4 Opportunities for Closing the Wealth Gap

photo by David Phan

Last month, the Federal Reserve Banks of New York and San Francisco, along with CFED and Citi Foundation, convened a diverse range of national and regional leaders in New York to discuss a new book, What It’s Worth: Strengthening the Financial Future of Communities, Families and the Nation. Launched in December, the book was designed to raise up promising strategies for increasing the financial well-being of households and communities. Together, more than 80 nonprofit leaders, educators, researchers, philanthropists and other community development experts came together to discuss one guiding, provocative question: What is the strongest lever we can push to close the wealth gap in New York and across the nation?

Over the course of five sessions and panel discussions, these experts offered their best ideas for how we can promote financial health and combat wealth inequality. As participants at the event considered these ideas, these four stood out as promising avenues to explore:

1. Prepare the Most Vulnerable Households for Homeownership. Colvin Grannum, President & CEO of Bedford Stuyvesant Restoration Corporation, called participants’ attention to the benefits of homeownership via strong communities. As Rick Lazio points out in his essay, Stable Housing, Stable Families, race and socioeconomic status play a significant role in determining whether an individual or family can achieve housing security, a key catalyst for financial stability. Given that much of the wealth lost in the past decade was a result of faulty bank practices that triggered the Great Recession and the millions of home foreclosures, we should build the capacity of low- and moderate-income households — especially households of color — to protect themselves against irresponsible and unethical mortgage lending practices.
2. Leverage CDFIs and Expand their Reach. Michael Rubinger, President & CEO of LISC, believes Community Development Financial Institutions (CDFIs) are uniquely equipped to alleviate poverty. By financing small businesses, microenterprises, nonprofit organizations, commercial real estate ventures and more, CDFIs spark job growth and retention in hard-to-serve markets throughout the US. However, the array of services CDFIs can offer in their communities are under-utilized, and encouraging greater uptake of these services through new and existing partnerships can help stretch the benefits of CDFI lending to the hardest-to-reach communities.
3. Invest in Public Sector Employment. Rubinger also highlighted how investment in skills training, especially for jobs in the public sector, can improve hiring and retention outcomes, boosting the effectiveness of each dollar spent on unemployment insurance. More support and integration of these services into workforce development programs should be made available, both in the workplace and at one-stop career centers that already provide technical and skills training. As Rita Landgraf argues in her essay, What Treating Financial Well-Being as a Public Health Issue, Delaware’s $tand By Me program proves that we can increase workforce development training completion rates while simultaneously emphasizing skills that produce long-term employment by integrating financial capability into the services that employees and potential employees are already accessing.
4. Use #FinTech to Automate Everything. Financial technology, or FinTech for short, is bringing us the next wave of innovations that can help build financial health. Rachel Schneider, Senior Vice President at the Center for Financial Services Innovation (CFSI), spoke to attendees at the New York event about CFSI’s Financial Solutions Lab. The Lab supports at-risk communities by helping scale technological innovations that help vulnerable consumers overcome some of the biggest challenges they face in navigating the financial marketplace. Schneider drew participants’ attention to several of these innovations: Propel increases takeup of federal nutrition programs among eligible households, eCreditHero simplifies the process of credit repair, and Digit automates savings to turn one-off deposits into habitual behavior.

These big ideas — just four among many — left participants in the What It’s Worth event with a deeper understanding of the challenges facing the most vulnerable consumers among us as they attempt to build their financial well-being. Although there was a clear sense that these challenges are daunting — both in New York and as they play out across the nation — there was also a clear sense that if we build bridges between professionals in the public health, education, housing and financial capability fields, these challenges are far from insurmountable.

Ultimately, What It’s Worth was crafted with that exact mentality in mind. We know that no single one of us has all the answers for helping people thrive, but we also know that there is a solid base of evidence-driven ideas on which we can build an economy characterized by the principles of opportunity and inclusion.

This evidence and a range of other ideas can be found in What It’s Worth and its accompanying resources, all of which are available for free. Download the free eBook and subscribe to updates at strongfinancialfuture.org and participate in the conversation by following @StrongFinFuture using #WhatItsWorth.

by Lee Davenport and Sean Luechtefeld, Prosperity Now (formerly CFED)