4 Ways to Assist in Closing the Racial Wealth Gap
- The impact of structural racism has created not only unequal access to opportunities across the economy and a much longer lead time for white families to amass significant wealth.
- Several factors lead to this disparity, including historical discriminatory policies like redlining, which denied credit and mortgages to minority communities, unequal access to quality education, and unfair labor practices.
- By investing in initiatives that provide support for education, job training, credit access for underserved communities, affordable housing opportunities, and financial counseling services, we can make real strides toward closing the racial wealth gap.
The wealth gap between racial and ethnic groups is a longstanding issue that is entrenched in the United States (U.S.) economy. According to data from the Federal Reserve, the typical white family holds eight times as much wealth as Black families and five times as much wealth as Hispanic families. Putting this in dollars and cents, white families, on average, have a median of $187,300, versus $13,100 for Black families and $31,700 for Hispanic households.
The growing racial wealth gap has a devastating impact on Black families, individuals, and communities. It is estimated that nearly 70% of middle-class African American children will fall out of this range as adults due to systemic barriers and a consequent precarious perch in the middle class.
These financial disparities, however, also create far-reaching consequences for American households. The effects of reduced purchasing power in Black and Hispanic households, for instance, ripple across the U.S. economy, resulting in missed opportunities for these groups to purchase homes, start businesses, invest in higher education, and save for retirement. Studies estimate that these inequities could cost the U.S. economy $1 trillion to $1.5 trillion over the period 2019-2028.
In addition to its effects on the economy, the racial wealth gap affects social dynamics in our society. The racial wealth gap reinforces a cycle in which those with wealth and resources can pass them on to their children, creating an advantage that is denied to those in communities of color. This, in turn, affects educational opportunities in these communities, creating long-term ramifications such as diminished career prospects and decreased social capital.
Recommended Read: Black History Month: Reflecting on Money Milestones
Becoming a Change Agent
"Injustice anywhere is a threat to jusutice everywhere. We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly affects all indirectly." - Martin Luther King Jr. (Letter from Birmingham, Alabama jail, April 16, 1963)
With the diversity of the U.S. population growing each year, closing the racial wealth gap is essential. Urgent attention from policymakers and individuals alike is key. Below are four steps you can take to be a change agent.
#1: Support Minority-Owned Businesses
Investing in and supporting minority-owned businesses help close the racial wealth gap by providing minority entrepreneurs access to capital and resources they would not otherwise have. Investing in these businesses also puts money into underserved communities and helps create jobs which can lead to more economic opportunities for people of color.
Recommended Read: Why Black Business Month is Great, but Support Year-Round is Better
#2: Educate Yourself on Systemic Racism
Understanding how institutionalized racism has contributed to the racial wealth gap is essential to making meaningful change. Learning more about how systemic racism works and its effects on people of color is important in understanding the problem and seeking the right solutions.
#3: Support Organizations Focusing on Closing the Racial Wealth Gap
Supporting nonprofits, advocacy groups, and other organizations dedicated to closing the racial wealth gap helps advance this goal. These organizations often rely on donations or volunteer work to help close this gap.
#4: Advocate for Policy Change
Changing the policies that contribute to the racial wealth gap is an important step toward closing this racial wealth gap. When you take a step toward changing local and federal policies, it can include supporting legislation, speaking out about issues, and holding elected officials accountable for their actions.
The Money Wrap-Up
A concerted, intentional effort is required to reduce racial discrimination, increase access to economic opportunities, and promote social initiatives that foster holistic financial well-being for all Americans. It is up to all of us to take action to close this wealth gap and create a more equitable society. We can work together to create a more equitable and just society by following the steps above.