Racial Wealth Gap: Black and Latinx Net Worth is Expected to Hit 0 by 2053
- Wealth allows one to be financially secure while also having the option to be work-optional.
- Wealth-building opportunities can become more challenging based on ethnicity. For example, Black and Latinx families have a large racial wealth gap versus their White counterparts.
- White people hold the majority of high-level paying jobs in the United States for a significant. This can become a barrier for people of color who want to climb up the economic ladder.
Wealth can invite several opportunities to significantly impact one’s life and even an entire generation of lives. Wealth differentiates what families own versus what they owe. A key factor to having wealth is also having ownership of your assets.
Many forms of ownership can include savings/checking accounts, retirement accounts, houses, and cars. Families that own assets can get ahead and build more wealth, with nothing holding them back. Contrarily, several forms of debt like credit card debt, student loan debt, and mortgage debt can significantly hold families back from building wealth because they have to dig themselves out of a steep debt-filled hole.
Wealth allows for one to have numerous options. Those options include access to excellent health care, access to healthier foods, better school systems, better career opportunities, and the list goes on.
However, when it comes to the distribution of wealth among Black and Latinx people versus white people in the United States, minorities have always been neglected. The racial wealth divide is widespread and stems from hundreds of years of policies and practices that were (and still are) put into place to hinder people of color from advancing economically.
Editorial credit: Kristi Blokhin / Shutterstock.com
According to The Road to Zero Wealth report published by the Institute for Policy Studies and Prosperity Now, if the racial wealth divide continues to be left unaddressed, the average wealth for Black people will hit an all-time low of zero by 2053. By 2073, the median Latinx household wealth is predicted to hit zero as well. In the same study, the median household wealth for White families is expected to increase by more than $100,000 by 2053.
Alarming Facts When Comparing White Households to Those of Black and Latinx Households
The wealth gap between ethnic communities and their White counterparts has caused these ethnic communities to remain in poverty. For example, as of 2019, 21.2% of African Americans and 17.2% of Latino households live in poverty, and only 9% of White households live in similar financial situations.
Furthermore, according to the Survey of Consumer Finances (SCFs), the median wealth for a White household is $184,000, which is staggering when the median black household has around $23,000 and Hispanics have $38,000. These gaps in wealth display how difficult it is for ethnic households to accumulate wealth on the same level as White households.
Reasons Why Levels of Wealth are Lower Than White Counterparts
Several modern factors have caused a significant delay in increasing Black and Latinx wealth, such as student loan debt and the credit gap. Still, the systematic inequalities that have consistently kept minorities from advancing economically need to be confronted and reformed. Those systematic barriers must be relinquished to give equal financial access and opportunities to Black and Latinx people and give them a fighting chance at building wealth for themselves and future generations.
How is United States Government is Fighting the Wealth Gap
President Joe Biden has initiated a 10-year plan to help reduce poverty levels and increase the middle class. His 10-year project aims to make post-secondary education more affordable and accessible to people in lower-income communities.
Campus of Bethune Cookman University, an Historically Black College (HBCU)
Editorial credit: James R. Martin / Shutterstock.com
He is increasing the resources that Historically Black Colleges and Universities (HBCUs), Tribal College and Universities (TCIs), and Minority Serving Institutions (MSIs) to make it easier for underrepresented communities to get access to opportunities that can change their lives for the better.
How to Fight the Wealth Gap Yourself
Educate Yourself and Others
One way to combat the generation-long racial wealth divide is through financial literacy. Financial knowledge regarding ownership, debt, entrepreneurship is among the most important tools to give to our Black and Latinx communities. Giving families the tools to manage their money in better ways and helping them learn how to grow their wealth is the key to combat this daunting net worth statistic.
Supporting Local Black and Latinx Businesses
When spending money at large corporations such as Target or Walmart for your everyday needs, local businesses have a harder time remaining open. However, choosing to do your shopping at a local and minority-owned grocery store allows the family that owns the store to remain in business and helps them reduce the wealth inequality between different ethnicities.
Hire Diverse People
A study conducted by Georgetown University’s Education and Workforce Center and JP Morgan revealed that in the labor market, people of color who possess the same level of education as their white counterparts struggle with discrimination and landing a good job.
When researching the percentage of people that hold well-paying jobs, it was revealed that 77% of white Americans have these types of positions. However, only 10% of Black Americans fall into the same category, displaying how discrimination plays a prominent role in the wealth inequality experienced by people of color.
Therefore, when one is in a management role and is looking for a person to hire, it is crucial to hire someone of color. This helps to close the racial wealth gap by providing a Black or Latinx family with the opportunity to have a well-paying job and get their family into a better financial situation.
Ask for a Raise at Your Place of Employment
If other employees have the same role and position as you yet are making more money, set up a meeting with your manager to discuss the possibility of getting a raise. When these issues go unnoticed and are not mentioned to management to rectify, then pay discrimination occurs, and it becomes difficult to get out of the situation.
Budget Your Expenses
Budgeting is a crucial part of everyone’s financial life. Without a budget, your money won’t have a set place to go every month, which allows frivolous spending. A common reason for people not being financially stable is that their expenses are too high, also known as living above your means. However, when trying to combat the wealth gap, every bit of money saved counts. Therefore, it is essential to create a budget and highlight every expense. By lowering or eliminating certain expenses, you can save money that will help you build up wealth.
The most important way to improve your financial situation is by investing, whether it is $5 or $500 a month; every tiny bit counts. When starting your investing journey, it can be challenging to determine where to invest your money. However, once you begin investing in small increments, these investments will pay off over time as they will allow you to generate passive income and steady returns as you hold onto them for many years.
Recommended Read: A beginner’s guide on how you can start investing.
CapWay Tip: At CapWay, we serve communities that need access to financial inclusivity. Financial inclusion is key to providing valuable and affordable financial products and services to communities left behind in the race to wealth and prosperity. CapWay provides resources such as our financial literacy program, Phunds, banking products, free financial education content (Learn Money), and much more. Our mission is to provide financial access with an equal opportunity to make money moves and build generational wealth.