As Wealth Gap Between Whites, Blacks & Latinos Grows, What Can Your Company Do?

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The widening wealth gap between whites and Blacks/Latinos made the headlines when a study, published by the Pew Research Center and based on U.S. Census Bureau data, found that the median wealth of Latino households fell 66 percent and Black households fell 53 percent between 2005 and 2009. The median wealth of white households declined by only 16 percent. This is creating the biggest wealth disparities by race/ethnicity since the Census Bureau started calculating this 25 years ago. The median wealth of whites is now 20 times that of Blacks and 18 times that of Latinos.

The study and media coverage primarily attributed the growing gap to a failure to diversify financial holdings by Blacks and Latinos, who often put savings almost entirely into real estate and also overextended themselves far more to purchase real estate than whites did. Much of that, no doubt, can be attributed to subprime lending and the greed of certain financial institutions. But there are other socioeconomic and cultural factors at play—and there are solutions to remedy this gap.

DiversityInc interviewed Christian Weller, a senior fellow of the Center for American Progress, who has done considerable research on the wealth gap. Here are his arguments for the reasons for the gap—and solutions for what can be done, especially for corporate America.

Causes for the Growing Wealth Disparities Between Whites and Blacks and Latinos

Weller notes that the United States does have a strong culture of homeownership as a means to wealth, more than most countries. But he adds that for Blacks and Latinos, there has been very little savings outside of real estate. This is problematic, especially since many people in those communities borrowed more to buy and so had far less or no equity when the housing bubble burst.

“They lost a far larger share of their income,” he says, adding that “there also isn’t good housing stock for rental properties in a lot of the areas where Latinos are buying predominantly.”

Homeownership rates for whites average about 70 percent, while they are at 50 percent for Latinos and 48 percent for Blacks. The difference, he says, is that whites usually have other income streams besides their homes. And homeownership rates for Blacks and Latinos have been declining in the last few years.

“A lot of families often see buying a home as forced savings. But whites are more likely to also have a 401(k) at their workplaces,” he says.

To that end, unemployment is a key factor in the lack of alternative savings strategies. An issue brief entitled “The Black and White Labor Gap in America” that Weller co-authored for the Center for American Progress found that the unemployment rate for Blacks grew far more significantly than for whites during the recession and has continued to grow at a more accelerated rate, even during the recovery period.


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“It is now painfully clear that African Americans are still facing depression-like unemployment levels,” he wrote with co-author Jaryn Fields. “Policymakers should obviously address the overarching problem of unemployment in whatever plan comes together to raise the federal debt limit by August 2, but there are unique structural obstacles that prevent African Americans from fully benefiting from economic and labor-market growth—obstacles that deserve particular attention when unemployment rates for African Americans stand at the highest levels since 1984.”

For April, May and June of 2011, Black unemployment was 16.1 percent, compared with 7.9 percent for whites. At the end of 2007, Black unemployment was 8.4 percent, while white unemployment was 4 percent. 

An article that Weller co-authored earlier this year, “The State of Communities of Color in the U.S. Economy,”stated: “The recession and recovery quickly eliminated the modest gains that Latinos had seen during the last business cycle. Latino homeownership rates in 2010, for instance, were again close to their levels in 2001 even though Latino homeownership rates had risen from 2000 to 2007.”

Weller also noted in our interview that Latino men have a higher prevalence of being employed in construction or construction-related jobs, which are more impacted by the housing decline than other industries.

Solutions: What Companies, Government and Communities Can Do

Weller believes the greatest solution to the wealth gap is to ensure that Blacks and Latinos have more access to full-time jobs and, thus, to 401(k)s and other means of savings in addition to homeownership. He urges corporations to automatically enroll employees in 401(k)s and to train and educate them on the benefits of saving for retirement and the future in several streams. And all financial-educational information should be available bilingually, he adds.

“One of the safest ways of saving in the United States has been through employment—savings and pension plans and 401(k)s. Whatever employers can do to get people to participate, the more wealth will be developed in communities of color,” he says.

DiversityInc notes that education is the critical means to increase employment and corporations can do much to help low-income students, who are predominantly Black and Latino, to get good educations through programs such as the Rutgers Future Scholars.

Another solution is for government to increase regulations even further to eliminate predatory practices, such as prohibiting high-interest payday lending, and to create more stringent and transparent usury laws. Crackdown on subprime lending and other predatory practices has intensified but there still exists considerable leeway and lack of accountability for financial institutions.

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15 Comments

  • There is some truth to this article, but another key difference is education. there are many blacks and latinos paying for private education for their children due to the lack of quality public education available where they are. In many of those homes, education trumps saving – meaning the disposable income if any available to contribute to save even outside company offered 401(k) plans is not there. and so yes, then saving for a home becomes the next big focus. Even the playing field all around and not just from what a company can offer perspective and gaps will start to shrink, probably never to 0 but in a much better ratio than they are currently.

  • As companies learn the merits of diversity and inclusion, perhaps (and I emphasize ‘perhaps’) those who make salary and pay decisions will see the benefits of promoting diversity. Once the economy improves, employees will have more options and will remember if they have been unfairly treated. Interestingly, a new study shows that older people simply leave and go elsewhere, as soon as they can, when they experience such discrimination.

  • Increasing laws will not make the difference because the diversity still doesn’t help… Companies are not interested in accommodating people outside their interests, culture and would allow their conterparts to step on that is trying to be one of them without doing anything unethical… I see how clickish moving up in the company reqardless of education.
    Most companies

  • Thsi is a great article. My thougthis that if more companies would invest in hiring more Blacks and Latinos into internships that would also be a start to increase dollars back into the commmunity. Create programs that foster local college or college bound students obtain local internships.

  • Being one of those who lost his home as a result of the predatory lenders, I can speak to this issue. My home was nestled in a nice conservative community of Valencia ,CA it was worth 800k allegedly, I was told it was going to be worth 1mill, then the bubble busted.

    All of my wealth was in my home and I had to file BK so I am starting all over again. We now live in an apartment and even though I have a degree in business I was unable to land a job in my field that paid a decent wage. Like many African American men in So Cal I became a Law enforcement security officer… which pays very little. I have shopped my resume which is very extensive, working for years for fortune five hundred companies and it has been my luck that all of the departments I worked in were either swallowed up by other departments or our departments were down sized and I was out. of a job. Some cases I was demoted and lost my salary even after being given a very good job eval.

    Of the companies I worked for, diversity was never a concern by the stakeholders, it was used against you in the 80s and 90s when their was blow back over affirmative action. African American wealth is a thing of the past in So Cal unless you work in the entertainment biz but that is a very difficult nut to crack. If you are a middle aged minority it is even harder. Once Obama was elected there was a rumor that companies were looking for well educated African American men , but the powers that be later began to return to the old ways of thinking that African American men are a threat to the business and it down grades their appearance to other business customers. Leadership positions are seldom offered even in government employment. Most of the children of the 80s are now middle management directors today and they have had very little exposure to minorities with exception to entertainment and sports. So when they are headhunting for a supervisor or manager they don’t look in our direction, because they have very little knowledge of who we are and our history.

  • Thanks for generating this dialogue about the role corporations can play in alleviating these economic disparities. My greatest challenge has been to get senior leaders comfortable enough to actually talk about the possible influences of race/ethnicity on their employees, as well as customers. Generally, there is either denial and/or such discomfort that the conversation just stops.

    Another big issue working against the gainful employment of Blacks and Latinos has been the decision of many companies to flee urban areas, moving out to suburban office parks to which access can be quite challenging.

    Let’s keep the dialogue alive and actions taken, so that the chasm does not get wider.

  • Anonymous

    The wealth gap is very much alive and striving in the part of the country I live in. I am African American and have worked for the federal government 29+ years. I am in middle management but have somehow managed to stay in the same pay grade for almost 20 years. In other words, I have been moving sideways when it comes to pay, even though my responsibilities on the job have increased. Based on my experience and education, I am well qualified for my career, so the only conclusion I can come to is that I have been discriminated against and the reason is to control the wealth in my family. Someone mentioned black and Latino interns, but 98% of the ones that are hired where I work, are not only white but also the children of upper management. Keeping the wealth in their families…..

  • Anonymous

    The article is very good. However, until African Americans as well as Latinos “own the means of production”, we will always be waiting on the Majority to provide our wealth. It is not going to happen people. It will never be in my lifetime or my Great Grand Children’s lifetime. It is up to us to become entrepeneurs as well as gain extensive knowledge and education in an effort to employ ourselves.

  • Anonymous

    I saw this report on the wealth gap a couple days ago and was disheartened. I believe there are many factors at play here. Of course, there is discrimination, which is huge! There are more whites in power in the U.S. so they hire their friends, cousins, etc. who whill inturn have more access to wealth opportunities such as 401K and medical care. Additionally, some middle-class blacks that I know are more interested in looking the part than actually building wealth, i.e., expensive clothes, homes, furniture that they cannot afford. I believe blacks (educated ones) have their priorities mixed up. Granted, if you are not taught how to manage money when growing up or learn it later in life through education or experience, it does not just happen by osmosis. My husband and I, who both grew up in extreme poverty, are what most would called upper class blacks, not snobs, but work hard, live in a nice house, nice cars, kids well kept, and college bound, good great, minimal debt, and both of us have retirement accounts and savings, but we have what we have through working, saving, listening to wisdom and advice from others who are doing it well – regardless of race, and staying out of credit card debt. I have clothes that are 10 years old but I know how to make them look very nice and professional and I know how to shop at a thrift store and you’d never know unless I told you. I believe many blacks are still controlled by a slave mentality. Even if you are educated, work, and make good money, you still cannot manage it. Clothes, eating out, and private school does not make you wealthy. Setting financial priorities will lead you to wealth. If we as blacks don’t understand, get educated on how to prioritize and use your money wisely. Stop waiting for someone to help you…no one really cares about anyone else. You have to go after what you need for yourself and while you are at it educate your children, family members, and friends who don’t know either. We must be empowered as black people and stop waiting for someone else to do something about our issues. Read the book Breaking the Psychological Chains of Slavery and see if you find yourself. In the book it talks about how slaves only had one or two outfits to wear for an entire year. If you are a clothes-aholic to the point of being in debt, research why clothes are priority for you. Slave mind – break it and help yourself and others!!! Bill Cosby was right in what he was saying, however, he fell short of offering solutions to the problems. I am tired of hearing about the next church meeting, conference, music festival, or family reunion that blacks folks are having but when it’s time to by something we are charging it or catch scratch $500 up for an emergency. How much was that last Coach bag you bought? What interest is it earning? WE must do better for ourselves. Blacks have to on up to what we are not doing, and start doing what we can. Educate the next generation and don’t just have children and expect them to raise themselves. Parents have a purpose.

  • Anonymous

    It’s difficult to accrue any wealth when your employment options include minimum paying or part-time jobs offering little to no compensation growth. The guest from So Cal is right, leadership positions are seldom offered to people of color. In my community, the African-American community, we know we are not going to be considered for those roles no matter our qualifications. While it’s great to suggest hiring interns or college bound students, the reality is that people who do not fit that demographic need gainful employment in a manner that is respectful and sustainable. A part-time job at McDonalds does not fit the bill nor does seasonable, retail work. I fear that we have returned to the old discriminatory practices when it comes to housing and employment. .

  • Anonymous

    As previous readers have stated, this article was well written and a good read. As a Black Women that has paid the price to seek higher education in hopes of finding employment that suit my skills and experience. I find it disheartening to find large corporations filling in the most entry level positions with people of color. I now struggle with selling my children on investing time and money into pursuing higher education when I have invested so much and although I have earned a MBA and have been in the workforce for over 20 years, I am still making almost the same as I did ten years ago. Part of the challenge in closing the gap is to hire Blacks and Latinos for jobs they are qualified for, including salary positions, and not just fill the quote with the low paying jobs. The higher you climb up the corporate ladder, the less colorful it gets. I agree with the guest that stated, “Companies are not interested in accommodating people outside their interest, culture.” Corporate America has a very long way to go and I am not so sure they are even interested in traveling the right road.

  • A couple of things about the data. One, these numbers are bad no matter what the skin color. Two, the disparity fails to acount for some demographics. The average white population in the US is far older than the averages for blacks and latinos. Older folks tend to have more wealth, regardless of ethnicity.Marriage is another factor. Married people tend to have far higher net worth. As noted, education plays a major factor in the accumulation of wealth. Drop out rates for minorities….making an exception for Asians, is staggering. Latino’s certainly suffer from language issues. My company can’t hire non-english speaking workers…..the computer systems cannot spit out orders in non-english on the shop floor.

    It would be a shame if the government tried to do something about this gap. They were the genesis of sub-prime lending. Anyone who fell for that….will fall for the next charade from Washington. The solution is simple. Get an education. Don’t get married until you have a career, then stay married. Don’t have kids until you can afford them. Don’t think anyone is going to look out for you.

  • Anonymous

    I agree with the july 29th poster, especially on three points…Get educated, don’t have kids until you are settled in a career (or at least a college degree), and no one will look out for you but yourself. One of the things this current economy has taught us is how important it is to be self reliant, and skilled in the art of finding your own path. I have seen hope and hopelessness in many of my fellow alumni, those with hope are usually the ones taking initiative, starting their own small business doing what they are best at, tutoring, cleaning, accounting, etc. The hopeless are the ones sending a million resumes waiting for a response because they say “what employer wouldn’t want me,” or “they owe me a job” or taking the depressed approach…they don’t want me because i’m old, i’m black, etc and take that attitude with them in their job search. Like others have said, make your own destiny, rise above challenges (real or perceived), stay away from crime, and don’t rely on some corporation or the govt to give you what you need. With that attitude, you can and will succeed even in these trying times.

  • Anonymous

    I agree with the guest comment “Companies are not interested in accommodating people outside their interest, culture”, as its part of their business objective (unwritten) –

  • Anonymous

    Interesting read

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