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Mike Groll/AP
New York Attorney General Andrew Cuomo

US Supreme Court and Census Bureau Scrutinize Racial Gaps in Loans, Jobs

April 29, 2009 06:00 PM
by Anne Szustek
U.S. Census data released Monday and two cases before the Supreme Court focus on perceived racial disparities in issuing high-interest loans, workers’ salaries and hiring decisions.

Race Numbers

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The Supreme Court heard oral arguments Tuesday on the case Cuomo v. the Clearing House Association, which could change who has jurisdiction over the regulation of national banks. The two parties named in the case are New York State attorney general Andrew Cuomo and a bank group. The dispute began some four years ago, when former New York governor and then-state attorney general Eliot Spitzer inquired why banks were doling out so many of their high-interest and subprime mortgages to minorities, particularly blacks and Hispanics. If Cuomo wins the case, individual states would have greater oversight of banking regulations.

Financial institutions and federal authorities argue that this would force national governmental oversight groups to have to deal with 50 different sets of banking rules in addition to federal law. Justice Breyer, who appears to agree with that argument, also suggests that minorities are more likely to be offered high-interest mortgages because they tend to pull in lower salaries than white borrowers.

Data released Monday from the U.S. Census Department corroborates this last point: the salary gap between whites and two minority groups, blacks and Hispanics, for higher-paying work is the greatest it’s been since 2001. African-Americans with a bachelor’s degree only pulled in $46,502 on average in 2007, 77 percent of what whites with similar educational backgrounds earned that year. On average, Hispanic college graduates earned 75 percent of their white colleagues’ salaries.

Census Bureau housing and economic statistician Sarah Crissey told the Associated Press, “It’s clear education alone is not the full reason for the pay gaps.” Mark Mather, a demographer for the Population Reference Bureau said that salary disparities are likely to increase during the recession; minorities are more likely to be the victims of layoffs, because, as the AP puts it, they “tend to be relative latecomers to the professional world.” While minority groups are behind in salary, they’re surging ahead in lawsuits. One-third of the approximately 95,000 discrimination claims filed in 2008 were directly related to race issues.

Affirmative Action or Reverse Discrimination?

Racial discrimination is at the heart of another case heard before the Supreme Court this month. The lead plaintiff in Ricci v. Destefano is Frank Ricci, a white firefighter who took a New Haven, Conn. Fire Department exam for promotions to lieutenant and captain. Ricci, a dyslexic who paid someone to read and tape study materials for him, passed the exam. But if the department had honored the test results, no African-Americans and only one Hispanic would have been promoted, so the Civil Service Board decided the test was “flawed.”

Karen Torre, the lawyer for Ricci and the other white firefighters involved, told NPR, "There's no question that their race and skin color were the driving motivation behind the decision not to promote them.”

Opinion & Analysis: Examining the gap

The city of New Haven is arguing that the test administered by the fire department was not race-neutral. Using ostensibly race-neutral tests for employment became mandated under a 1971 Supreme Court ruling, intended to eliminate factors that could be used as veiled discriminatory hiring practices. Legal scholar Jeffrey Rosen argues in the New Republic that the test was reviewed by outside experts to ensure that it targeted job-related skills. He also cites studies that indicate that unconscious racism is most likely to come into play in entry-level situations when yes-or-no hiring decisions are being made, and not when making well-considered decisions about promotions.  

The Cato Institute, the Reason Foundation and the Individual Rights Foundation argued in a friend of the court brief that immediate proof of racist attitudes should determine whether a test is valid or not and that written tests, “although they generate race-based statistical disparity, are good for both business and the public interest generally.”
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