Tag Archives: African Americans

Racial Economic Disparity vs. Economic Inclusion

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“The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit.” Jerome Powell, Chairman Federal Reserve

Wealth inequality, also known as the wealth gap, is a measure of the distribution of wealth—essentially the difference between the richest of the rich and the poorest of the poor, according to World Population Review. American household wealth—the value of assets subtracted by the liabilities and debts owed—may have increased largely in the form of equity, mutual funds, and similar investments, but not equally among all Americans.

Wealth inequality is closely related to income inequality, which tracks the money people earn. However, wealth inequality includes not just income, but also the value of bank accounts, stocks and investments, homes, and personal possessions such as cars, jewelry, artwork, and other valuables. Wealth inequality is a major cause of unequal living standards in many communities.

The Federal Reserve’s statistics have confirmed the racial inequity gap related to income and wealth disparities. In its 2019 Survey of Consumer Finances, white families were reported to have had a median wealth level of $188,200, substantially larger than the median Black family’s wealth level of $24,100.

“These disparities still stand from a racism that’s systemic. It can be traced from employment to small businesses and wealth and still exist today in ways that still damage our country’s health,” Cleveland-based artist Chris Webb said.

The central bank is studying racial inequities in the U.S. economy. The Federal Reserve says it can only do so much to address earnings and wealth disparities, but feels an obligation to at least research the economic implications of uneven economic outcomes in the U.S.

While the assets of white households are equally split between real estate, equity and mutual fund shares, pensions, and other assets, the assets of other racial groups are less diversified. Almost two-thirds of Black wealth is composed of real estate and pensions, with 38% coming from pension assets alone. Similarly, 61% of Hispanic wealth and 56% of wealth from other races is composed of just these two asset types.

Additionally, according to data from the Census Bureau, 35% of white Americans are 55 and older, whereas only 24% of Black Americans are and only 16% of Hispanic Americans are. Hence, a part of the reason why wealth ownership is much lower among Black and Hispanic Americans may be due to the fact that they are relatively younger on average than white Americans. Black and Hispanic populations may be younger for a variety of reasons, including differences in life expectancy—Black Americans’ life expectancy is 3.5 years less than that of white Americans—as well as immigration trends.

The white population is more likely to be older, has earned more income over their lifetime and hold more wealth than Black and Hispanic populations.

In summary, the causes of wealth inequality in America remains deeply rooted and are systemic. And, the results of wealth inequality in America persists even today.

References:

  1. https://worldpopulationreview.com/country-rankings/wealth-inequality-by-countryhttps://worldpopulationreview.com/country-rankings/wealth-inequality-by-country
  2. https://finance.yahoo.com/news/economic-and-racial-inequalities-are-long-haul-issues-for-the-federal-reserve-220405947.html
  3. https://usafacts.org/articles/white-people-own-86-wealth-despite-making-60-population/

Building Black Wealth Insights Study – U.S. Bank

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The racial wealth gap constrains the U.S. economy as a whole, resulting in $1-1.5 trillion in lost economic output and a 4-6% drag on America’s GDP.

The racial wealth gap in America is not just a ‘Black problem.’ It’s a problem that effects all Americans and is an ‘all of us’ challenge to remedy, according to U.S. Bank. “Extreme disparities and their persistent harm reach into every American’s future. We can all be energized by the opportunity to provide the tools of financial prosperity for Black families and other historically disadvantaged members of the American fabric because those benefits will be felt throughout our entire country. By working to close the racial wealth gap, we’re creating economic prosperity – more jobs, economic vitality – it’s better for business, for families and for communities. The racial wealth gap must be closed if we are to achieve our full potential as a nation,” says Greg Cunningham, SEVP, Chief Diversity Officer U.S. Bank

Building wealth and achieving financial security is a primary aspiration for most, but many communities, especially the African American community, face distinct systematic challenges in reaching these goals. And, the financial industry has an important role to play in eliminating the barriers and closing the racial wealth gap.

While everyone has a unique definition of financial security, it’s often defined as having peace of mind that their income is enough to cover both expected and unforeseen expenses.

U.S. Bank’s Building Black Wealth Insights Study attempts to understanding the needs, goals and challenges of the Black community. This research highlights many steps the financial industry must pursue to better serve the Black community, according to Gunjan Kedia, Vice Chairman, U.S. Bank Wealth Management and Investment Services.

In the United States, Black households hold significantly less wealth than white households, and over the last several decades, that gap continued to grow.2 While there has been some improvement, the net wealth of the average Black family today is less than 15 percent of that of a white family.1

The overall conclusion is that more work needs to be done to narrow the wealth gap; in fact, a 2018 analysis published by the Federal Reserve Bank of Minneapolis posited, “no progress has been made in reducing income and wealth inequalities between Black and white households over the past 70 years.”3

Also, according to the Q2 2021 Bureau of Labor Statistics report, the median weekly earnings for Black men were $877, or 78.7 percent of the median for white men ($1,115).4

It may come as no surprise, then, that our survey found Black affluent respondents feel they are at a disadvantage compared to rest of the population. Nearly twice as many Black affluent individuals as Hispanic individuals in the survey stated they had been treated differently by the financial services industry due to their race – and nearly four times as many compared to Asian and white individuals.

Despite these barriers, we found that Black affluent individuals are more likely than non-Black (white, Hispanic and Asian) affluent respondents to:

  • Have clearly defined financial goals.
  • Have a strong financial plan that helps guide their decisions.
  • Believe they are better at managing their finances than their parents.
  • Be more comfortable discussing money matters freely with friends and family.

U.S. financial institutions must acknowledge that they played a historical role in creating and sustaining present and persistent gaps in wealth by race and ethnicity. According to the Federal Reserve’s 2019 report, there is an 8:1 gap in wealth between white and Black families, and a 5:1 gap in wealth between white and Hispanic families.1 Financial institutions must not only acknowledges this history, but be willing to leverage the unique skills and expertise of its they possess to build wealth in African American communities and help close those gaps.

U.S. financial institutions must make a commitment to address this persistent racial wealth gap.

To help build wealth, banks and financial institutions must reduce actual and perceived barriers to their services, and redefine how they intend to serve the special needs of racially diverse communities. They must make a commitment to support businesses owned by people of color, help individuals and communities of color advance economically, and enhance career opportunities for employees and prospective employees

It must start by banks and financial institutions listening to and learning from their diverse customers and communities. “We are starting with the Black community, because that is where the wealth gap is greatest. We’ll continue to listen and learn in order to take steps to support lasting change,” explains Mark Jordahl, President U.S. Bank Wealth Management.

Despite the historical and current barriers faced by Black individuals, there are abundant opportunities by banks and financial institutions to cl,ose the wealth gap. And,
there is still much that industry leaders can do to support Black affluent individuals – and Black individuals at all economic levels. A few thought starters, according to U.S. Bank, are:

  • Advisor training – Ensure employees at all levels are trained to recognize their own individual biases and to treat all individuals with fairness – whether they’re greeting someone at a bank counter or considering approval for a loan product.
  • Advisor awareness – Acknowledge that working with a financial advisor may be uncomfortable for someone doing it for the first time or someone who has had a prior negative encounter. Consider how words and actions can impact an experience and commit to training client-facing advisors to enhance the client experience, especially for those from different backgrounds.
  • Diverse advisors – Know that representation matters. Expand hiring and retention efforts to ensure diversity doesn’t just occur at entry-level positions, but through all levels of client-facing roles and leadership.
  • Tailored advice – As with any customer, avoid making assumptions about financial goals and ensure financial planning advice takes into consideration the priorities of the individual or family. Examples may include ensuring current lifestyle needs are met, helping the next generation and leaving a legacy. Make real estatepart of the conversation and ensure fair mortgage lending.

https://www.usbank.com/dam/documents/pdf/wealth-management/perspectives/building-black-wealth.pdf

References:

  1. https://www.usbank.com/dam/documents/pdf/wealth-management/perspectives/building-black-wealth.pdf

Closing the Black Wealth Gap

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Black families have one-eighth the wealth of white families as a result of economic discrimination and institutionalized racism.

This year marks the 100th anniversary of the Tulsa Race Massacres. Over two days, a white mob in the city’s Black district of Greenwood killed an estimated 300 Black Americans and left nearly 10,000 destitute and homeless. The Greenwood area was known as Black Wall Street, an epicenter of Black business and culture.

The Tulsa Race Massacres is just one many thousands of violent and economic incidents throughout American history that created the wealth gap. As such, the Black wealth gap was created through centuries of institutional racism and economic discrimination that limited opportunities for African-Americans.

Wealth was taken from these communities before it had the opportunity to grow. This history matters for contemporary inequality in part because its legacy is passed down generation-to-generation through unequal monetary inheritances which make up a great deal of current wealth.

The racial wealth gap is a chasm with Black families owning one-eighth the wealth of white families. According to the Survey of Consumer Finances, in 2019, the median net worth of Black households was $24,000 as opposed to $189,000 for white households. This shortfall in financial wealth creates a cascade of inequalities in education, homeownership, and simply saving for emergencies.

Historically, Blacks were limited to certain neighborhoods and had more trouble borrowing to buy a home than white home buyers. Additionally, Black workers don’t advance to the top positions in companies at a proportional rate as other groups.

Moreover, African American families have had fewer opportunities to build generational wealth through home ownership, investments and inheritance. In this century, many Black families were stripped of their wealth and financial security by by both public and private institutionalized racism whether called Jim Crow or redline policies.

There are other factors: Many African-Americans, particularly older ones, are too conservative as investors. Only 34% of Black families own stocks, while more than half of white families do, according to a Federal Reserve. It is important to help African American investors get more comfortable with owning risk assets such as equity stocks, ETF and mutual funds that build wealth over the long term.

Do not seek shortcuts to build wealth

You must build wealth over time. If you’re saving 15% or 20% of your income over 30 years, there’s a good chance you will be wealthy. These methods truly work whether you’re making $50,000 or making $500,000 a year.

‘We just had an 11-year bull market. If you didn’t take the appropriate amount of risk, you’re significantly behind,” says Malik Lee, an Atlanta financial advisor whose clientele is more than 90% African-American.

American Dream for Black families

The heart of the American Dream for Black families is financial wellness, independence and freedom. There are many ways to express the American Dream, including owning their home, not living paycheck to paycheck, and being able to travel. Today, 69% of African American families are confident the American Dream is still attainable, according to MassMutual’s ‘State of the American Family’ survey.

Financial wellness for most families is the heart of the American Dream. American families tend to view financial wellness in terms of five common financial priorities:

  • Having an emergency fund
  • Feeling confident in both short-term and long-term financial decision making
  • Not carrying a lot of debt
  • Being financially prepared for the unexpected
  • Not living paycheck to paycheck

Black families are taking steps to secure their financial future and dreams, but more needs to be done to keep the American Dream alive. The top financial regret across all consumer groups surveyed is “not starting early enough.”

References:

  1. https://www.barrons.com/articles/this-advisor-wants-to-close-the-black-wealth-gap-accepting-risk-is-key-51625077456
  2. https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Net_Worth;demographic:racecl4;population:1,2,3,4;units:median;range:1989,2019
  3. https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/
  4. https://www.massmutual.com/static/path/media/files/mc1133aa_09248mr-final.pdf
  5. https://www.forbes.com/sites/brianthompson1/2021/06/17/the-key-to-closing-the-racial-wealth-gap-black-entrepreneurship/

Annual Black Investor Survey by Ariel Investments Charles Schwab

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“Black Americans are already behind the eight ball, and it is disheartening to see that at current savings and investing rates, the wealth gap will continue to expand, endangering our futures and leaving our families exposed.” Mellody Hobson, co-CEO & President of Ariel Investments

The annual Black investor survey by Ariel Investments and Charles Schwab was recently released.

This year, the survey revealed that Black Americans continue to have less opportunity to benefit from stock market growth than white Americans at similar income levels, according to Ariel Investments. The data also showed signs of hope, including increased young investor engagement.

For more than 20 years, the Ariel-Schwab Black Investor Survey has compared attitudes and behaviors on saving and investing among Black and white Americans.

This year’s results show the deep-rooted gap in participation between the groups persists. The survey conveyed several important trends:

  • Growing engagement in the stock market by younger Black Americans, with 63% under the age of 40 now participating in the stock market, equal to their white counterparts
  • The closing of this gap among younger investors is being driven by new investors: 3 times as many Black investors as white investors (15% vs. 5%)
  • A wide investing gap exists overall – 55% of Black Americans and 71% of White Americans reporting stock-market investments

It is encouraging to view that younger African Americans are investing in greater numbers. Yet, a significant gap persist in the overall number of who invests by race and ethnicity.

More Black Americans became first-time investors in 2020 than in any other year, according to the results of a new survey by Ariel Investments and Charles Schwab. The rise has primarily been driven by younger investors: 63% of Black Americans under 40 now report participating in the stock market, equal to their white counterparts.

On the whole, however, wide gaps remain, with 55% of Black Americans and 71% of white Americans reporting stock-market investments. “This disparity, compounded over time, means that middle-class Black Americans will have less money saved for retirement and less wealth to pass onto the next generation,” the report’s authors write.

The ongoing pandemic has only exacerbated the imbalance, according to the report. In 2020:

  • More than twice as many Black 401(k) participants (12% vs. 5%) borrowed money from their retirement accounts.
  • Almost twice as many Black Americans (18% vs. 10%) dipped into an emergency fund.
  • Nine percent of Black Americans (vs. 4% of white Americans) say they asked family or friends for financial support.

“Financial literacy is a great equalizer, and a life skill that everyone needs.” Carrie Schwab-Pomerantz, President of Charles Schwab Foundation

Financial literacy and education are desperately needed in the African American community. And, it needs to start at a very early age before the vestiges of debt and negative spending behaviors becomes a difficult to break habit.

Trust Remains an Issue

Trust in the financial services industry continues to affect stock market participation among Black Americans. While similar proportions of Black and white investors believe that financial services institutions are not trustworthy, only 35 percent of African American investors feel they are treated with respect by financial institutions versus 62 percent for white investors. As a result, Black Americans are less likely to work with financial advisors.

Additionally, what works against new African Americans investors is that most wealth and financial advisors will not work with you if you don’t already have large amounts of money you either earned or inherited. This leaves the vast majority of American (Black, White, etc) out of the financial advisory equation.

There will be a conversation among leading financial services experts from Ariel Investments, Charles Schwab, and CNBC discussing the challenges driving the racial wealth opportunity gap. This group will discuss the research findings, broader trends, and how the financial services industry can challenge the status quo.

The The Racial Wealth Opportunity Gap Widened in 2020 conversation will occur on Tuesday, March 2, 2021, 3:00 – 4:00 p.m. EST.

References:

  1. https://www.aboutschwab.com/ariel-schwab-black-investor-survey-2021
  2. https://blackinvestorsurvey.swoogo.com/ariel-schwab/979446?ref=swbh?SM=URO&sf243370044=1

Defense Secretary Lloyd Austin III

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Austin has broken racial barriers throughout his four decades in the U.S. Army.

Newly confirmed Defense Secretary Lloyd Austin III took office Friday as the first Black defense chief. Retired Army General Austin, 67, is a 1975 graduate of the U.S. Military Academy at West Point. He helped lead the invasion into Iraq in 2003, and eight years later was the top U.S. commander there, overseeing the full American troop withdrawal.

General Austin was only the sixth African-American four-star general in Army history. Austin gained confirmation after clearing a legal hurdle prohibiting anyone from serving as defense chief until they have been out of the military for seven years. Austin retired less than five years ago, but the House and Senate quickly approved the needed waiver, and President Joe Biden signed it Friday.

President Biden said he chose retired Gen. Lloyd Austin III for defense secretary because of his experience and integrity, calling the retired soldier “the definition of a patriot.”

The top Democrat on the Senate Armed Services Committee said that Austin is an “exceptionally qualified leader” who pledged to uphold civilian control of the military during his confirmation hearing.

The retired four-star Army general told senators that the Pentagon’s job is to “keep America safe from our enemies. But in the wake of the deadly insurrection at the U.S. Capitol, where retired and current military members were among the rioters touting far-right conspiracies, we can’t do that if some of those enemies lie within our own ranks.”

He said that military leaders must set the right example to discourage and eliminate extremist behavior. They must get to know their troops, and look for signs of extremism or other problems, he said.

But Austin — the first Black man to serve as head of U.S. Central Command and the first to be the Army’s vice chief of staff — also knows that much of the solution must come from within the military services and lower-ranking commanders. They must ensure their troops are trained and aware of the prohibitions.

“Most of us were embarrassed that we didn’t know what to look for and we didn’t really understand that by being engaged more with your people on these types of issues can pay big dividends,” he said, recalling the 82nd Airborne problems. “I don’t think that you can ever take your hand off the steering wheel here.”

Austin describes himself as the son of a postal worker and a homemaker from Thomasville, Georgia, who will speak his mind to Congress and to President Biden.

References:

  1. https://www.militarytimes.com/news/your-military/2021/01/24/for-1st-black-pentagon-chief-racism-challenge-is-personal/
  2. https://www.militarytimes.com/news/pentagon-congress/2020/12/08/biden-heres-why-i-chose-lloyd-austin-for-defense-secretary/

African Americans Disproportionately Dying

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African Americans are dying from the coronavirus at almost 3 times the rate of their white counterparts.

Black and Hispanic Americans were disproportionately more likely to die of COVID-19 during the spring and summer months indicating that the coronavirus’s toll is falling most heavily on underserved and minority communities, according to the Centers for Disease Control and Prevention (CDC).

When you consider that African Americans represent 12.5 percent of the population, but account for almost 23 percent of all coronavirus deaths, the COVID-19 pandemic is disproportionately decimating the black working class communities across the country.

Coronavirus has become the third leading cause of death of citizens in the United States in calendar year 2020. The virus has killed more than 300,000 since arriving on U.S. shores, making it a leading cause of death after heart disease and cancer.

In 2018, the 10 leading causes of death for all Americans (heart disease, cancer, unintentional injuries, chronic lower respiratory diseases, stroke, Alzheimer disease, diabetes, influenza and pneumonia, kidney disease, and suicide) remained the same as in 2017. The 10 leading causes accounted for 73.8% of all deaths in the United States in 2018.

The Centers for Disease Control and Prevention (CDC) maintains a provisional death count related to COVID-19. The deaths counted in that data are well below those compiled from the state and county levels because the provisional count is based on death certificates that may take weeks to filter up to the federal agency.

With respect to controlling the pandemic, Martin Luther King Jr. once declared “Whatever affects one directly, affects all indirectly.” This is definitely true for epidemiology and controlling the pandemic. To protect the health of all us, we must insure the health of the most vulnerable among us.

How to control COVID-19 is not a mystery — it requires wearing masks, social physical distancing of 6 feet, frequent washing of hands, widespread contact tracing and COVID testing and widespread vaccination. However, these efforts to combat the pandemic require people to trust the science and those behind the public health measures.

In the nationwide fight against the COVID-19 pandemic, well founded mistrust has developed over decades by African Americans of the government, public health officials and ‘the science’ can and has killed a disproportionate share of working class Blacks and other people of color.

References:

  1. https://www.cdc.gov/nchs/nvss/vsrr/covid19/
  2. https://www.usatoday.com/story/opinion/2020/09/09/covid-19-disproportionate-effect-african-americans-and-how-control-column/5679676002/
  3. https://www.cdc.gov/nchs/nvss/vsrr/covid19/tech_notes.htm