As the recession continues to take its toll, many Black Americans find themselves almost back at square one.
When Cole and Tracey Wallace purchased their home in Maryland’s Prince George’s County, the achievement of home ownership marked a giant step in their plan to become another All-American family in one of the wealthiest majority Black counties in the nation.
The five-bedroom, 3,000-square-foot home, situated on a cul-de-sac and backed by a golf course in the fashionable Lake Arbor area of Bowie, cost $450,000 in August 2007.
A stretch, yes, even after their down payment. Still, the Prince George’s real estate market was on a fast uptick and home buying there, as was the case in most of the nation earlier this decade, seemed like a smart investment for building wealth. The Wallaces’ income could support the $3,600 house note and household expenses. The house had plenty of room for their growing family and space for them to unwind after getting home from their jobs, his in the hotel business and hers in government.
Today, a national economy gone bust has derailed the Wallace family’s ambitious plans and those of millions of Blacks across the country. Gone are many of the economic gains, small as they were, achieved in the postsegregation era by millions of 1960s generation children and their children. Black America today is beset by job losses, business closures, pay cuts, furloughs, investment and savings losses, nose-diving home values and losses of homes and cars.
As important, the economic shakeout has rede fined the landscape ahead, as established ways of getting ahead â€” undergraduate and graduate degrees â€” and the infrastructure that nurtured it â€” affirmative action and diversity programs â€” have been turned on their heads. Thousands of high-income, white-collar jobs in the services industries, foundations and education have been eliminated. Diversity programs have been moved down the priority list of many employers. The gains of a whole era and the optimism that fed it have vanished.
“The recession has exposed our vulnerability,” says Hugh C. Burroughs, a consultant to foundations. “We’re not as secure or as strong as we think.”
Burroughs, a foundation executive since the early 1970s, says the recession has “caused a weakness of confidence” in the longheld “success” formula that prescribed getting a good education from a historically Black college, then a graduate degree from a prestigious historically White college, “then you’re set for life. We’ve found that doesn’t work,” Burroughs says.
The psychological impact of the recession is just as strong, adds Ron Brown, a management consultant to Fortune 100 companies.
“It (the economic bust) has impacted the pattern of ambition for Black Americans,” says Brown, a partner in Northern California- based Banks Brown. “After getting in a position where there was a level of excitement, people are frozen in place now. There are companies where there have been layoffs, and the people remaining are happy to have their jobs. Advancing was their focus. Now, remaining is their focus. People are in holding patterns.”
The economic slump is hitting people in different ways. Still, for all but a few of the wealthiest Black Americans, most are telling grim stories that illuminate the daily drum of aggregate numbers about double-digit unemployment, declining purchasing power, depleted savings and home foreclosures. They also tell a story of a determination to work through it.
The Wallaces are selling their home because it has lost nearly 25 percent of its value in a county where nearly half the 15,400 homes on the market so far this year were in foreclosure or so-called short-sale status (sold for less than is due the lender). Countywide, home prices are down nearly a third from their peak earlier in the decade, real estate experts say.
Meanwhile, child care for 2-year-old Cole III, food and utility bills continue to rise in the Wallace household while their pay has been frozen. All have combined to rattle their monthly budget and force some serious cost cutting. The Wallaces are moving to a less-expensive town house, cutting extras wherever they can and facing some tough discussions about college options for their 17-year-old son, James, a high school senior.
“It’s not like I’m living high on the hog. I don’t have a flatscreen TV in my house,” Cole Wallace muses. “It doesn’t make sense for me to put more money into a house that is worth less than what I paid for it. We’re downsizing now. My wife understands we need to make the move to get our finances in shape and that’s what we’re going to do.” In Michigan, veteran automobile dealer Michael Johnson, owner of Michael’s Chevrolet in Chesterfield was among the 12 minority-owned GM dealers told to close as part of the company’s downsizing.
Johnson, who was 30 when he got his first dealership in 1990 and made his first million dollars at 33, closed his dealership last month â€” throwing more than 50 employees and himself out of work. The final terms of his shutdown could leave him broke,
Johnson says. “I’m a true rags-to-richesback- to-rags story.” In California, where property values have evaporated and private-sector jobs have been on a downhill pattern, the weak economy has even battered the usually safe haven of government employment. Those workers who have not lost their jobs outright are being squeezed.
“A complete set of life plans has been put on hold,” says Dr. Lloyd Ferguson, an electrical and computer engineering professor at California State Polytechnic University, Pomona. In just the past year of belt tightening by the state, Ferguson and thousands of college faculty have been forced to forgo pay raises and endure summer school cancellation (cutting his annual teaching income by a third). Now, they are working through furloughs that are the equivalent of about a 10 percent pay cut, Ferguson says. Meanwhile, the value of his Los Angeles home has plummeted and his 401K has lost nearly half its value.
“We’re all in the same boat,” says the 64-year-old, who had considered retirement before the economic bust, having accumulated a comfortable nest egg over the span of 38 years of teaching. Now, Ferguson is pondering how many more years he will “It’s happening to everybody,” he says.
Employment opportunities in government and the private sector expanded dramatically for Black Americans starting in the late 1960s, as a series of federal and state laws abolished racial segregation and discrimination. In the aftermath of the riots of the late 1960s, private employers with the American auto industry and labor unions on the front lines began stepping up their recruitment and hiring efforts.
Soon, a new Black middle class emerged to improve the chances for more Blacks to accumulate wealth and long-term financial security. A healthy real estate market in the 1990s and much of this decade turned increasing home equity into personal “piggy banks,” economist Gregory Price says, with home equity loans used to buy cars, take trips and pay for college educations.
Eventually, home ownership was promoted nationwide and became a reality for nearly every aspiring homeowner earlier in this decade, regardless of income, as the government and mortgage industries relaxed lending standards for home buyers.
Then came the economic bust, one that locked the nation’s economy in a tailspin for nearly two years.
“There’s no silver bullet for digging out,” says Price, chairman of the economics department at Morehouse College. Price says it could take “another 20 years to gain traction again. I wouldn’t be surprised if we lose a lot of ground.” He added that as bad as economic indicators appear today it could be several more months before the full impact of the slump can be measured. For sure, he says, “Those high-flying salary days are gone.” Johnson knows of what Price speaks.
“We were fragile. We were still trying to grow and acquire. We hadn’t gotten to the point of stockpiling,” he says, drawing a comparison with many of Black America’s White counterparts. “Today, I’ve got to do this myself. I’m an army of one.”