In Economic Downshift, Minorities Risk Losing Most
New America Media, News Report, Suzanne Manneh Posted: May 17, 2008
Editor's Note: Latinos are at a greater risk of facing poverty than whites or African Americans, according to a recent study by the Center for American Progress.
SAN FRANCISCO — The nation's weakening economy has hurt many Americans, but African Americans and Latinos have been hit the hardest and will continue to lose the most, according to a recent national study released by the Center for American Progress, a national left-wing think tank.
African Americans and Latinos have experienced declining incomes over the past seven years, the study shows. The Latino median family income declined by an average of 0.5 percent per year from 2000 to 2006, and African Americans' median income declined by an average of 1.3 percent per year over the same period.
Christian Weller, senior fellow with the Center for Economic Progress, observes that the economy’s instability is rooted in what he calls “segregation across the economy”: the fact that opportunities for minorities to prosper are unequal to those for whites.
Latinos, for example, have been the hardest hit by the 12-month decline in the construction sector and rising unemployment rates.
In recent years, Latinos actually saw employment gains, but wage gains didn’t accompany them. Despite getting more jobs in construction prior to its decline, Latinos were still “far behind,” Weller said, “when it comes to other relevant measures of economic security such as wages and benefits.”
The unemployment rate for Latinos and African Americans, which was on the decline in the 1990s, began to increase after 2000. For African Americans, the shift was drastic: their employment rate growth fell by 60 percent in six years (2001 to 2007). This downshift, Weller explained, “quickly meant large losses in terms of employment, wages, and in terms of benefits from which they never recovered.”
Some see the current subprime loan crisis – and its disproportionate effect on black and Latino families – as another episode from which it will be very difficult to recover.
Nearly half (47 percent) of subprime loans taken out in 2006 will end in foreclosure, along with 40 percent of loans taken out in the first half of 2007. More than half of these loans were given to African Americans; and 42 percent of the mortgages given to Latinos were subprime according to Nancy Zirkin, executive vice president of Leadership Conference on Civil Rights.
“As a conservative estimate,” Zirkin said, “10 percent of African-American homeowners who received subprime loans will lose their houses, and 8 percent of Latinos (who received these loans will lose their homes).”
Since minority communities tend to have lower incomes, higher unemployment rates, and are more likely to be in mortgage trouble than whites, experts say the need for other forms of wealth to ensure financial security is critical.
The largest form of financial wealth is pensions, yet more than half (55 percent) of whites have private pension plans while only about 44 percent of African Americans and 31 percent of Latinos do.
These factors mean that Latinos’ overall wealth is declining. More of their money is tied up in risky home equity, and Latinos are at a greater risk of facing poverty than whites or African Americans.
Given this dire state of affairs, Zirkin says the best protection would be for the Senate to “let troubled borrowers go to bankruptcy court, and have their loans modified.”
Yet the White House has threatened to veto Rep. Barney Frank’s (D-Mass.) Homeowner Aid Plan, which proposes offering up to $300 billion of government insurance in new mortgages for troubled homeowners to acquire more affordable, fixed-rate loans.
Zirkin wryly notes that Washington seems least concerned with those financially at risk.
“It is ironic and blatantly unfortunate that many troubled mortgage lenders have been able to turn to bankruptcy court in the past year,” she noted, “but the troubled borrowers are out of luck.”
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