Last month’s demonstration in Jena, LA was a semi-nostalgic throwback to the glory days of the civil rights movement. It summoned up images from grainy, black-and-white news footage of the 1960s—white southerners brandishing nooses, black victims of unequal justice, busloads of demonstrators descending on a small Southern town, impassioned speeches from preachers-cum-civil rights leaders. For all its righteousness, however, the Jena demonstration obscured another story that’s much more important to the fortunes of African-Americans in the 21st century.
A new survey released a week after the marchers left Jena reported that middle and upper-middle class black Americans, who already lag far behind whites in household wealth, are not taking advantage of easily-accessible savings and investment opportunities that, especially in light of current conditions in the housing market, represent the most powerful wealth creation options in the American economic system.
According to the survey, conducted by Ariel Mutual Funds and the Charles Schwab Corp.:
• African-Americans are half as likely to be investors as whites are, even when demographic factors such as age, income, gender, family structure, education are held constant;
• 40% of African-Americans with household incomes of $50,000 or more have no money in stocks, compared with just 25% of whites;
• African-Americans who enroll in retirement plans save a median amount of $173 per month, compared with $252 for whites;
• Middle-class African-American households on average have just $48,000 in savings, while their white counterparts hold more than twice that amount, at $100,000.
The survey’s findings are consistent with recent research conducted by two large employers. At Exelon Corp., the nation’s largest operator of nuclear power plants, 15 out of every 100 black employees do not participate in the company’s 401(k) plan. The number of white employees who do not participate is 33% lower, at 10 out of every 100.
And McDonald’s Corp. discovered in 2004 that only half its black store managers participated in its 401(k) plan, a lower percentage than its white store managers.
Issues such as wealth creation do not lend themselves easily to the 1960s-style protest tactics that Al Sharpton and Jesse Jackson used so effectively in Jena. The Jena incident was a useful reminder that the civil rights victories wrenched from a reluctant America in the last century need to be guarded with special vigor today, lest we succumb to the right wing’s agenda in these twilight days of George W. Bush’s reign in Washington.
But issues like wealth creation and education—issues where victories are won person by person, rather than in grand sweeps that impact millions at once—define the civil rights frontier today. We have venerable civil rights organizations dedicated to defending the victories of the last century. But where are the new organizations that can help us figure out how to win the fights of this one?
In their groundbreaking 1995 book, “Black Wealth, White Wealth, A New Perspective on Racial Inequality,” sociologists Melvin Oliver and Thomas Shapiro note that wealth is the key indicator of individual and family access to life chances in the U. S.
“Wealth signifies the command over financial resources that a family has accumulated over its lifetime, along with those resources that have been inherited over generations,” they wrote. “Such resources, when combined with income, can create the opportunity to secure the ‘good life’ in whatever form is needed—education, business, training, justice, health, comfort, and so on. Wealth is a special form of money not used to purchase milk and shoes and other life necessities. More often it is used to create opportunities, secure a desired stature and standard of living, or pass class status along to one’s children. In this sense the command over resources that wealth entails is more encompassing than is income or education, and closer in meaning and theoretical significance to our traditional notions of economic well-being and access to life’s chances.”
African-Americans have made real progress toward closing the income gap with similarly-educated whites. But we’re still far behind in accumulating wealth. If African-Americans continue failing to invest and save, we will not generate wealth. And if we do not generate wealth, control of our own destinies will continue to float just outside our grasp.
The Ariel/Schwab study points to a number of social and cultural issues to explain the black/white investment gap. It notes that middle-class blacks tend to have greater family-related financial burdens than do whites, with black families more than 1.5 times as likely as whites to support adult children or aging parents, and more likely to have extended family members living in their homes. Middle-class blacks are also less likely to be married than are middle-class whites, the study notes.
The study also notes the relative lack of focus on matters of savings and investment in the African-American community. “For example,” it reports, “whites are almost twice as likely to have grown up in a household where they knew their parents were investors, giving whites the advantage of early exposure.
“This trend still exists today, with black parents being considerably less likely than white parents to expose their own children to various banking and investing activities…In 2001, just 56% of blacks said their child under 18 had a bank account, compared to 68% of whites; only 36% of blacks had savings bonds for their children, compared to 55% of whites; and only 21% of blacks had bought stocks or mutual funds for their children, compared to 31% for whites.”
Programs to increase financial literacy in the black community will not grab headlines or make the evening news. They will, however, help black people prepare for the challenges of the 21st century. We need new champions in new organizations that are as committed to this fight as the civil rights organizations were to the fights of the last century.