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Racial differences in Atlanta’s median household income widespread, deeply rooted

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By Guest Columnist DAVID L. SJOQUISTprofessor of economics at Georgia State University

The death of George Floyd and others at the hands of the police led to widespread demonstrations demanding police reform. But, more generally, there is a loud, pervasive, and persistent call for true equal rights and equal treatment of people of color. The scope of the treatment is multi-dimensional. If we are to create a more just society we need to address economic inequality across races. This is an enormous challenge, and to see how large it is, consider the city of Atlanta.

David Sjoquist

David Sjoquist

While one can tell the story of racial differential in economic conditions and treatment in many ways, racial differences in household income captures it. The racial difference in income in the City of Atlanta is stark and depressing. According to the latest American Community Survey, released by the Census, median annual household income for Black households in the city of Atlanta is $35,048, while it is 2.93 times larger, or $102,693, for white households. These numbers explain why the poverty rate for Blacks in the city of Atlanta is 30.2 percent, while it is 8.1 percent for whites.

Racial differences in other circumstances are driven by income differences. These circumstances include housing insecurity, food inadequacy, lack of appropriate health care, financial wealth, and obviously poverty. In addition, racial differences in many personal conditions, such as mental and physical health and life expectancy, are associated with racial differences in income.

Not all Blacks living in the city are poor and not all whites are rich; 40 percent of Black households have incomes in excess of $50,000, while 20 percent of white households have incomes of less than $50,000. The racial difference in median household income is not as large for the Atlanta metropolitan statistical area; $54,456 for Blacks and $80,470 for whites.

In order to address racial income differences, it is necessary to confront the factors or forces that cause these income differences. Racial discrimination is one factor. There is substantial evidence that many businesses discriminate. Most firms do not actually pay Blacks and whites differential wages for the same job, but many firms do implicitly require that Blacks have higher skill or experience than whites for the same job. This means that the return on education, experience, and ability is lower for Blacks.

There have been many experiments in which resumes are sent to a firm that had announced job openings. The resumes are identical other than one uses a name that suggests the person is Black. Consistently, these experiments find that whites are much more likely to get a positive response from the firm.

Vacant houses are not uncommon in less-wealthy neighborhoods where an owner awaits rising values to maintain a structure that’s fallen into disrepair. This one is near Atlanta’s future Westside Park, being built around a former rock quarry. Credit: David Pendered

There are many other factors beyond discrimination that are associated with racial income differences. There is a mismatch between where Blacks live and the location of jobs. This mismatch makes it more difficult for Blacks to find work and commute to a job. Likewise, some employers are less likely to hire someone who has a long commute. For low-skilled jobs, the number of potential workers is greater in low-income communities. The law of supply and demand results in lower wages in those communities. Research that has compared wages paid by fast food places in low-income and in higher income neighborhoods finds this pattern.

Education is a very significant factor in explaining differences in income. In the City of Atlanta, there is a substantial racial difference in the education level. Only about 2 percent of white adults living in the City of Atlanta have less than a high school education, compared to 14 percent for adult Blacks. On the other hand, 80 percent of whites have a college degree or more, while just 27 percent of Blacks do. Beyond eliminating racial and gender job discrimination, increasing education level would be an important step in eliminating racial differences in household income.

Females have lower incomes than males, which is another equity issue. But given that fact, it is of significance that in the city of Atlanta, 55 percent of Black adults are female while only 46 percent of adult whites are female.

The number of individuals of working age is another factor determining income. The larger the share of kids and seniors, the smaller the share of individuals who are likely to be employed. The percentage of Blacks who are under 18 years of age or over 64 years of age is 36 percent, but only 24 percent for whites.

Household income is the sum of the income of all members of the household. Thus, it is expected that households comprised of a married couple will, on average, have higher income than households comprised of just one adult. In Atlanta, 52 percent of white households are married couples, while it only 21 percent of Black households. Since, on average, females earn less than males, families with no male present will in general have lower incomes. In the City of Atlanta, 38 percent of Black household are female headed, while it is only 6 percent of white households.

A large part of household income is earnings, but income from financial assets, i.e., wealth, is an important source of income for many households. However, Black households have much smaller portfolios of financial assets, even for households with the same income. We do not have data on wealth holding for the City of Atlanta, but nationally it has been found that wealth of Black households is about 56 percent of that of white households, after controlling for income and other factors. And, of course, less wealth means less income.

Eliminating racial differences in household income is a complex, multidimensional problem. Eliminating racial discrimination in employment would certainly reduce racial differences in income, but it would not eliminate them. Recent research suggests that eliminating racial discrimination if the labor market might increase the wage rate for Blacks by at most 15 percent. This implies that the racial difference in median household income in the city of Atlanta would not change much from eliminating discrimination in the labor market. Eliminating racial discrimination in the labor market is no easy task; we have worked on it for years, but with little to show for the effort. But eliminating the other causes of the racial differences in income in the city of Atlanta is probably an even greater challenge.

Note to readers: David L. Sjoquist is a professor in the Department of Economics and a senior associate in the Center for State and Local Finance and Fiscal Research Center at Georgia State University. He specializes in state and local taxation, and urban and regional economics. 

 

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4 Comments

  1. Avatar
    Orlando Coombs July 20, 2020 9:22 am

    This is nothing new. Tells us something we don’t already know. Give us some positive updates on what’s happening in Atlanta in terms of black owned businesses weathering the storm and having a competitive edge during the pandemic. What resources are able to black entrepreneurs in Atlanta so they can keep on helping their employees feed their families. Give us an update on that.Report

    Reply
  2. Avatar
    Otis Houston Jr July 20, 2020 2:43 pm

    AND STILL I RISE :
    ARTIST
    BLACK CHEROKEEReport

    Reply
  3. Avatar
    Heather July 20, 2020 2:54 pm

    Is there a plan to fix this at all?Report

    Reply
  4. Avatar
    David Edwards July 24, 2020 9:10 am

    David, thanks for again reminding of us the persistence of racial inequity in our city. Although your focus on discrimination in the jobs market is important, it seems to me the geographic dimension of the challenges we face is much more acute. A child born into poverty in English Avenue or Thomasville Heights has a less than 1% chance of reaching the top 20% of wage earners in this country. That same child born in Virginia-Highland as a 23% chance. This astonishing difference cannot be explained by discrimination in the workplace. Instead, I would argue that it is a consequence of generations of public policies and private actions that have segregated our city and concentrated poverty into specific neighborhoods. These neighborhoods were redlined (preventing investment and wealth creation), environmentally abused (we are pulling slag out of people’s backyards in English Avenue as we speak), and over-policed (leading to mass incarceration and the destabilization of families and communities).

    As important as it is to eliminate systemic racism in employment practices, as you point out it will not solve the problem. We will never truly advance the cause of racial justice in this or any other American city until we have fully acknowledged and addressed the roots causes of the problems we have created: the economic and social isolation of mostly black residents into highly distressed and in many cases literally poisonous neighborhoods.Report

    Reply

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