Color Lines, Country Lines: Race, Immigration, and Wealth Stratification in America

Chapter 8. Contextual Conditions of Wealth Attainment

Contextual Conditions of Wealth Attainment R ace and education are, as we saw in chapter 7, the primary factors in the wealth stratification system; nativity and immigrant characteristics are secondary factors. The theoretical framework developed in chapter 2 indicates that the process of asset building and wealth accumulation is shaped not only by the nationwide racial hierarchy and education and by immigrant nationality group characteristics, but also by a household’s contextual conditions. Local economy and labor market conditions, such as the unemployment rate, offer economic opportunities but impose constraints on residents’ financial standing and property ownership as well. Residential segregation in metropolitan areas favors some groups at the expense of others. The nativity of the local population may change the degree of local labor market competition, particularly among workers with low skills, thus benefiting some groups and harming others. In addition, a large foreign-born population in a metropolitan area increases the local population’s racial and ethnic diversity , which in turn adds complications to the dynamics of racial residential segregation. This chapter addresses how these contextual factors operate in addition to the stratification factors and household characteristics examined in chapter 7. Wealth attainment is defined as positive net worth. Three sets of contextual factors for wealth attainment include the local economy and labor market, captured by the state unemployment rate, residential segregation , captured by black-white and Hispanic-white segregation across neighborhoods within metropolitan areas, and nativity composition, captured by the foreign-born percentage of the metropolitan area population . Because state labor market conditions affect the statewide population , residential segregation and nativity composition are salient features of metropolitan areas, I analyze the effects of local labor market conditions using the whole population and the effects of residential segregation and nativity composition using the metropolitan population. 246 Chapter 8 The analyses pay special attention to the expected different effects of residential segregation and nativity composition for different groups. To this end, I analyze a pooled sample consisting of four broadly defined racial-ethnic groups and then analyze each. My focus is on identifying the similarities and differences in the effects of contextual variables in determining wealth attainment among racial-ethnic groups and then looking at the effects of these same variables by nativity within raceethnicity groups. Three Contextual Conditions To better explain variations in wealth attainment, this chapter considers the roles of the local labor market conditions, residential segregation, and nativity composition. An essential indicator of local labor market conditions is the minimum wage rate. Employment opportunities directly affect earnings, which in turn affect consumption and saving during the process of wealth accumulation. Periods of unemployment force households to liquidate wealth to maintain their customary level of consumption , which then affects their current amount of wealth. As a result of job loss, households often accrue consumer debt, postpone mortgage payments, and lose homes to foreclosure (Warren and Tyagi 2003). Residential segregation institutionalizes multiple forms of discrimination against minorities in the labor, housing, and lending markets, exacerbating the slow process of minority wealth attainment. Changes in racial and educational compositions induced by flows of immigrants intensify labor market competition among low-skilled workers, affecting their wealth attainment by creating winners and losers. Local Labor Market Conditions The ups and downs of local labor market conditions directly impact earning and indirectly change the amount of net worth in households. These conditions vary across time and states. In the United States, the unemployment rate was higher (7.1 percent) between 1984 and 1986 and lower (4.4 percent) between 1997 and 2001 (U.S. Bureau of Labor Statistics 2007). During the same periods, variations in unemployment rates across states were large, with higher rates in some states, such as Mississippi and Louisiana, and lower rates in others, such as Connecticut, Maryland, and Minnesota. A higher unemployment rate means that workers face greater risks of job loss and long-term unemployment. To maintain their lifestyle, affected workers usually either liquidate their previously accumulated wealth or borrow money (most often via consumer debts), ending up with lower net worth. Using the 1984 to 2002 SIPP data, the first column of table 8.1 shows Contextual Conditions of Wealth Attainment 247 the unemployment rate facing members of broadly defined racial-ethnic groups, immigrant nationality groups, and native racial-ethnic groups.1 Unemployment rates for Hispanics and Asians are higher than they are for whites and blacks. In...