Impact of Unemployment on Wealth Retention in Black Communities

February 20, 2013 at 12:56 pm

As we have covered in the past, this economic recovery has not affected all communities equally.  The general fact is that the recovery is helping those high earning families, while failing to help the lower-income and minority communities. In fact, the recession caused the wealth gap between whites and minorities to increase by 20%, as reported by the Pew Research Center.  This drop caused the largest wealth gap since the government began tracking this information. 

The enormity of the wealth gap is in part due to the compound effect unemployment is having on our minority communities.  Thanks to the Bureau of Labor Statistics, we can see that this recession has left more minorities unemployed than whites.  As of the most recent numbers released for January 2013, the unemployment rate for Blacks was 13.4%, where the white unemployment rate has dropped to 7.0%.  Over the last year, the unemployment rate for Blacks is usually about 6% higher than for whites.

Due to this inequity in the unemployment figures, Blacks are more likely  to have needy relations than whites.  One recent study found that “Middle-income blacks are more than twice as likely as middle-income whites to have a poor sibling and more than four times as likely to have parents below the poverty line.”   This same study found that Black households are more likely than White households to give money to struggling relatives, and as they earn more money they give a higher proportion of their income to their needy family and community.

Thus, even when Blacks can find the opportunity to succeed and generate wealth, this wealth is usually used to help support their families in ways that are not demanded of white families.  A lack of generational wealth significantly stops the ability of individuals to reinvest into their communities and/or start a business. In fact, the U.S. 2012 Economic Census reports that 60.3% of small businesses are funded at least in part by personal savings.  Without this personal wealth, Blacks small business owners and community leaders are left without the capital necessary to assist their communities; exactly what is necessary to start creating wealth and end the current unemployment gap.

Entry filed under: Economic Development, Economy, Financial Reform, Jobs & Employment.

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