I recently read two articles in the New Pittsburgh Courier…”Nine facts about the racial wealth gap” and “The urgency of ending the racial wealth gap.”
One of the articles started out with this statement: “Five hundred years. That’s how long experts say it would take for Black people to reach economic parity with White people and close the racial wealth gap, given current trajectories…”
This prompted me to think of possible solutions to bridge the racial wealth gap in real-time.
This article identified a series of disparities that keep Black people from gaining financial ground with Whites—including higher rates of unemployment, lower rates of homeownership and wages, regardless of education.
The experts point to a total of nine factors directly affecting the racial wealth gap. Below, I’ll summarize their findings. I’ll also offer solution-based opinions on what the government can do to help bridge the tax wealth gap. More importantly, I’ll offer solution-based opinions on what we can do individually to help bridge the racial wealth gap.
Minorities have more wealth than ever, but not enough to shrink the racial wealth gap: While the multiplier for the Black-White wealth gap decreased from 9.9 in 2016 to 7.8 in 2019 to 6.3 in 2022, the gap in dollar terms increased from $153,800 to $165,000 to a staggering $240,000—showing that the disparity is getting worse.
Wealth Disparity Solutions
Government: Implement targeted wealth-building programs, such as baby bonds, which provide children from low-income families with government-backed savings accounts that grow over time. Also, increase access to financial education and planning services for minority communities.
Individuals: Live below your means, save and invest. Working is how you earn a living. Investing is how you build wealth. Living below your means creates the surplus between your income and expenses. Save and invest the surplus.
Black Americans earned 34 percent less than all racial and ethnic groups combined: As of 2022, the median U.S. household income across racial and ethnic groups was $74,580. Black households earned around $52,860, but White households earned $81,060, and Asian households brought in $108,700. Half of Black households’ total income was between $15,000 and $75,000.
Income Disparity Solutions
Government: Enforce equal pay laws and enhance wage transparency to ensure fair compensation across all racial and ethnic groups. Encourage companies to adopt inclusive hiring practices and promote diversity in leadership roles.
Individuals: Seek ways to increase earning potential and income security by developing marketable skills and creating multiple streams of income.
Higher education is important, but it does not guarantee better economic mobility for Black graduates. Black people with a bachelor’s or master’s degree had, on average, the most student debt and borrowed more than other groups yet had the lowest income. Black students borrowed around $58,400, and after four years, they still owed 105 percent of it, according to data from the National Center for Education Statistics. The combination of low-income and high debt makes repayment more challenging, leaving many Black people in a financial hole that is hard to climb out of.
Higher Education and Economic Mobility Solutions
Government: Reduce student loan debt by expanding grant and scholarship programs for Black students. Provide income-based repayment plans and loan forgiveness programs for graduates entering public service or lower-paying fields.
Individuals: Choose a college based on affordability, not popularity. Commuting to and from school will cut costs in half. Total of all student loans not to exceed projected first-year salary. Unemployment is still higher for Black workers; During the peak of the COVID-19 pandemic, Black and Latino workers had the highest unemployment rates. Four years later, as the national rate moved closer to pre-pandemic levels, Black workers were left behind.
Unemployment Solutions
Government: Invest in job training and apprenticeship programs tailored to high-demand industries. Create economic zones in underserved areas to attract businesses and create jobs.
Individuals: Create multiple streams of income. The average millionaire, celebrity, and entertainer has seven streams of income. Everyday people should heed that if millionaires have multiple streams of income to create income security, so should we.
Black households are less likely to own a home and more likely to be undervalued. While homeownership is another driver and indicator of wealth, the Black homeownership rate has never reached 50 percent. It came close in recent years, peaking at 46.4 percent in 2020, but dipped during the post-pandemic economic recovery period.
Homeownership Solutions
Government: Expand access to down payment assistance programs and affordable mortgage products for Black families. Enforce fair housing laws to combat discrimination and address the undervaluation of homes in Black neighborhoods.
Individuals: Get your financial house in order first, then seek homeownership. Once you develop income stability, and a healthy habit of living below your means, saving and investing, then homeownership is a natural progression.
Thinking About Their Financial Futures Differently: There are several ways to build a nest egg for retirement: employer-sponsored retirement savings plans, Roth IRAs, and pensions, to name a few. Yet as of 2022, just 35 percent of Black workers had some type of retirement account, and those that did had saved only around $117,530, according to the Survey of Consumer Finances.
Retirement Savings Solutions
Government: Encourage employers to offer retirement plans and provide matching contributions. Promote financial literacy programs that focus on the importance of retirement savings and investment strategies.
Individuals: Your retirement savings is your future paycheck. Start saving now even if you start with saving $25 per pay or $50 per pay, start now. Saving and investing is how you build your money muscles. Take advantage of employer-sponsored retirement plans. Many of them offer a matching contribution. Increase your contributions over time.
Lower Access and Higher Distrust in Traditional Banking Systems: The term “unbanked” refers to those who do not have an account with or use a bank, credit union, or other financial institution. The use of check cashing companies, payday loans, and money orders is higher for the unbanked and underbanked. But high transaction fees and interest rates lead experts to warn against using predatory banking companies, which are disproportionately located in Black neighborhoods.
Banking Access Solutions
Government: Increase the presence of traditional banking institutions in underserved communities. Offer incentives for banks to provide low-cost checking and savings accounts. Promote financial literacy to build trust and understanding of traditional banking services.
Individuals: Go to a local bank or credit union and open up a checking account and savings account TODAY! In today’s day and age, there’s no excuse not to have a basic savings and checking account. Most jobs and fixed income sources do direct deposit, giving you access to your money sooner. The issue I’ve observed particularly in lower income communities is people write checks or make withdrawals from banks when they know they don’t have the available funds in the bank. The bank recoups their funds plus fees when a deposit is made. The individual becomes mad at the bank.
Black Households Rely on Credit Cards: Undermining this is a common myth that carrying a balance on credit cards helps boost credit scores. It’s the opposite, the Consumer Financial Protection Bureau says. But, in 2022, 78 percent of Black households had a balance they were carrying monthly.
Credit Card Reliance Solutions
Government: Provide education on the impacts of carrying credit card debt and strategies for managing and reducing debt. Expand access to low-interest credit products and financial counseling services.
Individuals: People who complain about high interest rates but use credit cards befuddle me. Credit cards carry the highest interest rate of all loan products. People use credit cards for 3 reasons: 1. Convenience. Use a debit card instead. 2. Emergencies. Create an emergency fund instead. 3. Supplement their income. How’s that working for you? If you need extra income, get an extra job.
The Black-Owned Business Boom May Fade: While Black entrepreneurs may start businesses in an effort to increase wealth and income, without proper support and tools, their efforts may prove inadequate to increase wealth and may even become detrimental.
Black-Owned Businesses Solutions
Government: Provide grants, low-interest loans, and business development resources to Black entrepreneurs. Create mentorship and networking programs to support the growth and sustainability of Black-owned businesses. Ensure equitable access to government contracts and procurement opportunities.
Individuals: Have you ever seen a commercial for a chinese restaurant? Probably not! Yet chinese restaurants thrive. Why? Because chinese people can bank on their community supporting their businesses. In fact, most communities support their own except for Black people. The fix is twofold. 1. Black business owners have to create quality products and services to offer. Black consumers have to do a better job buying quality products and services from Black businesses owners.
Government-proposed solutions are wishful thinking at best. We’re in charge of our own destiny. If you desire to create financial stability, financial security, and financial independence for you and your family, you have to do things that will be favorable towards growing your net worth.
(Damon Carr, Money Coach can be reached @ 412-216-1013 or www.damonmoneycoach.com)
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