Wall St. And Business Wednesdays: Prosperity Slipping Away From Blacks? by By Stephen Dyer, Erika D. Smith and David Knox

For weeks, Michael Cole drove by the stately home in suburban Richmond Heights and peered in the windows. After years of hard work, this was it, his dream.

``You've got to see this damn home!'' he told his girlfriend with childlike enthusiasm.

Suzanne laughed at her future husband's joy. It wasn't long before she, like Michael, fell in love with the place.

They knew one thing: They were going to get this house -- all 2,900 square feet, seven bedrooms and five bathrooms of it. You need that much space when you have seven children.

The couple was making a combined $80,000 a year, largely because of Michael's job at Lincoln Electric, and got the house in March 1999. The black couple, like more and more African-Americans in the 1990s, had achieved the American dream, their piece of the pie.

That began to change late last year. Suzanne got sick, took leave from University Hospitals of Cleveland, then got laid off. Because of a sluggish economy, Michael's salary was slashed by 40 percent.

Despite help from Consumer Credit Counseling Service of Northeast Ohio, their dream house, on whose deck Michael proposed to his future wife, is balancing precariously on a pile of debt.

The Coles aren't alone. They are members of a fast-growing group: blacks who scrambled up the economic ladder during the booming 1990s and now are finding it difficult to avoid sliding back down. New to the middle class, they often carry more debt and have fewer resources to weather economic downturns like the recession that began in 2001.

There's no question that blacks made big economic strides in the past decade in Ohio, as well as the nation.

Between 1989 and 1999, the median income for Ohio households headed by African-Americans grew 15.8 percent, compared with 9.9 percent for white households, according to the 2000 census. In Summit County, the income growth of black households outpaced whites 18.7 percent to 14.5 percent.

Nationally, the black unemployment rate fell to the lowest point -- 7 percent in April 2000 -- since the U.S. Bureau of Labor Statistics began tracking it three decades ago.

But behind those positive facts lie some disturbing realities: A widening gulf between poor and middle-class blacks, and a greater debt burden for blacks than whites.

For every dollar in assets that blacks have, they hold about $3 in debt -- compared to $1.20 in debt for whites, the Federal Reserve's 2001 Survey of Consumer Finances found.

It's partially explained by credit card companies and other lenders greatly expanding their customer base in the 1990s, issuing loans to people who would have never qualified before -- often poor minorities.

And it suggests how black people could have both more financial assets than ever and a sinking bottom line. Since 1995, the median net worth of blacks declined by a little more than 7 percent -- to about $17,500 -- while white net worth jumped by nearly 50 percent since 1992 to $120,000.

Five factors cited

Policy Matters Ohio, a Cleveland think tank, cites five ``D'' factors jeopardizing the economic well-being of blacks: deindustrialization, deunionization, deurbanization, disparities in education, and discrimination.

``Sometimes it's easy to look at these figures and think it's just discrimination. But it's really more complicated than that,'' said Amy Hanauer, Policy Matters' executive director.

Many blacks have found their fortunes tied to the manufacturing sector. While it's true that the black professional middle class has grown tremendously in the last decade, in Northeast Ohio, the manufacturing sector has the highest concentration of black workers.

``Manufacturing provides a very high wage for people who haven't gone to school,'' Hanauer said.

Michael Cole, 52, for example, has a high school degree.

In the last three years, the region has lost thousands of jobs from machine shops and steel makers such as Republic, Timken and LTV. Hoover and Newell Rubbermaid also have cut back, and Telxon and Danner Press left altogether.

``There has been tremendous job loss in Ohio and an incredible increase in long-term unemployment,'' Hanauer said.

That means many blacks, some of whom bought houses and took on more debt in the 1990s, have found themselves jobless with mounting bills. And having less wealth than whites to rely on when a crisis happens, some blacks have undoubtedly gone deeper into debt, Hanauer said.

Like Michael and Suzanne Cole.

They have to make do with about half of what they were making last year. And they still have to pay the same bills.

So far, the Coles have managed to keep their home, but other, poorer people, both black and white, have not.

Often, Hanauer said, those who lose their homes are blacks with blemished credit who had a hard time getting a mortgage from a prime lender.

``African-Americans do shy away from the prime lenders because they've been turned away so often,'' said Bob Houston, a counseling supervisor for Consumer Credit Counseling.

A study by the Association of Community Organizations for Reform Now found Akron blacks were twice as likely as whites to be denied a home loan last year, regardless of income. When blacks do find mortgage money, it's often at higher interest rates.

The higher costs may explain why a smaller share of blacks own their own homes. In the Akron-Canton area, black home ownership dropped from 46 percent to 45 percent between the 1990 and 2000 censuses, while white home ownership climbed from 73 percent to an all-time high of 75 percent.

Whatever the explanation, black homeowners definitely carry a heavier financial burden. The 2000 census found more than a quarter of Ohio's black households pay at least 35 percent of their monthly income for mortgage, taxes, utilities and insurance -- compared to only 15 percent for white homeowners.

Gap on many levels

Some researchers suggest differences in education can explain the economic divisions between blacks and whites. But George Zeller, a senior researcher at the Council for Economic Opportunities in Greater Cleveland, said the racial economic gap exists at many educational levels.

As an example, he points out that the poverty rate of black high school graduates is higher than the poverty rate of white high school dropouts.

These days, the financial situation for many blacks is even more precarious because of the recession and ``jobless recovery.''

In 1989, the median wage for a black employee in Northeast Ohio was $12.49 an hour. It actually dropped to $12 an hour by 2001. The average white worker made $14.98 an hour in 1989 and $15 an hour in 2001.

The split has probably gotten worse since then, Policy Matters' Hanauer said.

``While we don't yet have all the data on that recession, I'm sure it hasn't been good for the black community,'' she said.

The only exceptions to that assessment are black professionals. Members of this group typically have advanced degrees and work in white-collar jobs. They haven't suffered the same way poorer blacks have in the last decade.

``There's no question the black middle class has grown significantly,'' said Mike Fetzer, district director of the Equal Employment Opportunity Commission's Cleveland office.

Still, they're more likely to hit a glass ceiling when it comes to top-level jobs.

Reshaping N.E. Ohio

The shift in income levels for black families continues to reshape Northeast Ohio.

Blacks who landed better jobs and better salaries in the '90s have left older cities with large minority populations for traditionally white suburban communities.

An Akron Beacon Journal analysis of census data counted six communities -- Fairlawn, Twinsburg, Macedonia and Copley Township in Summit County, and Perry and Canton townships in Stark County -- where black households had a higher median income than their white neighbors.

But the movement of some blacks up the financial ladder has left even more behind. That has resulted in a wider gap between rich and poor among blacks than among whites, according to the ``Gini coefficient'' measure of income disparity used by the Census Bureau.

If every household had the same income, the Gini score would be zero, while a score of 100 would mean one household had all the income in a community.

In Ohio, the Gini score was 49 for black households and 43 for white ones.

In the Akron-Canton area, the income gap was wider for blacks than whites in all five counties and large cities.

The communities where black incomes are most evenly distributed are all suburban. In fact, the income gaps for blacks in Macedonia and Twinsburg are among the narrowest of any municipality in Ohio -- regardless of race.

That doesn't surprise Gregg Glover. The longtime Twinsburg Township trustee said he's seen ``tremendous growth'' as blacks migrate to the area.

He and his wife, Janice, beat the rush. They moved in 1981 to a historically black neighborhood of Twinsburg Township called the Heights.

Until recently, the Heights, and the township in general, was known for low-income housing. But with sustained economic growth in the 1990s, the demand for suburban housing skyrocketed and developers started putting up bigger homes. Now, the township has a thriving middle class -- both blacks and whites who are doing well in blue-collar jobs at the nearby industrial park.

Twinsburg city's tale is slightly different, Glover said.

Growth came faster for the larger municipality in the '90s, and black professionals snapped up house after huge house in the suburb.

Generally, blacks in the city make more money than blacks in the township, which illustrates a widening split between blue-collar blacks in the township and white-collar blacks in the city. Both groups moved to the suburbs for a better life, but, in many ways, that's where the similarities stop.

``You can look at them and tell by their clothes and the cars they're driving,'' Glover said. ``They don't speak. Some just seem to be content with living in their $450,000 houses and not get involved with their community.... I don't understand.''

Moving forward

The Coles are trying to move forward and are starting to save. They opened an IRA.

``There ain't much in it, but it's there,'' Suzanne Cole said with a smile.

This month she will make her final credit card payment on her consolidated bill arranged through Consumer Credit. For the first time in a long time, the Coles will be rid of a large chunk of their $18,000 credit card debt.

The 45-year-old woman looks distinguished sitting on her plush living room furniture. She looks at home. Despite all the hardship she and her husband have gone through, she is optimistic that they will beat the trends and the statistics together.

``Get help,'' is Suzanne Cole's great plea to others feeling the debt crunch. ``The first time you start robbing Peter to pay Paul or don't want to answer the phone, get help.''


The Authors of this article can be reached via e-mail at: sdyer@thebeaconjournal.com

Note: This article first appeared at The Akron Beacon Journal

Wednesday, December 10, 2003