Racial wealth disparities between Americans remain significant, according to 2019 data from the Federal Reserve.1 For example, the median net worth of Black, Hispanic, and other nonwhite families was $24,100; $36,100; and $74,500, respectively, compared to $188,200 for White families. Additionally, homeownership is one of the most common paths to wealth, but according to the U.S. Census Bureau,2 at the end of 2020, 74.5% of White Americans owned their homes whereas just 49.1% of Hispanic Americans and 44.1% of Black Americans were homeowners.
With every financial downturn, the racial wealth gap widens. During the Great Recession (2005 to 2009), the household wealth of Black and Hispanic families declined at more than double the rate of that of White families. And during the recent global pandemic, Hispanic and Black Americans represented disproportionately higher shares of job losses.3
Perhaps an even more significant concern was highlighted by a 2017 report4 from the Institute for Policy Studies — it predicted that median Black and Hispanic household wealth will be $0 by 2053 and 2073, respectively.
It’s important to understand the many causes of the widening racial wealth gap, but it’s equally important to take steps to reverse the trend and create a more equitable society. One of the best ways to do that is to get more wealth into the hands of Black and Brown communities.
Support workplace pay equality
Equal pay for equal work is still unattainable for many people of color.
For example, research by the Pew Research Center shows that highly educated Black employees earn a much lower hourly wage than their White peers. College-educated Black and Hispanic men average $25 and $26 per hour, respectively, and college-educated Black and Hispanic women average $23 and $22 per hour, respectively. Meanwhile, college-educated White men make $32 per hour on average.5
Salary transparency is still uncommon in the workplace. Some companies publicly share their salary ranges internally or externally when posting jobs, but most companies reserve that information for potential job candidates. That’s why it’s essential to research before interviewing with companies to have an idea of the salary range. Sites like Glassdoor, Salary.com, or Indeed can help you obtain salary information to help you negotiate your compensation at a new job or ask for a raise. Talking to people in your network can also help you find salary information about a specific position.
Despite this, it’s common for recruiters to ask job candidates how much they earn in their current position. Several states, including California and New York, have passed legislation to ban that practice, but it’s still allowed in most states. If asked that question, consider not answering directly until you know the position’s salary range to avoid getting shortchanged.
As an example of how open conversations about salary can help reduce the racial wealth gap, a few years ago, a co-worker and I interviewed for similar jobs in the same department. She shared her salary expectations with me, and when it came time for me to discuss compensation with the job recruiter, I was told the top part of the range was $15,000 lower than what was offered to my coworker. Having additional information gave me the confidence to ask for more than what was initially presented to me. Even if you’re not comfortable sharing exactly how much you earn, you can help narrow the gap by providing details such as whether you earn above or below a certain amount.
Invest in financial education
While earning more can provide opportunities to improve a person’s financial situation, building wealth requires financial education. This is especially important if you’re a parent of Black or Brown children; raising financially savvy young adults can help them overcome an systematic challenges they face, setting them up for financial success and helping bring wealth back into Black and Brown communities.
If you’re financially savvy, you could get involved by sharing your time or money with organizations that are dedicated to increasing financial literacy in underserved communities.
From books to personal finance podcasts to online financial literacy curriculums for adults and children, there are plenty of resources to assist individuals and families on their wealth-building journey. Free personal finance tools like those from Empower can help you get further clarity on your own money. Once you aggregate your financial accounts to the secure online platform, you can see your total net worth, get a spending plan, analyze your investments, and track your progress toward long-term financial goals.
Support minority-owned businesses
Intentionally buying from minority-owned businesses and opening bank accounts at minority-owned banks are two more great ways to put money into minority communities.
Minority businesses are more likely to employ other minorities and invest in their communities, so supporting Black and Brown businesses not only helps business owners create wealth for their families but can also help create jobs in their areas and promote economic growth in their communities. For instance, studies show that Black-owned banks lend and invest in Black communities at higher rates than white-led financial institutions.6
Another way to support minority-owned businesses, if you can afford to, is to invest in them. African American-owned and Hispanic-owned businesses typically have less access to capital and more difficulty financing their businesses. Black women are the fastest-growing group of entrepreneurs in the U.S., but they receive 0.27% of Venture Capital funding, and Hispanic women only receive 0.37%.7 And even though minority-owned businesses were more heavily impacted by the pandemic,8 they received less help from the government.
If you’re not sure where to start, community development financial institutions (CDFIs) provide funding opportunities in economically disadvantaged communities. With a platform like CNote, you can invest in a CDFI for as little as $5.
These are just some of the ways you can help narrow the gap and create real change.