Why The Wealth Gap Exists — And How To Close It
This month, we recognized Juneteenth (short for “June Nineteenth”), which commemorates the end of slavery in the U.S. Today in 2021 we still have not achieved full equality. The wealth gap is a systemic problem that persists, and highlights the disparities in health, education, opportunity, etc. that people of color continue to face. In fact, right now the net wealth of a typical Black family in America is around one-tenth that of a white family.
To learn about why the wealth gap persists today and some solutions for change, I (virtually) sat down with some amazing panelists for a Consciously Unbiased LinkedIn Live conversation.
We discussed why education is essential for achieving greater equity and justice, how people of all races and backgrounds can benefit from closing the wealth gap, and the need to acknowledge the deep systemic inequalities in home ownership, funding, and income. Here are some key takeaways from our discussion.
The Diversity Dividend: Why Equality Benefits Us All
“In corporate America, we compare everything we do to what I call the diversity dividend,” says Hattie Hill, CEO & President, T.D. Jakes Foundation. “It makes us more competitive as an organization, more competitive in our communities, and more competitive as a nation, because we are globally competitive. Understanding how to close the wealth gap is not doing someone a favor. It is creating a larger pie so that we can all participate in a successful way. In order to do that, we have to go in with this diversity dividend mindset that says, what is the profit and loss margin for us? How do we connect this to strategic growth?”
The Wealth Gap Exists Because of Systemic Racism
“Racism is one of the biggest reasons why there is a wealth gap,” says Ruby L. Taylor, MSW, CEO & Founder, Financial Joy School. “We had people work for free for hundreds of years, which automatically created a major gap. Somebody is getting paid and somebody is not. We have to start there and then build from that. After slavery ended, the Jim Crow Laws also created systemic racism within the government and the corporations, which is why the gap continues to widen instead of close. The problem persists because we do not want to acknowledge the past and fix it. There has to be a macro and a micro solution. It just can’t be one sided, it has to be two. Once we begin to talk about the past and fix it, then we can begin to build. We can start with reparations, but they have to become reality and that is just one solution. There needs to be many more.”
Combating Home Ownership Inequality Will Require Intentionality
“Racism is baked into our housing market and industry,” says Lisa Wise, Chief Flockster, Founder, Flock DC. “Home ownership inequality has contributed to advancing segregation and poor educational opportunities for people of color. In order to untangle the injustice and all the wrongs that are embedded into this market will require a lot of intentionality. It will require people to just wake up. I think there is this assumption that people are making different choices or they chose not to buy. But everything about the real estate industry is designed to exclude people of color from buying. We have to change the paradigm and the narrative around that. People in the industry need to stop benefiting from that design and start redesigning the industry for more equity and inclusion.”
Small Businesses Need Equal Access to Financing
“Small businesses are a great vehicle for wealth generation,” says Gareth Waldeck, Investment Banking and Global Trade Specialist, Jahani and Associates. “The historical discrepancies between funding for small businesses so they have access to growth, capital, and working capital, have really affected specific communities. We need to ensure that there is equal access to debt and financing so that small businesses, especially black-owned small businesses, are supported and are able to grow. Small businesses are a key cornerstone and a key pillar for the community because they provide employment and growth.”
Positively Engage Others Into Conversations
“I have a phrase: each one, reach one. Reach out to people and be willing to have a conversation,” says Hill. “Trust is built on relationships over time. Very often, people don’t have anyone in their circle that they can reach out to understand the conversation that we are having right now about the wealth gap. So, engage someone in a conversation and know that there are two sides. Don’t be afraid to ask the question. And then if you are talking to someone who is different from you, don’t be afraid to give the answer and to engage in a very positive way. We are all learning every day.”
Closing the Wealth Gap Means Everybody Will Be Better Off
“When people have more, they spend more,” says Taylor. “And when people grow, our economy grows. But if it is saturated and the 1% begin to keep the wealth for themselves, the economy cannot grow the way it really can if wealth was more evenly spread out. It’s about the bottom line. I’m not talking about socialism, I am talking about capitalism working for everybody.”
Having Universal Basic Income Will Help Close the Wealth Gap
“It is not only a matter of closing the wealth gap, but also a matter of ensuring that people can meet their basic needs,” says Wise. “People should have access to quality education and healthcare. I would strongly advocate for universal basic income. It doesn’t need to be high, but it needs to be enough so that people aren’t wondering how to make ends meet so that they can pursue the opportunities that make sense for them and for their families and communities. Constantly struggling to meet basic needs will hinder peoples’ ability to contribute to their family and community the way that they want to, and the way that we need people to.”
Acknowledge the Deep Systemic Issues that Reinforce Inequalities
“I think we need to acknowledge we have some deep systemic issues,” says Waldeck. “The wealth gap is increasing rather than decreasing. There have been some positive steps, but we still need to increase diversity within venture capital funds, data providers, and small business support systems, not only at entry level, but in senior positions with key decision-makers as well. I also think that the investment community needs to focus on what is known as the triple bottom line. We should not merely focus on profits. We also need to focus on people and the planet. By doing this, you are actually investing in more sustainable business models. I think that produces long-term outcomes rather than just looking at short-term ROI.”
The wealth gap represents the accumulated effects of four centuries of institutional and systemic racism, and continues to contribute to the deeply rooted inequitable policies and practices we still have today. Although we have seen promising strides toward greater equality for all, there is still a lot of work to be done. Progress starts with more education at home and in your community, as well as turning intent into action. Our panelists also emphasized some positive steps we can take to help build a more equitably just society: having more quality research that focuses on the correct demographics, acknowledging that these systemic issues actually exist, and reaching out to others and engaging them in more conversations about diversity and inclusion. Diversity is not a favor, it’s a strategic advantage. If we begin to think about diversity as a business imperative, we will start to see change happen faster.
