Business & Finance

Racial Economic Inequality

I care not for a man's religion whose dog and cat are not the better for it.

March 8, 2021

Racial Economic Inequality

Inside the United States

  • The top 1% make 132 times more than the bottom 99%.
  • Average income of the top 1%: $16,161,955.
  • Average income of the bottom 99%: $122,447.
  • African - Americans are disproportionately represented at the bottom of the pyramid

Source: www.epi.org/multimedia/unequal-states-of-america/

The Economic Pyramid

Income inequality and income gaps

Systemic racism has contributed to the persistence of race-based gaps that manifest in many different economic indicators. The starkest divides are in measures of household wealth, reflecting centuries of white privilege that have made it particularly difficult for most Africans to achieve economic security.

Many Africans living in the diaspora make up a disproportionate share of low-wage essential workers who’ve had to keep working in food processing plants, grocery stores, hospitality and other service-related workplaces.

For instance, according to the U.K. housing survey, households in the Black Africans 20% of ethnic groups had the lowest rates of homeownership. Compared with 68% of White British and 74% of Indian households owned their own homes.

A recent report by the Runnymede Trust, Black African households have only 10p of savings and assets for every £1 of white British wealth.

In the United States, on average, Black households considerably have less wealth than white households. In 2016, the average wealth of households with a head identifying as black was $140,000, while the corresponding level for white-headed households was $901,000, nearly 6.5 times greater.

Africans are also more likely to carry higher debt than other races, have little to no savings, and little to no investments. When financial challenges arise, the lack of savings combined with the financial literacy gap reality can be devastating to many African families.

How you can make individual change

Becoming empowered with financial education is one of the first steps you can take to closing the racial wealth gap.

Here are three websites with free financial education and have a ton of resources to support you.

www.smartaboutmoney.org

www.edx.org/course/personal-finance

www.moneyadviceservice.org.uk/en

Taking strategic action

  • Pay down debt, save and invest
  • Spending less and saving more are worthy goals. Paying down debt, however, is the key to success. The key is to give yourself time.
  • Create a debt repayment plan and start actively working on that plan to get out of debt.
  • You'll also want to create a plan to save and invest. Prioritize setting up an emergency fund to help with any near term needs.
  • Learn how investing works and start investing to achieve your long-term goals.
  • Homeownership is also worth pursuing as a way to transition generational wealth.
  • Share your knowledge with your children and community

Children have a lot of years to grow up, and you can give them years of age-appropriate financial lessons in their own home that will last a lifetime. Start now if you haven’t already.

Devising long term financial plans for children

Whether you live in Africa, Europe, the US or any other part of the world you should explore long term financial schemes and help give your child a head start in life.

Support African diaspora-owned businesses.

Supporting Black businesses also means supporting Black communities, as they are usually more than just places that offer goods and services. “They are community spaces for meeting and connection. They are cultural hubs and platforms for local artists. They provide programs and resources that the community needs. Especially given these multifunctional roles, strengthening Black businesses helps strengthen our communities.

Give to causes to fight racial injustices

If you're in a position to do so, giving to causes that fight racial injustices can make a world of difference. There are many aspects to supporting the movement. You can do so financially, physically in person during events and emotionally by lending a hand or an ear.

It would be nice if giving to causes were so straightforward. However, one needs to take precaution and examine the chosen cause’s underlying mission and goals to how well the charity will use your money, from their governance and how they will use your data. Charitable giving is becoming an increasingly complex gesture of goodwill, and it’s important that you think about these issues before you make a donation.

A word of caution

Before giving to any causes, do thorough background research and look beyond the emotional appeal of the chosen cause’s communications!

Source: Content licensed under a Creative Commons 3.0 License www.clevelandfed.org/newsroom-and-events/publications/economic-commentary

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