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: 

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:

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:”

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.

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:

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.

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. Lindert and JWilliamson, Unequal Gains, p. 37Press) 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. Lindert & Williamson, Unequal Gains, 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. ↩︎