Recession Proofing the Economy: Building Wealth in Communities of Color
By Meizhu Lui
When I was growing up, my Chinese parents used to say to me (as they sat me in front of my homework while my white friends were out playing), “You have to work twice as hard to be equal.” That just made me roll my eyes at their naïveté. After all, this was America, the land of equality. Fast forward to the 1974 recession when I was looking for work; my college degree didn’t help, so nearly a year into my search in desperation I applied to Dunkin’ Donuts. The manager interviewing me said, “You Chinese are good workers, aren’t you?” Suddenly, the light dawned: it was me, not my immigrant parents, who was naïve; I would be expected to work twice as hard as the other “girls.” Later, I found that many other children of color heard the same advice from their parents, too.
As we look at today’s economic picture, it reflects our parents’ truth. In fact, over the last few years people of color have been three times – not twice – more likely to live in poverty, three times more likely to have been steered into a sub-prime mortgage when they could have qualified for a lower rate, and three times more likely to get knocked back to zero through foreclosures. Recession? Some communities of color have been in a permanent recession. While there is a big hoo-ha now that overall unemployment has broken the double digit barrier, the rates among people of color surpassed 10% several years ago. And if you break down that 10% by race, African Americans have 15% unemployment, Latinos 12%, Asians, although suffering less from unemployment as a percentage of the Asian population, are seeing the fastest growing rate of unemployment, and on some Native American reservations, up to 50% have no jobs. For whites, the double digit mark has not quite been reached at 9%. And so while all racial groups are hurting, the pain is not distributed equally among all communities.
While most of the emphasis in getting out of the recession is on jobs and income, wealth – what you own minus what you owe – is even more important to achieving economic security for the people and economic stability for the nation in the longer term. Without wealth – no savings, no homeownership, no business ownership, no retirement pension, no assets – you will not be able to weather economic recessions, nor will you be able to make your money grow, and most importantly, you won’t be able to give your children a jump start on their own journey into the economy. As we tackle the recession, asset building and wealth creation, particularly for people of color, need to be part of the agenda.
When I was a kid, children used to chant at me, “Ching-Chong Chinaman, sitting on a fence, trying to make a dollar out of fifteen cents.” Looking at the data on wealth today, the average family of color still has only fifteen cents to the dollar owned by the average white family. In fact, African Americans are losing ground: in 2004, households headed by African Americans owned twelve cents to the average white household’s dollar; in 2007, it had shrunk to a dime. Single black and Latino women on average have only a little over $100 in wealth. Even if all the unemployed got jobs tomorrow, people of color would still lag far behind due to the racial wealth gap.
Why does such a huge gap exist? Throughout US history, government actions have transferred vast amounts of wealth from people of color to whites, created policy barriers to wealth creation by people of color, and used tax dollars and benefit programs for those who served in the armed forces to secure wealth building opportunities for whites. Land held by Native Americans was taken from them through violence and disregard for treaties. African Americans could not even earn a wage – they were themselves financial assets, part of the wealth holdings of their owners. Mexicans were forced off their land through a trumped up war and then allowed to come back only as temporary workers. Asians were denied the right to become citizens and to receive the benefits of citizenship, such as the right to own land, to form corporations, to get government jobs, or to receive public benefits. European Americans, on the other hand, have consistently received incentives and subsidies for wealth creation, from the Homestead Act to the free land-grant college system to low-interest mortgages to access to farm and small business loans to the current tax breaks for high-end homes and for capital gains.
For an equitable recovery, several principles have been developed by a network of experts of color in the asset building field organized by the Insight Center for Community Economic Development, a national nonprofit organization dedicated to helping families and elders achieve and maintain economic security.
- Policies must be universal and targeted to communities of color. Like the policy in the Emergency Room, those with the most life threatening situations need to be cared for first. Every life can be saved if you start with the ones with the most pressing problem. We know there are new emerging sectors whose growth will be encouraged by government investment: besides green technology, broadband and transit are two sectors that will need new workers. The first hired for the new jobs that are “good” jobs – ones that include wealth building possibilities such as health and retirement benefits – need to be those from communities with disproportionately high unemployment rates. Tax incentives for employers who hire people from disproportionately affected groups; job training and creation programs that are targeted to people/areas disproportionately affected by job loss; community rebuilding programs with job residency requirements are tools to steer good jobs to communities of color.
- The perspectives of and resources created by experts of color must be drawn upon to develop public policy. Too often, “experts”, who have very little real-world experience in or with communities of color, have the most influence in shaping policies intended to help lift the poor. Look at the college savings accounts that allow such savings to be deducted from income taxes. For low-income families of color who don’t make enough to file income taxes, this doesn’t help. A more direct approach – scholarships for example – would best achieve increasing college enrollments by minority students, and set them on an upward economic path. 150 experts of color can be searched for by area of expertise in the Experts of Color Clearinghouse of the Closing the Racial Wealth Gap Initiative, Insight Center for Community Economic Development. Their experience and their professional training are available to design effective policy solutions that will have a successful and lasting impact – so we don’t want to hear, “We want experts of color, but don’t know where to find them!”
- Collection of racial and ethnic data is essential to evaluate policy effectiveness. As the late Justice Blackmun once wrote: “In order to get beyond racism, we must first take account of race. There is no other way.” Too often there are insufficient or poor data to knowledgeably design public policy or measure its effectiveness, especially for Native and Asian communities. Aggregate data mask problems; Asians look like they’re doing well as a whole, but the poorest ethnicities in the US are Asian and they are denied the help they need due to the lack of good data. It is not easy to tease out the impact on communities of color from the American Recovery and Reinvestment Act of 2009 (ARRA) due to lack of data; future policies must be mandated to collect data so we can be clear about who benefits and who does not.
- Solutions must focus not just on individuals, but on community-wide prosperity. Because residential segregation is still a reality, and because people of color operate as members of extended families and larger communities, economic solutions must focus on communities, not just individuals. With the foreclosure crisis continuing into 2010, which will exacerbate the racial wealth gap, reform of the financial sector is essential to protect people of color from predatory products. The proposed Consumer Financial Protection Agency is a step in the right direction, but it should not just hear individual complaints, but have the authority to oversee the Community Reinvestment Act and watchdog banks and the services they provide in minority neighborhoods as a whole. In addition, support must be given to community based organizations, which provide the cultural, educational, and financial bonds that strengthen community fabric.
Turning hard work into prosperity is the essence of the American dream; but people of color have been denied the tools to turn their dreams into reality. The US government knows that giving white Americans opportunities to gain assets helped grow the economy. To do so for all of us will expand our economy for the long term.
Meizhu describes herself as a “professional troublemaker!” She is the Director of the Closing the Racial Wealth Gap Initiative at the Insight Center for Community Economic Development, and a co-author of The Color of Wealth: The Story Behind the US Racial Wealth Divide.
* Photograph included above is copywritten by Blethen Maine Newspapers.