As Wages Rise, Black Workers See the Smallest Gains

Despite record-low unemployment, black workers’ weekly pay growth lags behind other groups

Black workers have received far smaller pay increases in recent years compared with other racial groups, despite unemployment for black Americans trending at historic lows.

For all U.S. workers, inflation-adjusted median weekly earnings rose 5.3% in the first quarter of 2019 compared with when the recession began in late 2007, according to a Wall Street Journal analysis of Labor Department data released Tuesday.

.. The disparity suggests black workers aren’t benefiting to the same degree as others from what is by several measures the best labor market in nearly half a century.

Black unemployment last year fell to the lowest level on records dating back to the 1970s. But the rate, an average of 6.8% in the first quarter, was well above the overall rate of 3.9%.

“In a hotter economy, it’s important to be looking at the structural issues that may be inhibiting black workers from seeing better gains.” said Valerie Wilson, an economist and director of the Economic Policy Institute’s program on race, ethnicity and the economy.

One of those is racial discrimination, she said. Other factors are lack of jobs near where black workers live and a reluctance of employers to hire those with criminal backgrounds. More prisoners are black than white, according to the Justice Department, despite black people accounting for about 13% of the U.S. population. And reports have shown black men receive longer sentences than white men for similar crimes.

Hispanic workers are likely benefiting from the effects of better educational attainment, Ms. Wilson said. As Hispanics are increasingly first- and second-generation Americans, rather than immigrants, they’re seeking more schooling and earning correspondingly higher wages.

Hispanic workers still earned the least among racial groups, an adjusted $692 a week. Black workers, while they’ve seen smaller percentage increases, earned a median wage of $711 a week.

Women earn less than men within all racial groups. That could be another factor holding back overall pay for black workers: More black women than men are employed. In every other racial group, male workers outnumber female workers. In the past decade, Hispanic men began earning more than black women.

The Student-Debt Crisis Hits Hardest at Historically Black Colleges

Long a path to financial security, traditionally African-American schools are now producing graduates who struggle with disproportionately high debt

Historically black colleges and universities helped lift generations of African-Americans to economic security. Now, attendance has become a financial drag on many of their young graduates, members of a new generation hit particularly hard by the student-debt crisis.

Students of these institutions, known as HBCUs, are leaving with disproportionately high loans compared with their peers at other schools, a Wall Street Journal analysis of Education Department data found, and are less likely to repay those loans than they were a decade ago.

Among key findings of the Journal’s examination of 2017 data, the latest available:

  • HBCU alumni have a median federal-debt load of about $29,000 at graduation—32% above graduates of other public and nonprofit four-year schools.
  • The majority of HBCU grads haven’t paid down even $1 of their original loan balance in the first few years out of school.
  • America’s 82 four-year HBCUs make up 5% of four-year institutions, but more than 50% of the 100 schools with the lowest three-year student-loan repayment rates.

Though HBCUs typically cost less than other public and nonprofit four-year schools, these colleges have long trailed those peers on measures of debt and repayment. Now they are trailing by far greater margins.

Many HBCUs see a mandate in giving opportunity to disadvantaged youth, who often start out with fewer financial resources and a diminished ability to pay.

At Stillman College in Tuscaloosa, Ala., the board until recently included alumni from rural Alabama working as lawyers, doctors and ministers, said its president, Cynthia Warrick. “They’ve told me that no one else would take them but Stillman. I think we have a responsibility to still be that place.”

Graduates of four-year for-profit colleges, which weren’t part of the Journal’s comparisons, have similar overall repayment rates and median debt loads to HBCU alumni, an analysis of federal data shows.

The HBCU debt gap has widened partly because of simple math. Tuition increases have outstripped inflation across America.

  • Black families have the least wealth of the largest U.S. racial groups, Federal Reserve data show.
  • Parents of black college students have lower incomes and are less likely to own homes than those from other racial groups, Education Department data show.

So in coping with tuition increases, black students have fewer resources to draw on than many Americans. Borrowing proportionally more has been the solution for many black students and families.

.. Blacks typically earn less than whites after college, so they have fewer resources to repay. Black college graduates between ages 21 and 24 earned nearly 17% less per hour, on average, than white graduates of the same age range in 2018, according to an analysis of census data by the Economic Policy Institute, a left-leaning think tank.

.. Many HBCUs opened after the Civil War and in the first half of the 20th century when public and private universities often denied admission to African-American students. The schools often started out severely behind their peers financially. Many never caught up, despite government efforts that the schools say have been insufficient.

Say Anything, Cain Version

For a $50K household, married couple, two kids, all income from earnings and standard deductions, the current tax burden is $8.3K.  Under 9-9-9, that would grow to $13.5K, an increase of over $5,000 (hat tip: CCH, BS).  The WaPo fact checker came to a similar conclusion.  E Klein too.

(I expect that any minute now the Tax Policy Center will release a slew of data supporting these points with their much more detailed tax model.)

But Lowrie wouldn’t accept that conclusion.  In fact, he asserted that their federal tax would be lower because they’d move from a 15% payroll tax to a 9% income tax.  This, as I said on air, is “patently wrong.”

First of all, assuming they plan to exist, they’ll need to consume stuff, and thus they’ll also face the 9% sales tax.  That already makes their tax rate 18%, higher than the 15%.

But as Michael Linden points out, and this is widely agreed upon by tax economists, the incidence of the 9% tax on business income (which denies businesses a deduction for wages paid) also hits them, which is why former Joint Tax Committee chief of staff Ed Kleinbard described the tax as a 27% payroll tax for families whose incomes derive from earnings (note that Lowrie is perfectly comfortable with the standard assumption assigning the incidence of the employers side of the payroll tax to the family—this one re the business tax is equally standard).

For a family with $500K, same assumptions as above, their tax bill would fall by $44K.

But where this plan really gets regressive is when you get up into the families who derive their income from non-labor sources.  While the details of the plan are fuzzy when it comes to capital gains and dividends, it seems clear that those earning thousands or even millions of dollars in these types of non-labor income would enjoy a massive tax cut.  And that would further widen the disparity between the highly preferential treatment of capital gains and dividends on the one hand, and the taxation of “ordinary” wage and salary income on the other.

We’ve got enough income and wealth inequality coming from the pretax distribution—we don’t need to exacerbate it through the tax code.

Middle class families that depend on earnings will pay more taxes under the Cain tax plan.  High income families will pay a lot less.  His advisors who say otherwise are misleading the electorate and that must not stand.