COVID Effects Worsen America’s Racial Wealth Gap
As the global pandemic continues to claim victims and infect generations, virtually every dimension of life is called into question. And people with the least financial resources before COVID-19 are challenged more than ever.
It is both a challenge and an opportunity for the leadership of the Biden administration, Congress, the Federal Housing Finance Agency and the Department of Housing and Urban Development, as well as the private sector, apply policies and practices that reverse the country’s ever-growing racial trend. wealth gap. Proven wealth creation tools, such as targeted home ownership and expanding investments in small businesses, would together bring lasting and meaningful change to historically financially marginalized people.
In an effort to better understand and resolve the double sagas resulting from centuries of racial discrimination and COVID, leading universities, government agencies, public policy institutes and businesses are releasing new research that analyzes additional challenges of the pandemic that exacerbate inequalities racial history.
For example, from the first quarter of this year, blacks, on average, had 22 cents for every dollar of white family wealth, according to the Federal Reserve’s Institute for Economic Equity in St. Louis. These substantial differences have remained largely unchanged since 1989.
The disparities are also reflected in the results of research conducted by Harvard University, which drew a key distinction between income and wealth inequalities.
“Income is unequal, but wealth is even more unequal,” said Alexandra Killewald, professor of sociology at Harvard, who studies inequality in the contemporary United States.
“You can think of income as the water flowing in your tub, while wealth is like the water in the tub,” she said. “If you have wealth, it can protect you if you lose your job or your home. Wealth is distinctive because it can be used as a cushion and can be passed directly from generation to generation, providing families with more choices and better opportunities in the present and the future… White Americans Enjoy a Legacy of Benefits… The typical white American family has about 10 times the wealth of the typical African American family and the typical Latino family.
The 150-year-old global financial firm Goldman Sachs is urging the public and private sectors to invest in a targeted and sustained manner to close the racial wealth gap in the United States. While this report focuses on black women, its projected results would also benefit black men.
Entitled “Black Womenomics: Investing in the Underinvested,” Goldman Sachs’ March 2021 report calls for access to capital, education, equitable incomes, health care and housing to lay the groundwork for reverse historical disadvantages, while creating financial independence and personal wealth.
Most importantly, the report calls for the participation of black people – and especially black women – to shape their own futures.
“[A]All efforts to effectively solve problems can only be successful if black women are actively involved in formulating strategies and shaping results. In addition, tackling discrimination and prejudice will be fundamental for real and lasting progress … The large wealth gap faced by single black women is particularly important as black women are increasingly likely to be mothers. single and breadwinner… Among black mothers, over 80% are breadwinners compared to 50% of white mothers, ”the report said.
Some data points from the report:
• Black women face a 90% wealth gap.
• The pay gap for black women widens throughout their working life, and particularly rapidly between the ages of 20 and 35.
• Black women are five times more likely than white men to use expensive payday loans.
• Black women are nearly three times more likely to forgo prescription drugs and much more likely than white men not to see a doctor because they can’t afford it.
• The median single black woman does not own a home, and single black women are 24 times less likely than single white men to own a business.
Additionally, the shortage of affordable housing in the country translates into 85% of black women whose families face housing costs ranging from over 30% to 50% of their income. Once the monthly rent is paid, these overburdened households have little left to cover utilities, food, childcare or other household needs.
According to a recent analysis from the Center for Responsible Lending (CRL), even black families earning a median income will need 14 years to save 5% down payment. A legacy of historically low incomes and little wealth available to pass down through families leaves most black Americans without the comparable financial benefits enjoyed by other races and ethnicities.
These and other circumstances lead many women of color to turn to high cost loans of just a few hundred dollars. While the typical $ 350 payday loan is marketed as a short-term solution to an unexpected expense, the reality for many low-income people is that the high-cost loan – which can carry interest of up to 400% – becomes yet another long term. -a long-term burden that worsens financial strains with each renewal.
“Predatory high interest lenders are dragging people into financial quicksand, making them more susceptible to various harms, such as losing their bank account, defaulting on bills, losing their car and filing for bankruptcy. It’s low-income consumers and communities of color disproportionately – which lenders target – who are being harmed, ”CRL’s Ashley Harrington said in testimony this summer before the US Senate Banking Committee. United.
The harms of wealth inequality also extend to the wider U.S. economy, according to the Goldman Sachs report. In her view, expanding opportunities for black women who are often at the bottom of the economic ladder can create a path to individual and national prosperity.
The sum of these results underscores the frustration felt by much of black America. The Civil War ended slavery and promised the emancipated 40 acres and a mule. The civil rights laws of the 1960s promised to eliminate discrimination in voting, housing and public housing. Second, affirmative action programs of the 1970s promised equal employment opportunities in areas previously off limits to blacks and other people of color.
It is time for this nation to keep its age-old promises. Creating neighborhoods of opportunity from pockets of poverty would strengthen cities and suburbs. If corporate executives joined with the Biden administration and Congress in ensuring that black America and other people of color share in the nation’s prosperity, everyone would be better off.
No person or community will ever beg to get out of poverty. But the down payment help for fifirst generation mortgage homebuyers would be a family estate. Likewise, the creation of an equity investment fund for small black businesses would preserve opportunities in the neighborhood, including more permanent jobs.
In the timeless words of the late Dr. Martin Luther King, Jr., “Everything we say to America is, ‘Be true to what you said on paper.’
Charlene Crowell is a senior member of the Center for Responsible Lending.