Stop Taking Black Wealth

Federal immigration policies have stolen Black wealth for the majority of the 165 years after slavery.

Adapted from Chapter 24 of Back of the Hiring Line, by Roy Beck

The inability of the typical Black household to build wealth over the 165 years after the end of
slavery has denied many African Americans participation in the fullness of American society.
The Brookings report stated that the measurement of household wealth is a crucial benchmark
for many reasons beyond simply family income:

“Wealth is a safety net that keeps a life from being derailed by temporary setbacks and
the loss of income. This safety net allows people to take career risks knowing that they
have a buffer when success is not immediately achieved. Family wealth allows people
(especially young adults who have recently entered the labor force) to access housing in
safe neighborhoods with good schools, thereby enhancing the prospects of their own
children. Wealth affords people opportunities to be entrepreneurs and inventors. . . . Gaps
in wealth between Black and White households reveal the effects of accumulated
inequality and discrimination, as well as differences in power and opportunity that can be
traced back to this nation’s inception.”¹

The Brookings scholars cited a U.S. history replete with shameful examples in which they stated
wealth was taken from Black communities before it had the opportunity to grow:

“Efforts by Black Americans to build wealth can be traced back throughout American
history. But these efforts have been impeded in a host of ways, beginning with 246 years
of chattel slavery and followed by Congressional mismanagement of the Freedman’s
Savings Bank (which left 61,144 depositors with losses of nearly $3 million in 1874), the
violent massacre decimating Tulsa’s Greenwood District in 1921 (a population of 10,000
that thrived as the epicenter of African American business and culture, commonly
referred to as ‘Black Wall Street’), and discriminatory policies throughout the 20th
century including the Jim Crow Era’s ‘Black Codes’ strictly limiting opportunity in many
southern states, the GI bill, the New Deal’s Fair Labor Standards Act’s exemption of
domestic agricultural and service occupations, and redlining.”

While government, banking, and societal practices have taken wealth from Black communities
before the wealth could grow, federal high-immigration/loose-labor policies have taken wealth
from Black communities before it is even earned.

Loose-labor immigration policies deny income to Black households by facilitating the reduction
of African Americans in jobs and the depression of wage increases for those who have jobs. This
kind of taking of Black potential wealth has been occurring for the majority of the 165 years
since the end of slavery, and it is in full force today.

Without sufficient access to jobs and continuous incomes — year by year, decade by decade —
there can be no foundation for the generational accumulation of net assets.

The Virtuous Economic Circle

The peak economic gains of African Americans occurred first during World War One and then
from 1924 into the 1970s, both periods of moderated immigration. Black workers were buoyed
in part by worldwide trends. Lindert and Williamson identified the 1913 to 1973 period as one in
which economic inequality shrank in all industrialized nations in what they called “the greatest
leveling of all time:”

“The decline (in inequality) has no parallel in the history of the now-industrialized countries,
and certainly not the United States.”²

They dubbed the period “the Great Leveling.” That period of shrinking inequality was quite
different from the major narrowing of inequality in the South after the Civil War. That happened
largely because the southern upper class lost so much of its wealth because of the war. Part of the
wonder of the 20th century’s Great Leveling was that inequality shrank even as every segment of
the population was gaining income.

“While inequality plummeted, average incomes rose at a remarkable rate. . . . True, the
rich got richer, but the percentage gains of the middle and lower classes eclipsed those of
the rich.”

Average income-adjusted U.S. family income for the bottom 99 percent may have grown by
more than 200 percent. “Will the bottom 99 percent ever have such good fortune again?” the
economists asked.

At the beginning of the Great Leveling and the moderating of immigration, only one of every
four African Americans by one measure was considered in the middle class. By the end of the
period, three of every four were in the middle class.

The change in immigration was only one factor in the great improvements after 1924.
Politics had something to do with it, too. The New Deal programs under President Franklin D.
Roosevelt redistributed wealth from the affluent to the poor. But inequality shrank significantly
even before taxes and income transfers were added in, Lindert and Williamson said. They said
the explanation of that Great Leveling rests heavily with five fundamental market changes during
the era:³

• first, “the great slowdown in labor supply growth” because of reduced immigration and
  lower fertility,
• second, a rapid advance of education,
• third, the slowdown in technological bias against the unskilled,
• fourth, a much more anti-trade world economy that deflected labor-intensive imports
  from American shores and suppressed American skill-intensive and capital-intensive
  exports,
• and fifth, a retreating financial sector.

All five contributed to the shrinking inequality in every industrialized nation. But Lindert and
Williamson discovered that the rate of labor force growth was the factor that seemed to be the
key in which ones had the best records.⁴

The reason behind the good fortune for all of America, but especially African Americans, was
clear:

“America’s great population slowdown was reinforced when the US government
slammed the door on immigration in the wake of World War One. So great was the
change in immigration policy that the foreign-born share of the US labor force dropped
from over 21 percent in 1915 to just 5.4 percent in 1970.”

Economist Harry T. Oshima of the University of Hawaii explained in the Journal of Economic
History how the immigration restrictions during World War One and then from 1924 to the 1970s
created a virtuous circle of responses that could benefit so many parts of the American population, including the long-neglected population of African Americans. A tightened labor pool not only made employers pay more for scarce labor, it was a great stimulator of a country’s creativity. Employers were forced to raise wages. That induced the employers to press for major advances in mechanization. The resulting new technological applications of gasoline and electric machines made it possible to mechanize enough unskilled operations and hand work to release many workers into more skilled jobs. Growth in output per worker hour was phenomenal. That made it possible to raise wages still further. Because of the increasing demand for skilled workers, American parents realized they would need to spend more money to help each child gain a better education. This contributed to lower birth rates, and thus to slower labor-force growth, and thus to still-tighter labor markets, and thus to higher wages, which pushed manufacturers to move the skill levels of their workers up even further. In this cycle of productivity and wage gains — each feeding on the other — the United States became a truly middle-class nation during a long period of lower fertility and moderated immigration.⁵

African Americans benefited more than other Americans by this powerful economic virtuous
circle. There was no special government or industry-wide program that encouraged much greater
benefits to Black workers than to others. Rather, it seemed that in the virtuous circle created by
decades of tight labor, individuals and groups that may have previously been held back by
various forms of discrimination finally had room to demonstrate their capability and to begin to
catch up.

Whenever the country needed their labor, disadvantaged African Americans gained advantage.

The Great Reversal and More Inequality

In the 1970s, despite their impressive progress over the previous half-century, the descendants of
American slavery still were a long way from economic parity with other Americans. But there
no longer was an economic virtuous circle to move them further forward; it had been replaced by
something more like a vicious cycle.

Most of the five major forces behind the shrinking during the Great Leveling “reversed after the
1970s.”

Inequality stopped shrinking in most developed nations, although income gaps did not start widening again. But a few English-speaking nations began losing the inequality improvements they had gained during the Great Leveling. What distinguished the countries where inequality grew worse was the larger rate of growth in their labor force, the economists stated. No reversal of positive forces in the United States was greater than the loosening of labor markets primarily through the quadrupling of annual immigration.

Clearly, Congress picked a terribly inappropriate period of U.S. and global history to be
increasing the U.S. labor supply through immigration. It was like throwing gasoline on a fire that
already was burning bridges to a better economic life for those Americans most in need of a
bridge.

Lindert and Williamson compared rates of growth in the U.S. working-age populations with the
rates in other countries since the 1970s. The industrialized countries which suffered widening
inequality were the ones with renewed higher immigration.

“Working-age populations grew faster in Australia, Canada, New Zealand, and the United
States—all of them countries where the income gaps widened greatly compared with
western Europe or Japan, and all of them countries of heavy immigration. . . .⁶ [T]he US
foreign-born share of the labor force rose from 5.4 percent in 1970 to over 15 percent
around 2005. The arrival of extra immigrants has contributed to the rise of US earnings
and income inequality by lowering the average education and skill levels, just as it did
from the Civil War to World War One.”⁷

In 2016, the Economic Policy Institute reported that “Black-White wage gaps are larger today
than they were in 1979.”⁸

Nobel Laureate economist Paul Romer of New York University has explained that the problem
with a large increase in the number of workers is that it tends to result in a lower amount of
capital investment per worker. It is the capital investment per worker, along with technology, that
is the most important ingredient in increasing per capita output, according to Romer’s research.⁹

This challenges the political insistence that the federal government must continue to run a
high-immigration program in order to boost the U.S. economy. Rapidly adding workers usually
does increase the nation’s overall economic output, but not by enough to improve the circumstances of the average worker. “In fact, what the data suggest is that labor productivity responds quite negatively to increases in the labor force,” Romer said.

Looking across American history, Romer found that when the growth in number of workers went
up (through high immigration and fertility), there was a decline in the growth of per capita output
— just as has occurred during this latest time of high immigration and depressed wages.

During a high rate of labor growth, a country has to divert its capital to provide jobs for new
workers rather than improving productivity of existing workers.

But a low rate of labor growth creating tighter labor markets allows a country to use its capital to
increase the productivity of its existing workforce, while raising the incomes of all.
Creating those conditions would truly move the country beyond its long indifference to the plight
of its citizens who are struggling on the bottom rungs of the occupation ladders or off the ladders
altogether.

1. Kriston McIntosh, Emily Moss, Ryan Nunn, and Jay Shambaugh, “Examining the Black-White wealth gap,”
   Brookings Institution, February 27, 2020. ↩︎
2. Ibid, pp. 194-195. ↩︎
3. Ibid, p. 218. ↩︎
4. Ibid, p. 210-211. ↩︎
5. Harry T. Oshima, “The Growth of U.S. Factor Productivity: The Significance of New Technologies in the Early Decades of the Twentieth Century,” Journal of Economic History, vol. 44 (March 1984). ↩︎
6. Ibid, p. 228. ↩︎
7. Ibid, p. 238. ↩︎
8. Valerie Wilson and William M. Rodgers II, “Black-White wage gaps expand with rising wage inequality.”
   Economic Policy Institute, September 20, 2016. ↩︎
9. Paul Romer, “Crazy Explanations for the Productivity Slowdown,” National Bureau of Economic Research
   Macroeconomics Annual (1987): pp.181-183. ↩︎