Blue Civil War
Pension Mismanagement Hits Blacks Hardest

One of the under-appreciated tragedies of black history in the United States is that they have tended to win access to employment in certain sectors of the economy just as those sectors were starting to decline—or, as WRM put it several years ago, “blacks often only get to the gravy train when the locomotive is coming to the end of its run.”

Toward the end of the 19th century, when employers had access to mass low-skilled European immigrant labor, blacks were more-or-less shut out of Northern factory jobs, one of the underpinnings of middle class prosperity. Blacks started to make their way into manufacturing by midcentury, but by the 1970s, this sector of the economy had already peaked.

Ditto for government employment. A key objective—and success—of the civil rights movement was to grant blacks access to middle-class professional jobs in the civil service. In the 1970s and 1980s, blacks flocked to public sector jobs that provided middle-class wages and strong retirement security. But now state and local finances are starting to deteriorate, burdened by can-kicking legislators and mismanaged pension funds.

A sobering report from the left-wing think tank Demos highlights the degree to which blacks are dependent on public sector pensions, and how disproportionately they will bear the burden of reforms that may be needed to bring public finances back in line:

The importance of public pensions to black retirement security is perhaps mostly starkly illustrated by the huge difference between the poverty rates of black retirees with and without public pensions. Less than 3 percent of black retirees with public pensions lived below the poverty line in 2014, which is nearly 87 percent lower than the 21.8 percent of black retirees without public pensions who lived in poverty, as shown in Figure 4. Black retirees were nearly twice as reliant on public pensions to provide a secure retirement as the retiree population as a whole.

These depressing numbers stand to create frictions in state and local politics going forward. Many of the most serious and well-founded grievances of the disadvantaged black communities in Democratic-run urban areas have to do with the inadequacy of various government services—the criminal justice system, welfare bureaucracies, failing schools. Cash-strapped urban areas like Chicago will increasingly face a choice between paying off pensioned workers and re-investing in services that black citizens disproportionately depend on. This competition over resources could exacerbate the phenomenon we have called the blue civil war, or the conflict between various state and local democratic constituencies.

The author of the Demos report clearly favors keeping public pensions as they are, or even expanding them. This is quite simply economically unrealistic; incompetent state and local governments have allowed the total pension shortfall to rise to $3.4 trillion dollars, by some estimates. What we can focus on is trying to break the racial disparity in 20th century economic history, whereby blacks are shepherded into fading economic sectors. As WRM wrote, “As the blue model breaks down, the next train is leaving the station. This time, Blacks should be on board from the start and it’s in the interest of all Americans to make sure that this happens.”

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