Money Culture

June 16, 2022

Conversations about the vast White-Black disparity in U.S. wealth may acknowledge its roots in slavery. But four economists have now made the case quantitatively by charting changes in the wealth gap since the Civil War.

The political and societal influences on wealth accumulation between 1860 and today are multifaceted but the basic trajectory is this:

The wealth gap shrank by roughly half during the Civil War era from 1860 to 1870 and dropped in half again between 1870 and 1920, the researchers said in their recent paper. The decades of improvements in Blacks’ per capita wealth, compared with Whites’, occurred despite a quick end to Reconstruction after the Civil War and the rise of Jim Crow laws around 1890 that curtailed recently freedmen’s rights in the South. (I’ll explain more about this counterintuitive finding below.)

Progress continued but was more modest after the 1920s and started stalling out around the 1950s. The situation deteriorated after the go-go-1980s on Wall Street as Black Americans’ wealth levels fell behind largely because they own much less stock and haven’t equally enjoyed the bull market gains of recent decades.

The wealth gap is so entrenched today, the study concluded, that reaching equality is “an extremely distant or even unattainable scenario.” …Learn More

May 12, 2022

The following statistic will sound familiar since I use it regularly: about half of U.S. workers are not saving enough and may see their standard of living drop when they retire.

A major culprit in this poor state of preparedness is that millions of Americans at any given moment don’t have a traditional pension or 401(k) savings plan at work.

A new study takes a close look at who these people are and shows stark differences along racial lines. A large majority of Hispanic workers in the private sector – two out of every three – do not have access to a pension or 401(k)-style plan, and more than half of Black workers do not have access. Although the numbers are lower for Asians (45 percent) and whites (42 percent), they are still substantial.

Other estimates of private sector coverage, also from this study by John Sabelhaus of the Brookings Institution, show big gaps between high- and low-paid workers and workers with and without college degrees, and at large and small employers.

Coverage also varies from state to state: In Pennsylvania, 41 percent lack access to a retirement plan, but in Florida, 59 percent do not have coverage.

Sabelhaus is certainly not the first to document disparities in retirement plan access for different demographic groups. But his methodology advanced the ball, resulting in more reliable estimates. By using three data sources, he could compensate for their shortcomings while taking advantage of the unique information in each one. He combined recent data from the U.S. Census Bureau, the IRS, and the Federal Reserve Board. …Learn More

April 14, 2022

There is joy in owning one’s first home. But homeownership has a deeper meaning for Robin Valentine.

Unlike her late mother, who was unable to leave any money to her children, Valentine will one day pass on the house that she purchased last September to her three children.

“I told my children, ‘If anything happens to me, and you don’t want to stay here, that’s fine. Take the money [from selling the house] and put it towards your home,’ ” she said. “It’s more than just me buying this house and living in it. It’s for me to leave a legacy.”

Valentine, who is 52, is accomplishing something that historically has proved difficult for African-Americans like herself: building intergenerational wealth.

For most workers, a house is their largest source of wealth. But the homeownership rate in the Black community is dramatically lower than for whites for reasons ranging from mortgage discrimination to insufficient income. When Black people do own houses, their properties hold significantly less wealth. The typical Black homeowner had $4,400 in home equity in 2020, compared with $67,800 for white homeowners.

With sheer determination, Valentine, an administrative assistant in academic services at the University of Massachusetts-Boston, overcame numerous obstacles to buying a house.

She attended college but had to drop out because she couldn’t afford it. It took about eight years to pay off $20,000 in student loans and credit card bills after a divorce from an abusive marriage. For seven years after that, she saved for a down payment by resisting any purchase that wasn’t essential. Once a year, she would ask the bank for a mortgage preapproval to see if she could afford a house yet.

“I just kept saving every little penny I could save,” she said.

Last July, Valentine paid $275,480 for a three-story townhouse in Boston’s Dorchester neighborhood. Her mortgage payment is $1,635 – not much more than she paid to rent a subsidized apartment under the federal Section 8 program.

She got big assists from two government programs and a non-profit. One program is overseen by the U.S. Department of Housing and Urban Development (HUD). Under HUD’s Family Self-Sufficiency Program (FSS), the non-profit Compass Working Capital partners with local housing authorities to help tenants like Valentine get a foothold in the housing market. …Learn More

March 17, 2022

Every state should have what Delaware has: a program that helps low- and moderate-income seniors find a financial survival strategy.

Since it opened in 2013, the program, Stand by Me 50+, has connected more than 2,300 older residents – mostly retirees – with federal and state aid programs, advised them of Social Security’s rules, and helped them pay medical bills or eliminate debt. The services are free.

Kathleen Rupert, a financial coach and head of the organization, helped one man in his 70s pay off $13,000 in debt. Another retiree doubled his income from Social Security after she determined that he was eligible for his late wife’s $1,700 benefit. About 44 percent of the program’s clients have monthly income of $1,500 or less.

“We go wherever the need is – to senior housing, senior centers, community centers, libraries,” she said. “We set up appointments at Panera Bread or Hardee’s – wherever they’re available.”

Squared Away interviewed three clients who said the financial solutions they got from the program have given them peace of mind. Here is the first client’s account of how Stand by Me 50+ helped her.

Peggy Grasty retired in 2010 after two decades at Elwyn, a non-profit social services agency where she was a supervisor and worked with people with mental disabilities. She continues to help people – voluntarily. The 71-year-old takes other retirees under her wing who need assistance because they have trouble walking or aren’t as capable as her.

She initially contacted Stand by Me because she couldn’t make ends meet. She has a comfortable, federally subsidized apartment in Wilmington, Delaware. But her income is limited to a $1,500 Social Security check and a $53 pension from a job long ago waxing floors and driving a bus for a Pennsylvania middle school.

Stand by Me got help for Grasty through two programs: federal SNAP food stamps and a Delaware non-profit that pays low-income residents’ medical bills. By doing this type of work, the program addresses a real need. Although myriad financial assistance programs are available for low-income workers and retirees, they are frequently unaware of the programs, assume they don’t qualify, or may need help navigating the application process. …Learn More

February 22, 2022

The pandemic has dramatized the grim consequences of Black and Latino Americans having less access to healthcare than whites: disproportionately high death rates from COVID-19.

But there has been some progress toward racial equity in an unlikely place: Medicare Advantage plans sold by insurance companies. Enrollment in the plans has increased unabated for years, and minority enrollment more than doubled between 2013 and 2019.

During that time, Advantage plans increased from about a third of the various Medicare options purchased by Black, Latino, Asian and other minority retirees to nearly half, according to the non-profit Better Medicare Alliance.

Dr. Elena Rios, president of the National Hispanic Medical Association, and Martin Hamlette, executive director of the National Medical Association representing Black physicians, said Advantage plans provide retirees with access to preventive services like mammograms and cholesterol checks that keep them healthy.

Advantage plans are “a needed tool in the work of building a more just health care system,” they wrote in a recent Health Affairs article.

The appeal is upfront affordability. The monthly premiums are significantly lower than Medigap premiums, and many Advantage plans charge no premium. They frequently include prescription drug coverage, eliminating the need to pay for a separate Part D drug plan.

The reason Advantage plans are especially popular with minorities is that they tend to have lower incomes than whites and less room in their monthly budgets for medical care. Three out of four minority retirees in Advantage plans have incomes below 200 percent of the federal poverty level, compared with half of the whites in the plans.

Like all insurance, however, Advantage policies are a mixed bag. Medicare beneficiaries in poor health may face higher costs down the road if they experience a major medical crisis. In one study, the sickest retirees with Advantage plans had more risk of inordinately large annual out-of-pocket expenses for copayments and deductibles than retirees with Medigap plans. …Learn More

Research

January 6, 2022

Opioids fueled a record of nearly 100,000 drug overdose deaths in the United States last year.

The biggest cause of overdose deaths was dangerous synthetic opioids, such as fentanyl. But the epidemic involving illegal chemicals grew out of the abuse of highly addictive prescription opioids. A spate of new research reveals that the use and abuse of these prescription drugs have plagued people with disabilities, who often start taking them to treat painful musculoskeletal conditions such as arthritis or a bad back.

A 2017 analysis featured in this blog provided the first estimate of opioid use among people who have disabilities that limit their ability to work. The researchers found that about one in four people applying for federal disability benefits used the medications – a much higher rate than in the U.S. population overall.

Painkillers often do more harm than good because they can increase society’s dependence on disability benefits by impairing lung function, aggravating existing conditions like rheumatoid arthritis, or causing addiction. According to 2021 research by RAND that followed older workers over several years, the opioid users in the study were much more likely to wind up on disability than their counterparts who did not take them.

“Although the pain relief is an important health goal,” the researchers concluded, “the consequences to workers and social programs of powerful prescription painkillers are substantial and long-lasting.”

The isolation and stresses caused by the pandemic are believed to have fueled the dramatic rise in overdose deaths last year. But a long-running cause, prior to COVID, was the decline in U.S. manufacturing employment. Research reported in this blog directly tied the movement of robots onto factory floors to the rise in deaths of despair – from drug addiction, alcoholism, and suicide – among men between ages 30 and 54. The study found that automation accounts for nearly one in five overdose deaths in manufacturing counties, which are concentrated in the heavily industrialized Midwest. The researchers said the rate of applications for disability benefits is also higher in these counties.

Opioid abuse in the disability community is happening for the same reason it is pervasive in society: an ample supply of the addictive drugs. …Learn More

August 24, 2021

Last year, millions of older Americans went into hiding to protect themselves from the ravages of COVID-19.

Did the isolation take a psychological toll? How did they respond to infrequent contact with friends and family? Researchers in a recent webinar tried to understand the unique phenomenon of loneliness in a modern pandemic.

What we know from the National Poll on Healthy Aging in the early months of the pandemic is that more than half of older workers and retirees between 50 and 80 said they “felt isolated from others” – twice the levels seen in 2018.

In a different survey conducted every two months for most of last year, loneliness was “common and it was incredibly persistent during the first six months of the pandemic,” said Lindsay Kobayashi, a University of Michigan epidemiologist involved in the COVID-19 Coping Study, a survey of adults over age 55.

Two groups in particular suffered rates of loneliness that were twice as high as their peers: older people who live alone and residents of senior communities and nursing homes, where staff often separated the residents or confined them to their rooms in an attempt to protect their health.

A larger share of Black Americans also expressed feelings of loneliness than whites and Hispanics, and women were generally more lonely than men. “I’m very afraid that we are going to get so used to being alone, on our own, by ourselves that we won’t reconnect the way we need to,” a 76-year-old woman told the Coping Study researchers last fall.

But the news isn’t all bad. Feelings of loneliness, especially among the oldest retirees, had subsided a bit as early as November as news reports emerged that the vaccines were effective. Older people also found ways to cope with their isolation, and some even felt the pandemic gave them a renewed sense of purpose, according to a pair of studies in The Gerontologist. …Learn More