The voices of Urban Institute's researchers and staff
February 10, 2016

The stalled, struggling black middle class

February 10, 2016

In December, Pew Research Center released a report demonstrating that the number of households earning a middle-class income had reached its lowest point in over 40 years. The decline is due in part to growth in the number of earners at either end of the income spectrum; basically, the middle got smaller because the distribution got bigger.

But as the distribution has grown, so has income inequality, leaving many families among the lowest earners. While the evidence is mixed for the middle class as a whole, the black middle class is decidedly losing ground.

Black families lag behind, despite some signs of growth

The Pew report shows that black adults experienced the largest income increase from 1971 to 2015 and were the only racial group to see a decrease in the percentage of their low income earners. But black middle class families are still far from being as financially secure as their white counterparts.

Black households by and large have seen gains in their real incomes since 1979. Although each of the top four income quintiles have seen increases, with the highest quintile seeing the largest increase, black households still lag substantially behind white households. The mean income for the top black quintile in 2014 is virtually the same as the mean for the top white quintile in 1979.

 

Black families' financial gains are positive, but not necessarily secure

Real median income for all Americans peaked around 1999, but black households have since seen the largest relative decrease in their earnings, falling by 14 percent in 2011 post–Great Recession, compared with 7 percent for white families.

Percentage change in median income by race, 1979—2014 (in 2014 $)

If the racial disparities in income are large, the disparities in wealth are massive. Black families own only one-seventh of the wealth of white households, a gap averaging over $600,000 per family. Despite holding less wealth overall, black households also hold a larger share of their wealth in homeownership than white households (48.6 percent vs. 27.7 percent of total wealth), which hurt them more severely during the housing crisis.

Furthermore, they are more likely to to face an added burden of giving or lending money to poorer relatives. Black families are more likely to receive financial support from relatives, but in smaller amounts than white families. Although lending to kin has a relatively small impact on wealth inequality, the higher rates of giving among middle- and upper-middle-class black families reflect the compounding problem of financial insecurity across the black community as a whole. Money that could be saved or invested goes towards supplementing relatives that aren’t supported by the larger economy.

Proportion providing assistance by family income, 2007 PSID

For the black middle class, these larger economic differences not only make it difficult to support extended relatives, but also their children. The claim that many in the middle class are worse off than their parents is especially true for black families. Black children raised in middle class households in the late 1970s and early 1980s fall out of middle class status at notably larger rates than white children upon reaching adulthood. More than 35 percent of black children raised in the middle of the income distribution will drop into the bottom 30 percent as adults.

Perhaps even worse, a quarter of black children will make less than 80 percent of what their parents did, meaning that even in this expanding economy with higher earnings, as adults they are not just worse off relatively, but objectively. Put simply, retaining middle class status is more difficult for black families across generations.

These racial differences in mobility can be explained in part by educational attainment and marital status, but by far the biggest factor is childhood test scores. The gaps in childhood test scores likely say less about innate abilities and more about differences in the quality of schooling. The impact of test scores is supported by the impactful work of Raj Chetty and colleagues, whose research shows that local levels of segregation and the average quality of area schools are highly correlated with mobility rates, even after accounting for parental income. Having well-to-do parents in many cases is not enough to counteract the segregated neighborhoods and poor schools where many lower- and middle-income black families live.

Protecting progress for black families

America needs a healthy and thriving middle class to support its economy and keep the American dream alive. However, large portions of the middle class are not thriving, but actually struggling to keep pace.

The progress made among many black families should not be ignored, but attention should be paid to their plight as well. Upwardly mobile and middle-class blacks face difficulties others do not, such as discrimination in job search, hiring, and promotion and worse terms for home mortgages, making it challenging to sustain their status. These factors compound to keep blacks in lower-opportunity neighborhoods, often with underperforming schools, increasing the difficulty of passing on hard-earned privileges to their children.

While we encourage policies and practices to improve the life chances of the large numbers of lower-income black families, we must also support policies and practices that allow them to hold onto those gains and prosper as part of the American middle class.

As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.

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Henry Bolden Jr., second from right, stands in front of his home in Hanford Village neighborhood with his sons, Will, Hank and Ron, Tuesday, Jan. 22, 2008 in Columbus, Ohio. Photo by Kiichiro Sato/AP