 1990s. That, coupled with an increase in wages, contributed to higher black family incomes in 2000, notes the report’s author, Michael A. Stoll, associate professor of policy studies and associate director of the Center for the Study of Urban Poverty at UCLA.

Over the past decade, the black–white family income ratio has increased from 0.54 in 1990 to 0.58 in 2000, an indication that African Americans have made up some small ground relative to whites. A major explanation for the racial gap in family income is that “African Americans are less likely to be married and are more likely to have families headed by females than are whites,” says Stoll. Thus, “black families have fewer members contributing to family income.”

The median income for black households remained relatively unchanged: $30,158 between 2001 and 2002, dropping to $29,668 between 2002 and 2003 due to higher unemployment rates among African American professionals. What is even more striking is that the wealth gap between white and black households has widened since the 2001 recession and jobless recovery. The median net worth (assets minus liabilities) of blacks was only $5,988 in 2002. Debts mounted while assets dwindled among families, especially when one or two members were out of work.