Blacks in Pontiac and Throughout America Have Few Businesses

"And even when we try to spend money in the neighborhood where we live, usually, because we haven't learned the importance of owning and operating businesses, the businesses of our community are usually controlled by outsiders, the stores are controlled by people who don't even live in our community. So even when we try and spend our money in the neighborhood where we live, we're spending it with someone who puts it in a basket and takes it out as soon as the sun goes down." - Malcolm X

"Until we Blacks develop a passion for economic strategy and entrepreneurship, we’re going to be the only group left in America waiting for a bailout. Every immigrant group that has come here has majored in business development. We ought to zoom in on Dr. King’s message to strengthen Black businesses and that is let’s not forsake the building of our own." - Rev. DeForest Soaries

There’s no comfortable way to say this, so I won’t soften it: point blank we are an over-consuming and under-business developing people and it’s costing us economic power.

As a Black person living in Pontiac when you walk or drive through majority Black neighborhoods and you view the existing businesses it is clear and obvious that the majority are owned by non-Blacks (Arabs, Asians, etc.).

This non-Black business domination of Black communities is not just a phenomenon in Pontiac it’s the case throughout America, yes there's a scarcity of Black business development nationwide. A 2023 Pew Research study cites that Blacks only own about 3% of U.S. businesses; Blacks are 14% of the country's population.

Most Black businesses are sole proprietorships; about seven in ten (71%) of Black owned firms had between one and 9 employees. Black businesses accounted for just 1% of gross revenue from all classifiable companies.

According to recent studies in 2025 Blacks in America have a buying power of over 2 trillion dollars, this tremendous spending is spent overwhelmingly with non-Black businesses. Indeed, Black dollars don't benefit Black people! In a speech titled “The Birth of a New Age”, Dr. King stated:

“We cannot use the excuse anymore that we don’t have the money. The national income of the Negro now is more than 16 billion dollars, more than the national income of Canada. We have the money, we can do it. We have it for everything else that we want. We have the biggest and the finest cars in the world and we can spend it for all those frivolities, now let us use our money for something lasting, not merely for extravagances. I am not the preacher that would condemn social life and recreational activities those are important aspects of life but I would urge you not to put any of these things before this pressing and urgent problem of Civil Rights. We must spend our money not merely for the adolescent and transitory things, but this eternal, lasting something that we call freedom.”

Blacks have developed a consumer slave mentality that non-Blacks need our money more than we do. The 3% Black businesses number is not just a statistic. In practical terms, it means we are largely financing other people’s economic development while not funding our own; it’s a reflection of structural imbalance, it means:

• Fewer Black employers hiring within the community
• Less wealth being generated and passed down
• Minimal control over local economic conditions
• Reduced ability to fund schools, infrastructure, and social programs independently

Why Do Blacks Have Few Businesses?

In the post-civil Rights era (1965 to the present), Black America had won so-called legal access but lost economic direction. We gained entry into spaces that were once closed, but in many cases we entered as consumers rather than builders; employees rather than owners; borrowers rather than lenders.

To reiterate again, Black-owned businesses make up roughly 3% of all businesses in the United States a number that should disturb anyone serious about freedom, dignity, and long-term survival.

This paltry number is not accidental and it’s not simply a matter of individual failure. It is the predictable outcome of racist structural exclusion, cultural misdirection, and economic dependency that has been normalized over generations.

From Survival Economics to Consumption Culture

Historically, Black communities-built businesses out of necessity and self-determination. During segregation, we created parallel economies barbershops, insurance companies, farms, banks, schools because we had no other choice. Places like Black Wall Street were not just symbolic they were functional ecosystems of Black economic self-reliance.

But after the Civil Rights Movement, pursuing integration came with unintended economic consequences. As legal barriers fell, Black dollars began flowing outward into white suburban cities at unprecedented rates, as Malcolm X remarked:

"Any time you take your dollar out of your community and spend it in a community where you don't live, the community where you live gets poorer and poorer and the community where you spend your money gets richer and richer."

We were finally allowed to spend anywhere, and we did often without a corresponding strategy to own anything in our own communities and foreign merchants filled the void. The result? We transitioned from producers under pressure to consumers under the false self-worth belief that the more I buy, the more I am.

The Illusion of Progress Without Economic Ownership

Let’s be honest about what progress has looked like for many of us: more access to white name brands, more visibility in entertainment and sports, more representation in corporate spaces. But representation is not the same as ownership; visibility is not the same as Black economic control.

What should be clear is that a community cannot spend its way to power if it does not own the institutions where that money circulates. Black Americans command over two trillion dollars in annual purchasing power, yet that money rarely recycles within Black communities.

Black dollars exit the community almost immediately through non-Black businesses coupled with it flowing out into corporations that neither depend on nor reinvest in Black development at scale. This is not just an economic issue it’s a structural vulnerability.

Political Representation Without Economic Power

Here’s a hard contradiction we rarely confront directly; we have more Black elected officials today than at any point in American history: more mayors, city council members, state legislators, congress persons, even a former president in Barack Obama.

And yet, we have fewer Black-owned businesses proportionally than we did in earlier periods when political representation was far more limited. That should force a serious pause reflection.

There was a time when Black communities had less access to formal political power but maintained stronger internal economic systems. Today, we often celebrate political milestones while ignoring economic decline. That imbalance matters.

Because political power without economic backing is fragile. Elected officials can advocate, propose, and symbolize progress but without a strong economic base behind them, their ability to materially transform Black communities is constrained.

Policies can be passed, but if we don’t own businesses, banks, supply chains, and land, we remain dependent on external actors to implement and sustain those policies.

In plain terms Black elected officials are political symbols without substance; visibility without leverage; representation without Black financial empowerment; they receive votes but Blacks have gained little economic development.

Lets take a look here in Pontiac at Black elected officials and business development in Black neighborhoods. Pontiac has had a strong mayor for 46 years since 1980. Over this four decades period there's been 6 Black mayors and majority Black City councils, but Black neighborhood business development was not a priority, the neglect is obvious now!

This is not an argument against Black political leadership it’s an argument against depending on and overestimating what political leadership can achieve in the absence of economic power. A community that does not control its economic engines cannot fully direct its political destiny.

The Exploitation Parallel: From Black America to Black Africa
We need to confront a deeper, global pattern one that connects the Black economic condition here in America to a broader Pan African historical reality.

Black Americans generate over a trillion dollars in purchasing power annually. But because we lack sufficient business ownership, production capacity, and distribution control, that wealth is systematically extracted by non-Black businesses.

In many ways our lack of business situation mirrors what has happened and continues to happen in numerous Africa nations. Across the continent, countries rich in gold, oil, cobalt, diamonds, and other natural resources remain economically underdeveloped not because they lack value, but because they lack control over the systems that extract, process, and profit from that value.

External imperialist entities like the U.S. and European nations come in extract African resources, export profits, and leave behind limited infrastructure and widespread poverty. The lands of Africa are rich; the people are rich in potential, but the system of neo-colonialism is structured for extraction, not development.

Now look at Blacks in America, our “resource” is not minerals it's spending power; it’s cultural influence; it’s labor; it’s creativity. Yet, just like those mineral rich nations in Africa we do not control the pipelines through which our value is monetized.

So what happens? Our dollars are extracted ‘domestic business colonialism’; our neighborhoods are economically underdeveloped; our needs remain underfunded; this is not a coincidence it is a pattern.

Think about this Black folks, our spending enriches Arabs, Asians, and East Indians by the billions; their profiteering of funds from us is used for their business expansion; our money buys their very nice suburban homes and new cars; it pays for their children’s private schools (K-12) and college tuitions; it enables them to send massive amounts of money back to their native countries to take care of their people, as Dr. Amos Wilson stated:

"How many jobs do we create just buying from Koreans, buying from other ethnic groups out here? How many people are we creating employment for in terms of our spending and consumption habits as a people? We are creating all kinds of businesses, jobs, and wealth for others and we must come to understand this! We are creating businesses and jobs for others while we don't develop businesses for ourselves and go around begging for jobs."

In contrast, Black communities are drained of needed dollars; our communities are in decline; schools and recreation centers closed; high unemployment; too often survival economics (drug selling, crime) is prevalent. Just like in exploited African nations, the absence of Black business ownership turns collective wealth generation into wealth extraction.

Black Barriers To Business Are Real

We cannot discuss Black business honestly without acknowledging racist systemic barriers such as:

• Limited access to startup capital
• Discriminatory lending practices
• Lower rates of inherited wealth
• Unequal access to business networks and mentorship

These are real external racist constraints, but here’s where I push us: internally we cannot allow these constraints to stop us from pursuing Black business development and economic self-reliance.

Other non-white immigrant groups for example arrive with fewer resources and still manage to build dense business ecosystems within a generation. They circulate dollars internally, prioritize ownership, and create economic insulation. We have to ask: what are they doing that we are not consistently doing?

Cultural Misalignment: The Status Trap

Part of our economic underdevelopment is internal lies in culture of paying for what we want and begging for what we need. Too often, we have been socially conditioned to be immediate gratification consumer slave ‘shopaholics’ chasing white symbols of success rather than systems of power.

Indeed, for decades we’ve seen hundreds of thousands of Black men lose their lives and freedom chasing symbolic wealth; too many lives lost to the illusion that consumption equals status.

High-end clothes, luxury cars, jewelry are not inherently wrong though they should not be a priority especially when they become substitutes for economic empowerment, they become richness deception and debt traps. Meanwhile, business ownership requiring disciplined financial management remains underdeveloped.

The Dependency Problem

When the Black community does not own its businesses, it becomes completely dependent on others for:

• Employment
• Goods and services
• Financial systems
• Food distribution
• Housing development
• Grant funding

Dependency is not just economic, it’s psychological; it shapes how we see ourselves and what we believe is possible. And dependency creates a dangerous condition: if others control your access to resources, they indirectly control your stability.

Toward Economic Self-Reliance

As Black folks, if we are serious about economic change, then we need a shift not just in policy, but in mindset and behavior.

1. Re-center Ownership
We have to make business ownership a cultural priority again not just for the elite, but as a normalized path of Cooperative Economics (Ujamaa).
2. Circulate the Dollar Intentionally
Supporting Black businesses cannot be occasional or symbolic. It must become strategic and habitual.
3. Build Ecosystems, Not Isolated Hustles
One business is not enough, we need networks—suppliers, distributors, service providers working together.
4. Social Entrepreneurship
Supporting local Black businesses so they can be profitable and reinvest some of their profits into community services, infrastructure, and other local businesses.
5. Cultural Preservation
Supporting Black businesses that reflect and preserve Black culture, history, and identity.
6. Cooperative Food Buying Club
Black blocks can come together buy food at wholesale costs the price savings from retail prices can be invested or be used as start-up capital for a community business.
7. Community Flea Markets
Flea markets can be set-up in places like Church basements where neighborhood residents can sell goods competing against non-Black businesses; vendor fees would be cheaper and the flea market would also act as a business incubator.
8. Teach Economic Literacy Early
Our children must first and foremost learn the necessity of economic power and community business control; they should learn entrepreneurship as basic life-skills not a specialized knowledge. They should understand credit, ownership, investing, delayed gratification, and the pitfalls of consumerism.
9. Redefine Success
Success must shift from what we wear and drive to what we own and build.

Closing Reflection

As Black folks we must accept that no government programs, no corporations, no political party, no Black elected officials, no rich Black celebrities and professional athletes are going to build economic independence for us at the scale we need. Financial assistance can help but it cannot replace economic self-determination.

If we as a people stay on the continued current path of economic suicide, high consumption, low ownership we will remain economically exploited visible but financially weak much like resource-rich African countries that don’t control their own wealth.

Developing and increasing Black-owned businesses is not just an economic imperative, it’s a struggle against racial economic injustice. If we reclaim the discipline of building, owning, and circulating wealth within our communities, that 3% business ownership can grow and with it our economic power.

The question is not just: “Why do Blacks have few businesses?”
The deeper question is: What are we willing to change to build more?

The financial Suicide Mentality of Blacks Keeps Them Economically Trapped

"Blacks are 14% of the U.S. population and only have 3% of the country's businesses; Blacks have over 2 trillion dollars in purchasing power and 97 cents of every dollar Blacks spend are spent with non-Blacks. Psychologically Blacks suffer from a financial suicide mentality, being consumer slaves, business under development, and thus super exploited economically." - KenRaySun

Why Black Families Have Struggled Decades to Get Wealth

by Darrick Hamilton

Black History Month has become the time to reflect on all the progress black Americans have made, but the sobering reality is that when it comes to wealth the paramount indicator of economic security there has been virtually no progress in the last 50 years.

Struggling Against Economic Injustice and for Economic Power

Based on data from the Federal Reserve’s Survey of Consumer Finance, the typical black family has only 10 cents for every dollar held by the typical white family.

While there is no magic bullet for racism, access to wealth, and the security to pass it down from one generation to the next, would go a long way toward changing the economic trajectory for blacks.

As researchers who study historical and contemporary racial inequality, we mostly conceive of wealth as a maker of success, but its true value is functional: the independence and economic security that it provides.

Out of slavery

Until the end of legal slavery in the U.S., enslaved people were considered valuable assets and a form of wealth. In the South, entrepreneurs and slave owners took loans out against the collateral value of their property in the form of people to fund new businesses.

The U.S. government has a long history of facilitating wealth for white Americans. From at least the Land Act of 1785, Congress sought to transfer wealth to citizens on terms that were quite favorable. In some instances, land could be attained by the luck of the draw but only if you were a white man.

While the 1866 Homestead Act sought to include blacks specifically in the transfer of public lands to private farmers, discrimination and poor implementation doomed the policy. Black politicians during Reconstruction attempted to use tax policy to force land on the market, but this was met with violent resistance.

While blacks did make gains in wealth acquisition after chattel slavery ended, the pace was slow and started from a base of essentially nothing. Whites could use violence to force blacks from their property via the terrorism of white-capping, where blacks were literally run out of town and their possessions stolen. 

This includes the race riots, as in Memphis in 1866 and Tulsa in 1921, which systematically destroyed or stole the wealth blacks had acquired, and lowered the rate of black innovation. Black wealth was tenuous without the rule of law to prevent unlawful seizures.

By 1915, black property owners in the South had less than one-tenth of the wealth of white landowners.

This trend remained stable for the next 50 years. In 1965, 100 years after Emancipation, blacks were more than 10% of the population, but held less than 2% of the wealth in the U.S., and less than 0.1% of the wealth in stocks. Wealth had remained fundamentally unchanged and structurally out of reach of the vast majority of blacks.

Housing assistance and education

These racially exclusionary systems endured well into the 20th century. A complicit Federal Housing Administration permitted the use of restrictive covenants, which forbade home sales to blacks; redlining, which defined black communities as hazardous areas, directly reducing property values and increasing rates; and general housing and lending discrimination against African-Americans through the 20th and 21st centuries.

Moreover, blacks were largely excluded from the New Deal and World War II public policies, which were responsible for the asset creation of an American middle class.

The GI Bill is one example of several postwar policies in which the federal government invested heavily in the greatest growth of a white asset-based American middle class, to the exclusion of blacks. 

Historian Ira Katznelson documents that, by 1950, via the GI Bill, the American government spent more on education than the Marshall Plan that rebuilt Europe. But most American colleges and universities were closed to blacks, or open to only but a few in token numbers.

Meanwhile, GI benefits in education, employment, entrepreneurship and housing assistance were all distributed overwhelmingly toward whites. In the Jim Crow segregated South, there was a truncated housing supply. These factors limited the ability of historically black colleges and universities to accommodate the education and housing needs of black veterans.

It is important to note that it was never the case that a white asset-based middle class simply emerged. Rather, it was government policy, and to some extent literal government giveaways, that provided whites the finance, education, land and infrastructure to accumulate and pass down wealth. 

In contrast, blacks were largely excluded from these wealth generating benefits. When they were able to accumulate land and enterprise, it was often stolen, destroyed or seized by government complicit theft, fraud and terror.

Building new wealth

Nonetheless, blacks have still been able to overcome tremendous odds, particularly in acquiring education. Social science research indicates that blacks attain more years of schooling and education credentials than whites from families with comparable resources. In other words, blacks place a premium on education as a means of mobility.

Despite this investment, the racial wealth gap expands at higher levels of education. Black families where the head graduated from college have less wealth than white families where the head dropped out of high school.

Rather than education leading to wealth, it is wealth that facilitates the acquisition of an expensive education. The essential value of wealth is its functional role; the financial security to take risks and the financial agency that wealth affords is transformative.

In our view, education alone cannot address the centuries-long exclusion of blacks from the benefits of wealth-generating policies and the extraction of whatever wealth they may have. 

The most just approach would be a comprehensive reparation program that acknowledges these grievances and offers compensatory restitution, including ownership of land and other means of production.

For generations, many black activists have looked at America’s financial system and said, thanks, but no thanks. As an alternative, they’ve promoted self-sufficiency the creation of black wealth through black-owned banking and entrepreneurship, and patronage of black businesses. 

This idea resurfaces again and again, as it did recently in the #BankBlack movement and in Jay-Z’s “The Story of O.J.”: Black Americans ought to use their economic power to shore up their own community, instead of participating in a broader and more discriminatory system.

A New Emphasis On Building Black Economic Power

In the Post-Civil Rights era a period of '55 years' Blacks believed that electing Barak Obama as president and other Black politicians along with a good education and a decent paying job would level the racial economic playing field but it did not occur. 

Indeed the average white family today has 13 times the wealth as an average Black family. As Black folks there must be a new emphasis on economic empowerment.

The emphasis on building Black economic power has been put forth by Us Lifting Us Economic Development Cooperative whose developed a comprehensive 10-point plan. Us Lifting Us believes that the security and welfare of Black people depends on controlling our economics and practicing group economics. 

The 10-points reflect the desire to be free from chattel slavery, and an impulse that led Black people to form mutual aid societies and engage in group ownership once we were emancipated from slavery.

The Unfulfilled Promise of Black Capitalism

by Gillian B. White

In her new book, The Color of Money: Black Banks and the Racial Wealth Gap, Mehrsa Baradaran, a professor of law at the University of Georgia specializing in banking law, provides a deep accounting of how America got to a point where a median white family has 13 times more wealth than the median black family. 

Baradaran’s book covers the period of time spanning from Reconstruction with the promise and subsequent revocation of land, jobs, and economic independence for freed slaves to the present. 

Over this expanse of history, Baradaran finds that much of the economic turmoil black Americans have faced has been the direct result of negligence, discrimination, or broken bonds on the part of both government and private entities run mostly by white Americans.

With that history in mind, she interrogates the question of whether or not black Americans can fix the problem on their own, for instance by turning to black-owned banks to spur lending and wealth creation. 

Baradaran determines that, while theoretically promising, the movement in support of black economic self-sufficiency will falter without the type of powerful assistance that helped create white wealth, including government policies promoting jobs, home ownership, education, and access to loans. 

“The theory behind developing a separate black economy had been that economic power would lead to political power, but perhaps they had it backward,” Baradaran writes.

Worse yet, she argues, is that the spirit and main tenets of black self-sufficiency, as imagined by black activists to include reparations, control over financial infrastructure, and a mandate to support and grow black businesses, were corrupted and repurposed by the Nixon administration and anti-integrationists during the late 1960s.

Nixon and other Republicans, Baradaran writes, seized upon the idea of a separate black economy. They came up with a program“black capitalism,” they called it that they argued would promote black businesses and the creation of a thriving black economy, via policies such as affirmative-action requirements for private government contractors, bank-deposit transfers to black-owned institutions, and financial support for minority-owned businesses. 

President Nixon used Black capitalism as deceptive economic development

But, in reality, Baradaran writes, these efforts were more a way to mollify black activists and assure white voters that racial tension and upheaval would soon end than they were an actual effort to erase racial economic inequality. 

For example, in 1969, Nixon created the Office of Minority Business Enterprise (OMBE) in the Commerce Department, but didn’t allocate any funding to it. 

Instead, the office was to solicit funding from private sources and other government agencies in order to do the work of bolstering black businesses. The board that oversaw the OMBE was largely white, and, according to Baradaran’s account, indifferent to the outcome.

The head of the black-capitalism program, Maurice Stans, derided an early proposal by one of the highest-ranking black members at OMBE, Abe Venable, to invest $8.6 billion in the creation of 400,000 minority businesses, and then promptly shut it down. 

In 1979, the OMBE was rebranded as the Minority Business Development Agency by the Carter administration, and still exists with the mission of advancing minority-owned business operations.

Many similar efforts amounted to very little considering the scale of the challenge. By 1971, a Small Business Administration program had doled out $66 million to minority firms, but that accounted for one-tenth of 1 percent of the government contracts granted that year. 

And still, the programs that set aside contracts for minority businesses were deemed controversial by white business owners and conservatives, making it difficult to allocate any more funding to bridge the gap. 

Similarly, the OMBE founded the Minority Bank Capital Program in 1969, with the goal of encouraging federal agencies to deposit $100 million of their total account holdings into minority banks. By 1971, only $35 million had been transferred.

With little investment or enforcement, these so-called pro-black-capitalism programs and others were set up to fail. “All the black capitalism programs, including affirmative action, relied primarily on the voluntary participation of private firms and government agencies,” Baradaran writes. 

During his campaign, Nixon promoted the idea that blacks, especially poor blacks, need “a hand up,” not “a handout.” His policies put little money or political weight behind actually alleviating poverty and boosting the black economy. 

With weak incentives and little pressure to diversify business practices and customer bases, few companies, lenders, and agencies made anything more than the most meager of efforts to help black businesses thrive or to put black Americans in a more secure economic position.

Black capitalism came at a particularly dangerous time, in the aftermath of so many civil-rights victories. The promises made by the government regarding the advancement of black economic security through black capitalism created just enough of a diversion to what was ultimately halted progress toward real economic equality. 

“Particularly relevant are failed integration efforts and demands by black leaders for reparation both of which were being actively pursued in 1968. By 1970, the administration had scuttled each of these plans without fanfare,” she writes.

The effects of these policies are still felt by black families today. “Black capitalism delegated the responsibility to solve the racial wealth gap to the black community without the help of the white political establishment who had always held power and the purse strings, and who continued to do so,” Baradaran says. 

“If the roll-out of the black capitalism program had demonstrated anything, it was that economic power could not be achieved without government help.”

Median Wealth of Black Americans Will Fall to Zero by 2053

by Jamiles Lartey 

Growing up in the projects of Baltimore in the 1980s, things like savings accounts, stocks and bonds were completely foreign to Mysia Hamilton. Asked if her parents could have passed along some money to help her buy a car, go to school or put into a house, she can’t help but chuckle.

“No, that wasn’t there. There was no wealth. My mother was working, she was providing – we weren’t on the street begging – but there was no money in terms of ‘here you go’. No money to pass down.”

Three years from now, white US households are projected to own 86 times more wealth than black households. Now 48, Hamilton is on the path to a different reality. 

Working as a medical office manager and earning her college degree, the mother of five manages to squelch away $50 a month by furiously clipping coupons and being “extremely frugal”. “$50 is definitely not my goal, but it’s all I can do with the money that’s going out,” Hamilton said. And it’s working: a decade after she began working with a financial coach, she is on track to have a positive net worth by March 2018. “I’m so driven to do that. It’s important to me.”

But Hamilton is in the minority, in execution if not intention. A new report calculates that median wealth for black Americans will fall to $0 by 2053, if current trends continue. Latino-Americans, who are also experiencing a sustained downward wealth slide, will hit $0 about two decades later, according to the study by Prosperity Now and the Institute for Policy Studies.

“By 2020, median black and Latino households stand to lose nearly 18% and 12% of the wealth they held in 2013 respectively, while median white household wealth increases by 3%,” the report states. “At that point just three years from now white households are projected to own 86 times more wealth than black households, and 68 times more wealth than Latino households.”

With the US set to become “majority minority” by 2044, researchers say this spells major economic peril for the nation. “If the racial wealth divide continues to accelerate, the economic conditions of black and Latino households will have an increasingly adverse impact on the economy writ large, because the majority of US households will no longer have enough wealth to stake their claim in the middle class.”

The authors cite the legacy of discriminatory housing policies, an “upside down” tax system that helps the wealthiest households get wealthier, and the economic effects of mass incarceration as among the root causes for the discrepancy.

“The middle class didn’t just happen by market forces, and the whiteness of the middle class didn’t just happen by market forces. Both were intentional,” said Dedrick Asante-Muhammad, a senior fellow at Prosperity Now and one of the report’s authors.

Moreover Asante-Muhammad says African-American households are making ​​‘middle-income money’ but have the wealth of a white high-school dropout. Take homeownership, which has long been the primary means by which Americans of modest and middle-class income are able to build generational wealth. 

After the broken promise of “40 acres and a mule” to newly freed slaves, virtually nothing was done to endow black Americans with a share of the wealth generated by centuries of slave labor – the same labor that, directly or indirectly, helped to build most of the wealth enjoyed by white Americans.

So black Americans started off generations behind, only to encounter the redlining and racially restrictive housing covenants of the early-to-middle 20th century, which prevented the sale of many homes to black Americans, and isolated them together in communities that lost value as white residents fled to the suburbs.

“The majority of white Americans weren’t middle class until the 1930s or 40s,” Asante-Muhammad told the Guardian. “Then there was mass investment to create an American middle class but it was a white American middle class.”

Programs such as the GI bill, which offered returning WWII veterans generous lending terms to buy houses, helped turn the US into a home-owning middle class society – from which black Americans were functionally excluded. In his 2005 book When Affirmative Action was White, Ira Katznelson notes that of the first 67,000 mortgages insured by the GI Bill, fewer than 100 were taken out by non-white people. 

Recent economic crises have widened this wealth gap, according to the report, as communities of color took the brunt of the economic hit. Black median wealth has never recovered from the 2001 recession, nor Latino median wealth from the 2008 financial collapse. White median wealth, on the other hand, was left unaffected in 2002, and began rebounding just two years after the speculative housing bubble began to implode.

“Unfortunately home values don’t come back in the same way in black communities when things happen,” said Althea Saunders-Ranniar, a financial coach and advisor in Baltimore, Maryland, where about 95% of her clients are black.

One of the things Asante-Muhammad and his co-authors found extremely important was focusing on inequality of wealth as opposed to income, because they felt it was a more accurate test of middle-class status. 

“You find first-generation, even second-generation African-American and Latino households that have professional jobs and are making ‘middle-income money’ but they have the wealth of a white high-school dropout,” Asante-Muhammad said. “They’re not truly part of a middle class which would mean financial stability, money to weather challenging economic situations, or money to invest in the economic opportunities of their children.”

The solution, he said, is to “invest in a 21st-century American middle class. We need to make sure, for the first time, that we are investing in a middle class that includes communities of color. 

This generally hasn’t been done before.” Despite all the institutional and historical barriers, Hamilton remains determined to make the lift – even if those investments never come. “I’m mad because I didn’t start 20 years ago, but it’s OK. I dare not be selfish and not pass this knowledge down to my kids – ones who I know have a chance.”

She hopes to pass more than simply knowledge down, and is on track to come up with a down payment for a modest home by late 2018. “In 20-30 years, even if they still have to pay the mortgage, I can tell them: ‘It’s yours. This is yours.’”

The Retirement Crisis Facing African Americans

What's causing it and what could be done to address it

by Rodney Brooks

There’s a saying: When white America catches a cold, black America catches pneumonia. So, if there is an impending retirement crisis in America, what does that mean for African Americans? The answer to that question is discouraging.

There is a huge gap in retirement preparation of African Americans compared to white Americans, generally speaking. According to the Urban Institute’s Nine charts about wealth inequality in America:

*The average white family had more than $130,000 in liquid retirement savings (cash in accounts such as 401(k)s, 403(b)s and IRAs) vs. $19,000 for the average African American in 2013, the most recent data available.

*The wealth gap is growing. The average wealth of white families in 2013 was more than $500,000 higher than that of African American families ($95,000). *In 1963, the average wealth of white families was $117,000 higher than for black families.

*White families accumulate more wealth over their lives than African American families, on average, which widens the wealth gap as they age. In their 30s, whites have an average of $140,000 more in wealth than African Americans (three times as much). By their 60s, whites have over $1 million more in wealth than African Americans (11 times as much).

*According to the Federal Reserve, in 2013, the median white household had $13 in net wealth for every $1 in net wealth of the median black household.

“The American dream has not happened for African Americans and Hispanics,” says Signe-Mary McKernan, economist and co-director, opportunity and ownership initiative at the Urban Institute. “Retirement wealth is at the end of the cycle. A lot of things can happen along the way before you get there.”

The pay gap and the wealth gap are among the many reasons African Americans enter retirement in poor financial shape, says Maya Rockeymoore, President of Center for Global Policy Solutions in Washington, D.C. Other explanations include financial literacy and investing habits.

The Pay Gap

“There is a pay gap when it comes to what African Americans earn when it compares to whites, even when you control for education,” says Rockeymoore. “We are starting with less.”

The hourly pay gap has widened to the worst in 40 years, according to the Economic Policy Institute (EPI) - a roughly 27 percent difference in 2015. Whites earned an average of $25.22 an hour vs. $18.49 for blacks, the EPI says. Declining unionization, the failure to raise the minimum wage and lax enforcement of anti-discrimination laws have contributed to the growing black-white wage gap, according to the EPI.

“We need to be having forums addressing labor-market decisions,” Rockeymoore says. Blacks are earning less than whites and it is not a reflection of talents or skills, she notes. “It is a reflection of discrimination in the labor market. We talk about the gender-pay gap, but we need to talk about the racial-pay gap.”

The Wealth Gap

According to the Federal Reserve’s Survey of Consumer Finances, in 2013, the median white household had $13 in net wealth for every $1 in net wealth of the median black household. Also, according to a Pew Charitable Trusts report, What resources do families have for financial emergencies, the typical white household has slightly more than one month’s worth of income in liquid savings, compared with just five days for the typical African-American household.

The Federal Reserve report said that whites are five times more likely to receive large gifts and inheritances than blacks and the amounts tend to be much larger for whites. “That is one of the main issues,” says financial planner Nick Abrams of AJW Financial Partners in Columbia, Md. “We [African Americans] are starting at ground zero every generation. That is hurting us financially.”

Rockeymoore agrees. “The wealth gap is serious,” she says, pointing to disparities between blacks and whites regarding employer-sponsored retirement plans.

“A significant number of us [blacks] are in jobs where we do not have access to pre-tax preferred retirement vehicles like 401(k) or 403(b) accounts,” says Rockeymoore. Many blacks work in small businesses where such plans frequently are not offered.

“If we do work in jobs that offer tax-preferred vehicles, we tend to not contribute at rates that whites do. And we take out loans out at higher rate,” adds Rockeymoore. One solution, she notes, would be more access to such employer-sponsored plans.

Home ownership also plays a big part in the wealth gap. The typical white household aged 47 to 64 has housing wealth of $67,000; the typical household of color in this age group has zero home equity, according to the December 2016 report, Social Security and the Racial Gap in Retirement Wealth, from the National Academy of Social Insurance.

Debt can limit the ability to achieve other financial goals, especially retirement planning, too. “Among African American employees surveyed who are offered an employer-sponsored retirement account but contribute less than the employer match or do not contribute at all, 40 percent say that paying down debt is a higher priority for them than making retirement contributions, according to Prudential’s 2015-2016 African American Financial Experience.

Financial Literacy

There are also big differences in financial literacy between blacks and whites. Only one in 10 African Americans work with a financial professional compared with one in four white Americans, the Prudential report said.

“Many African Americans have had no history of someone who was a grandfather or someone who gave them some level of financial education in that household,” says James Brewer, president of Envision Wealth Planning in Chicago and president of the Association of African American Financial Advisors. “So, one of the challenges is around some level of financial education.”

Theodore Daniels, president of the Society for Financial Education and Professional Development agrees. “There has got to be more education. People have got to be willing to attend financial education workshops. Some people don’t know what they don’t know. Once they attend, they say ‘I can do this.’ If they are not educated, they are not comfortable making decisions, and they won’t do it,” Daniels notes.

African Americans Tend Not to Invest in Stocks

Some analysts also say that African Americans often shy away from investing in the stock market. “Whatever discretionary income we have, we tend not to invest in equities,” says Rockeymoore. “We don’t have a diversification.” This may be due to a lack of comfort with the stock market.

“African Americans are risk-averse,” says Deborah Owens, a former Fidelity Investments vice president who calls herself America’s Wealth Coach. “So, one of the major reasons they have less in retirement savings is they are ultra-conservative, particularly African Americans who work in the public sector and nonprofit organizations.”

Owens says black investors typically focus on guaranteed or fixed investments that are low-risk or no-risk. As a result, their retirement funds aren’t compounding at a high rate of return.

According to the Federal Reserve, the average balance of African Americans in 401(k)s is only $23,000. And Social Security and the Racial Gap in Retirement Wealth found the average balance for African Americans in pensions and IRAs was $10,300, vs. $105,600 for white Americans.

Owens believes many African American workers don’t take full advantage of all the choices in their employer-sponsored plans because they don’t understand them. “The tendency to be risk averse is directly correlated to their lack of knowledge,” she says.

What Employers and Policymakers Could Do to Help

Brewer believes employers could play a bigger educational role. “It is important for companies or organizations who have higher percentages of African American employees to realize that there are some differences, and they need to bring in people who have some cultural sensitivities to those differences, and come up with a plan to help those groups,” says Brewer.

He says African Americans need financial advice on issues such as having higher student loan debt than white counterparts and, often, a greater need to financially assist less affluent family members. Rockeymoore says African Americans, even in retirement, tend to support other family members, including children and adult children. Also, they are disproportionately taking care of grandchildren, making them unable to save more for retirement.

All in all, says Rockeymoore: “There needs to be a national campaign to encourage young African Americans to save and invest. Home ownership is the pathway to wealth. They [blacks] need to be educated in the homebuying process and also to diversify their investments to include stocks and bonds.”

McKernan believes policymakers also need to take action to close the racial retirement security gap. “This country is built on the premise that it provides economic opportunity,” she says. “But this country continues a history of discrimination and the result of that is passed from generation to generation.”