A Decade After Economic Crisis, Many Families Continue to Struggle

A discussion about financial security in low- and moderate-income African-American communities

A Decade After Economic Crisis, Many Families Continue to Struggle

As Americans this fall recall the 10th anniversary of the stock market crash of 2008, most of the recent economic news has been good—low unemployment, a thriving stock market, and rising home prices—but the focus on positive developments nationwide obscures the financial struggles still faced by many families. 

A recent panel discussion sponsored by The Pew Charitable Trusts at the National Association of Black Journalists’ convention in Detroit highlighted these continuing concerns. The conversation, moderated by Teresa Wiltz, a senior writer at Pew’s Stateline news service, included academics, community activists, and journalists. The panelists offered an in-depth look at how finances for many families often do not reflect the upbeat economic trends, and, more specifically, how these changes are affecting African-American communities.

For example, Pew released a report in April that focused on how many Americans are rent burdened, meaning they are paying more than 30 percent of income toward rent. The analysis found that in 2015, 38 percent of all “renter households” met that definition, an increase of 19 percent since 2001. Within that total, nearly half—46 percent—of African-American-led renter households were rent burdened, compared with 34 percent of white households.

These numbers matter because rent-burdened households tend to be financially insecure. Nearly two-thirds had less than $400 cash in a bank account. That jumped to 84 percent among rent-burdened households headed by African-Americans. Half of all rent-burdened families had less than $10 in savings, while half of homeowners had more than $7,000 available. In addition to having little savings to withstand a financial emergency, the data showed that rent-burdened households also struggle to transition to homeownership, one of the most widely used tools for building wealth and long-term financial security.

Ron Stodghill, a professor of journalism at the University of Missouri, highlighted research by Pew and others showing that metro areas with the highest rates of economic segregation also experience the lowest rates of economic mobility. “Even if you’re upwardly mobile, your house is going to be worth less [if you own a home],” Stodghill said.

Trooper Sanders, a Rockefeller Foundation fellow and a domestic policy adviser in the Clinton White House, said education can be a critical way to increase economic mobility. Still, he cautioned that it can be challenging to pursue a degree after a career in an unrelated field, a reality that puts many 21st century jobs just out of reach. It can be unrealistic, he said, to expect someone “… to simply go out and take classes at the local community college,” because time—and money—are limited resources for many working-class families.

“It takes a ‘14th grade’ education to take advantage of these emerging job opportunities,” said Sanders, explaining that careers in technology are inaccessible without college-level writing, math, and science. “If you have that foundation, you can go in any number of directions.”

Time, like disposable income, is in short supply for families that may be struggling financially.

“People have to work,” said Gillian White, a senior editor with The Atlantic, reflecting on interviews she has done with people in challenging economic situations. “It’s why neighborhood advisory committee meetings tend to be attended by those with higher incomes.”

And lower incomes make saving more difficult. For example, most American households (55 percent) are savings-limited, meaning they can replace less than one month of income through liquid savings. When race is taken into account, a quarter of black households would have less than $5 if they liquidated all financial assets, compared with $199 and $3,000 for the bottom 25 percent of Hispanic and white households, respectively.

Some people also face issues particular to their communities. Sarida Scott, executive director of Community Development Advocates of Detroit, spoke about the confluence of economic factors linked to the Great Recession that worsened problems in her city. In the years after the 2008 market crash—which included a city bankruptcy filing in 2013—property values dropped drastically, and property taxes were assessed incorrectly. Many homeowners found themselves required to pay tax bills that did not reflect the value of their homes. These inflated assessments led to many foreclosures, particularly for working-class African-American families.

Scott’s group is part of the Coalition to Stop Unconstitutional Property Tax Foreclosures in Detroit. She highlighted how limited time and difficulties navigating complicated paperwork created new and larger barriers to financial security.

“There’s a belief that the problem is just personal responsibility,” Scott said. “But how can you know that you’re overpaying your property tax if you don’t understand the system?”

Pew’s 2014 Survey on American Family Finances showed that financial security is a three-legged stool supported by income, expenditures, and wealth. As many households continue to walk a financial tightrope, stock market gains do not add hours to the day, nor extra income month to month. In fact, just 54 percent of all households have market investments, according to a 2017 Gallup survey. That’s down 8 percentage points since 2008. Moreover, wages over time have remained largely stagnant, meaning the challenge of making ends meet remains difficult. Although the economic numbers look strong on a macro level, the lived experiences of families, especially in low- and moderate-income communities, provide a less positive outlook.

Karen Kavanaugh directs The Pew Charitable Trusts’ project on financial security and economic mobility.

Family
Family
Report

American Families Face a Growing Rent Burden

Quick View
Report

Nearly 43 million U.S. households rented their homes in 2016, including about 9 million households that were formed over the preceding decade, according to the Harvard Joint Center for Housing Studies. Demand for rental properties has increased across age and socio-economic groups since 2008. Recent research indicates that although some of those increases can be explained by population shifts, a significant portion is the result of declines in homeownership since the Great Recession.

Woman at computer
Woman at computer
Article

The Racial Wealth Gap and Today’s American Dream

Quick View
Article

There is a growing recognition among Americans that moving up the income ladder in the United States can be challenging: As recently as 2014, only 23 percent of Americans believed that it’s common for someone to start poor, work hard, and become rich, which was down 16 percentage points from just five years earlier.

Coins
Coins
Data Visualization

Portrait of Financial Security

Quick View
Data Visualization

This interactive highlights the financial balance sheets of 17 family types and illustrates how household demographics, such as education, race, and family structure, relate to financial security. Users can explore three areas of the balance sheet—income, wealth, and liquid savings—to better understand how families are doing financially and how they perceive their financial well-being. The interactive is based on data from Pew’s nationally representative Survey of American Family Finances. Select a profile to get started.