Economic (In)Security
The Experience of the African-American and Latino Middle Classes
February 21, 2008
By Jennifer Wheary, Thomas M. Shapiro, Tamara Draut, Tatjana Meschede

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Executive Summary


The post-World War II emergence of the American middle class was the direct, deliberate result of broad public investments that created economic opportunity, promoted upward mobility, and expanded the middle class. Even after decades of progress, substantial economic disparities remain along racial and ethnic boundaries. These disparities are apparent when comparing white households with the two fastest growing racial and ethnic groups in America, African Americans and Latinos.  As a result of these barriers, these groups continue to experience greater barriers to entering and staying the middle class.


This report builds on our previous report, By a Thread: The New Experience of Americas Middle Class, which used an innovative Middle Class Security Index to measure the financial security of the middle class. The Index measures five key factors to determine whether a households overall profile supports middle-class economic security, puts them at high risk of falling out of the middle class, or leaves them somewhere in between.  For each of the five areas measured by the Indexeducation, assets, housing, budget and healthcarewe have established thresholds that would support overall financial security or would threaten it.


The Middle Class Security Index is used to determine what percentage of families that are considered middle class by income meet each of these thresholds.  Families are considered to be securely middle class if three or more of the factors in their family profile support financial health. Families are considered to be at high risk for slipping out of the middle class if three or more of the factors in a familys profile threaten their financial security.


As the next installment in the By a Thread series, this report uses the Middle Class Security Index to provide the first comprehensive portrait of the level of financial security enjoyed by African-American and Latino middle-class families. The findings show that, in the wake of fading economic opportunity, these two rapidly growing groups face mounting obstacles in becoming part of, and remaining securely in, America's middle class. 

Overall Economic Security

African-American and Latino families have more difficulty moving into the middle class, and families that do enter the middle class are less secure and at higher risk than the middle class as a whole. Overall, more African-American and Latino middle-class families are at risk of falling out of the middle class than they are secure. This is in sharp contrast to the middle class as a whole, where 31 percent are secure and 21 percent are at risk. Specifically.   

  • Only 26 percent of African-American middle-class families have the combination of assets, education, sufficient income, and health insurance to ensure middle-class financial security.  One in three (33 percent) are at high risk of falling out of the middle class.
  • Less than one in five Latino families (18 percent) are securely in the middle class.  More than twice as many (41 percent) of Latino families are in danger of slipping out of the middle class.
  • African-American middle-class families are less secure and at greater risk than the middle class as a whole on four of the five indicators of security and vulnerability. Latino middle-class families are less secure and at greater risk on all five indicators.

As is true for middle-income families as a whole, middle class African-American and Latino families are most vulnerable because they do not have the financial assets that provide a foundation of middle class economic security. And like all middle-class families, they are most secure in having health insurance coverage for all family members.

Alarmingly Insufficient Assets

  • Only two percent of African-American and eight percent of middle-class Latino families have enough net financial assets to meet three-quarters of their essential living expenses for nine months if their source of income disappeared.  Both figures are substantially below the already alarmingly low national average of 13 percent.

  • Even more alarming, 95 percent of African-American and 87 percent of Latino middle-class families do not have enough net assets to meet three-quarters of their essential living expenses for even three months if their source of income disappeared. Both figures are well above the national average among all middle-class families of 78 percent.
  • Sixty-eight percent of African-American and 56 percent of Latino middle-class households have no net financial assets whatsoever and live from paycheck to paycheck.

At Risk Education

Thirty-two percent of African-American and 25 percent of middle-class Latino households meet the education threshold for economic security that at least one member of the household has a Bachelors degree or higher. This falls well below the national middle-class average of 36 percent. 

Thirty-four percent of African-American and 39 percent of Latino middle-class households are at high risk because neither the primary earner nor the spouse has any education beyond high school  well above the national middle-class average of 27 percent. 

Inadequate Incomes to Meet Housing Expenses

Only 26 percent of African-American and 37 percent of Latino middle-class families spend less than 20 percent of their after-tax income on housing - both are below the national average of 40 percent.

Thirty-one percent of African-American and 35 percent of Latino middle-class families match the Department of Housing and Urban Developments definition for housing burdened, spending 30 percent or more of their after-tax income on housing expenses.  This falls well above the national average of 28 percent of all middle-class families. 

Inadequate Incomes to Meet Essential Expenses

Thirty-six percent of African-American and 28 percent of Latino middle-class families are secure in being able to meet essential family needs because they have $25,000 or more left after paying income taxes and meeting essential family needs each year compared to the national average 34 percent.

Nineteen percent of African-American and 28 percent of Latino families are at risk of falling out of the middle class because they have less than $5,000 per year left after paying for taxes and essential expenses compared to the national average of 21 percent.

Lack of Healthcare       

Only 70 percent of African-American and 63 percent of Latino middle-class families have every household member covered by private or government health insurance, well below the middle-class average of 77 percent. 

Thirty percent of African-American and 37 percent of Latino households are at high risk because at least one household member is not insured, both well above the national middle-class average of 23 percent.