For Blacks, Progress without Parity

Fewer are poor, but blacks are no closer to economic equality

Raised outside Philadelphia on Social Security after his father's death, Joseph McKenna, who is black, became the first in his family to earn a college degree. After graduating, he worked as a professional at predominantly white Wall Street firms. But now, at 37, McKenna has begun to wonder about his future. Last September, investment bank J.P. Morgan Chase & Co. axed him from his $85,000-a-year job as a credit-card analyst amid a string of layoffs. Now he scrapes by on $400 a week in unemployment as he looks for a job, relying mostly on money from his wife, Cherrie, who still works in financial services. "It's hard to keep cheery all the time," he says. "I just want to get back into the workforce."

Millions of African Americans, like McKenna, achieved middle-class prosperity during the 1990s boom. The supercharged labor market drove black unemployment rates down to a very low 7% in early 2002. Employers, strapped for workers, took chances on people whom they would otherwise not have hired. The racial problem in America seemed ready to yield to the inexorable forces of economics.

But the gains for blacks turned out to be more fragile than anyone realized. Since the stock market bubble burst in March, 2000, black unemployment has soared to nearly 11%, double that of whites. And it's not just less skilled blacks who got hurt. In 2002, the number of employed black managers and professionals fell, with much of the decline coming in financial services, where McKenna used to work. Meanwhile, the number of employed white managers and professionals continued to rise, including in financial services. "Blacks have been disproportionately hit," says Harvard Business School professor David Thomas.

Taking the last 10 years as a whole, the data reveal a surprising -- and distressing -- fact: Despite the biggest economic boom in 30 years, black Americans closed little, if any, of the gap with whites on important measures of economic success. Average black household income gained slightly, going from 63.4% of white household income in 1991 to 64.9% in 2001, the last year available. Black men earned 73.9% of what white men earned in 2002, measured by median full-time wages and salaries. That's barely up from 73.4% a decade ago. Black female earnings actually lost a bit of ground over the same period, compared with those of white women.

The same lack of relative progress shows up in other measures. When it comes to wealth accumulation, blacks failed to catch up with whites in the buoyant 1990s. For most middle-class families, their home is their major asset -- but the black-white gap in homeownership rates narrowed by less than a percentage point since 1994.

More broadly, in 2001, the average net worth of black families was only 16% of non-Hispanic white families' average net worth -- down from 22% in 1992. That reflects a big jump in the number of wealthy white families. By 2001, a stunning 18.2% of white families had a net worth over $500,000, compared with only 2.4% of black households.

And in higher education -- often believed to be a bright spot for African Americans -- the gap didn't close at all. The share of whites with a college degree grew by 5.1 percentage points from 1992 to 2002 while the black share rose by the same amount. This lack of progress portrays a different vision of the future than Supreme Court Justice Sandra Day O'Connor's declaration, in the recent affirmative-action decision, that "we expect that 25 years from now, the use of racial preferences will no longer be necessary."

The persistence of the black-white differences in economic performance is especially troubling given that another long-standing divide -- the income disparities between men and women -- has been shrinking. In 1992, women over 25 earned 74% of what men over 25 earned, measured by full-time median earnings. By 2002, they were earning 78% of what men made.

Some argue that the race gap gets too much attention. As long as blacks are getting steadily better educated, better paid, better housed, and wealthier, why should anyone care that whites are making gains at about the same rates?

There's no doubt that when measured on an absolute scale, rather than on one relative to whites, the improvement in the economic situation for blacks has been impressive. The share of blacks in families living below the poverty line plummeted from 31% in 1992 to 21% in 2001, the latest year available. Before this drop, the black family poverty rate had bounced between 27% and 34% since the 1960s.

Equally important, the share of blacks 25 and over with four years of college jumped to 17% in 2002, from just under 12% in 1992. That's a much bigger rise than in the previous 10 years. The implication: With more work experience and better education, blacks may be better positioned to take advantage of the next big upturn in the economy, breaking the cycle of poverty.

Moreover, the surge of immigration in the 1990s and the rapid growth of the Hispanic population have blurred the ethnic and racial makeup of the country. The 2000 Census offered Americans the choice of identifying themselves as belonging to more than one race. Also Hispanics, not blacks, are now the largest minority group.

Yet it still makes sense to pay special attention to the economic gap between whites and blacks. It's a fact of U.S. history that civil rights legislation was passed specifically to help African Americans. There's also a perception that the lingering gap has something to do with a variety of social and economic factors that have inhibited many African Americans from achieving their full potential.

African Americans, after all, inherit the legacy of America's "peculiar institution" -- slavery. Blacks, it's painful to recall, were counted as three-fifths of a person for census purposes in the Constitution. After the abolition of slavery came the infamous Jim Crow laws. In 1883, the Supreme Court ruled that the 14th Amendment did not protect blacks from discrimination by private businesses and individuals. "We are all under the gun together, because of history, to pay attention to this," says Rebecca M. Blank, dean of the Gerald R. Ford School of Public Policy at the University of Michigan.

It's tempting to conclude that racial discrimination has been relegated to history now that the Supreme Court has upheld affirmative action and black men run such powerful companies as AOL Time Warner, American Express (AXP ), Merrill Lynch, and Fannie Mae (FNM )

But is it? Discrimination in hiring still exists, as evidenced by a recent study that tested employers' reactions to 5,000 résumés that were doctored to make the applicants appear either black or white. Holding all else equal, job applicants with white-sounding names like Emily and Neil were 50% more likely to get called for an initial interview than applicants with African American-sounding names like Lakisha and Tyrone, reports the study by Marianne Bertrand of the University of Chicago Graduate School of Business and Sendhil Mullainathan of Massachusetts Institute of Technology. Most disheartening: Having excellent credentials boosted callbacks for "black" résumés far less than it helped "white" résumés.

Black managers and executives are also getting paid less than whites in similar jobs. A new study, based on government data from 1999 to 2002, by William M. Rodgers III, associate professor of economics at the College of William & Mary, shows that black male executives and managers earn 23% less than white ones. Rodgers concludes that only about one-quarter of the gap is based on factors such as experience and education.

Indeed, black men lag behind in every major occupational category -- from police officers to accountants. Those in protective-services jobs get paid 16% less than white men. Professionals make 19% less than their white counterparts. At the top end, these gaps are widening. According to government data, in 1992 the average black worker with an advanced degree earned 16% less than a white worker with advanced education. By 2001, the rift widened to 25%.

When blacks' résumés get a colder reception than whites', it's not always because of active discrimination. It's often a subconscious decision -- what Chicago's Bertrand calls a "rational reaction." That is, the legacy of lagging economic performance by blacks causes an employer to infer that a black applicant will be less productive. This creates a vicious cycle in which discrimination doesn't go away until after blacks have managed to succeed in spite of it.

Since blacks have a smaller cushion of wealth than whites do on average, extended unemployment takes a bigger toll. At some point, unemployed blacks lower their sights, notes Dr. William E. Spriggs, executive director of the National Urban League. "They have to move down in the labor market, and that shows up in lower pay."

Consider the plight of Judy Evans. She lost her job as an office manager in June, 2002. After nearly a year of knocking on doors, she accepted a commission-only spot with cable giant Comcast Corp. in May. She now rises before dawn and commutes 30 miles from her Chicago home to Indiana, where her job is to approach people who are tapping into the cable-television service of neighbors and convert them to paying customers. This tough work makes her only about $180 per week.

The lost ground troubles even blacks who are doing well. When Larry L. Earvin and his family were featured in a 1988 BusinessWeek cover story on black America's rising middle class, he was a college administrator making less than $50,000 a year. Since 2000, he has been president of Huston-Tillotson College, a historically black institution in Austin, Tex., earning more than $120,000. His children are also thriving: His son, William, 25, teaches high school in Atlanta. Earvin's 23-year-old daughter, Allyson, is working on her master's degree in health administration at Southwest Texas State University in Austin. (His wife died in 2000.) But despite personal prosperity, Earvin sees firsthand how educational gains are eroding: "I'm really anxious. The higher education participation rates among blacks are not what they should be."

It's possible to disagree over whether the glass is half-full or half-empty for black Americans. But there's no doubt that the racial disparities that have lingered for decades weren't wiped out by the boom of the 1990s, and they aren't about to disappear anytime soon.

By Roger O. Crockett in Chicago, with Peter Coy in New York

— With assistance by Peter Coy

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