Wealth is the difference between what someone owns and what someone owes. The racial and gender wealth gaps are the discrepancy in wealth between households of color and white households, and between women and men. Not surprisingly, wealth gaps are rooted in structural inequality.
To help make explaining the racial and gender wealth gaps easy listening, I’ve put together a playlist (I’m a playlist maker) that tells you what you need to know.
“Whoa-oh! All the things I could do. If I had a little money.” – ABBA.
Let’s sing—er, talk—about wealth. The word “wealth” may make visions of The Great Gatsby and HBO’s Succession dance in your head. However, wealth is not just for the wealthy; it is important for everyone’s financial security, whether it’s having emergency savings to deal with an unexpected bill (like a car repair or ER visit), savings to cushion the impact of cut hours or job loss, or saving for the future (college, a house, or retirement). Wealth, even in small amounts, may be even more important for low-income women, to help weather such economic shocks.
“9 to 5, yeah, they got you where they want you. There’s a better life, and you think about it, don’t you? It’s a rich man’s game, no matter what they call it. And you spend your life putting money in his wallet” – Dolly Parton.
There are many systemic and structural factors that create and perpetuate wealth gaps, but the wage gap is a big contributor. Women of color experience two-fold discrimination on the basis of race and sex. Even when working full-time, year-round, women of color make much less than their male counterparts. There is a gender wage gap in over 97 percent of occupations. Notably:
- Black women make only 62 cents for every dollar paid to white men;
- Latinx women make 54 cents, Native women make 57 cents, and Native Hawaiian and Pacific Islander women make 61 cents for every dollar paid to white, non-Hispanic men;
- Though Asian women are paid 85 cents for every dollar paid to white men, there are big disparities among sub-populations.
These wage disparities result in an average yearly loss of just under $24,000 for Black women, over $24,000 for Native women, and over $28,000 for Latinx women. Over a career, these income losses can total hundreds of thousands of dollars for women of color.
In addition to the wage gap, wealth gaps are furthered by other policies and practices that diminish the wealth accumulation of women of color over a career. For example, women of color are overrepresented in jobs with the lowest wages. Workers in low-wage jobs, like child care and the retail and restaurant industries, often have unpredictable hours that result in fluctuating salaries, lack benefits such as paid family and medical leave, and struggle to find financial support for their own child care needs. Having less income makes it very difficult for women of color to cover the needs of their families and build wealth.
“Let me help you in here
Until women can get equal pay for equal work
This is not my America” – Janelle Monae.
A lot of women who are trying to get ahead, even as they are paid less, may sympathize with Janelle. As if getting paid less, on average, for full-time, year-round work wasn’t enough of a barrier to wealth building for women of color, and women overall, there are more roadblocks.
The cost of an education keeps rising, and it’s affecting women and people of color the most. (I could dedicate an entire think piece to how student debt is a women’s issue, but I digress.) Women are the majority of college graduates and hold almost two-thirds of the outstanding student loan debt. In 2011 and 2012, the average cumulative student debt for those graduating with a bachelor’s degree was almost $30,000 for Black women, almost $21,000 for Latinx women, and just over $20,000 for white, non-Hispanic women. In comparison, the average cumulative student debt for white, non-Hispanic men was under $19,000.
For-profit colleges disproportionately enroll students of color, and upon graduation, these students have heavy student loan burdens. Black Millennials have more student loan debt and take longer to pay back their loans than white Millennials. Furthermore, Millennials are defaulting on their loans more than past generations of graduates due to large monthly payments with high interest rates. While the wealth of white Millennial female college graduates ($52,406) is almost $20,000 less than white Millennial male college graduates, it is far greater than the wealth of Latinx ($29,889) and Black ($3,316) Millennial female college graduates. Because Millennials carry so much debt, many delay homeownership.
Homeownership is one of the best ways to build wealth. Unfortunately, structural racism and sexism often create barriers to accessing this form of wealth as well. Redlining, the discriminatory lending policy of refusing or increasing the cost of loans based on race, targets women of color by limiting their access to homes in predominately white neighborhoods where there are well-funded schools and more economic opportunities. If you’ve seen the movie about the 2008 financial crisis, The Big Short, you may remember the scene where Margot Robbie explains risky mortgages, also known as subprime mortgages, in simplified terms. Subprime mortgages are given to women, especially single women and women of color, more than men, which is one reason why the homes of women and people of color lost value in the recession. These policies related to student debt and homeownership exacerbate wealth gaps.
“‘Cause I’m the Taxman. Yeah, I’m the Taxman. And you’re working for no one but me” – The Beatles.
Provisions of the federal tax code also exacerbate racial and gender wealth gaps. The tax code contains “incentives” (big emphasis on those quotation marks) for homeownership, education or retirement savings that are often inaccessible to low-and-moderate-income families. The Mortgage Interest Deduction (MID) is one example, and I’m going to try and be like Margot Robbie and break this MID down.
The MID (as the name suggests) allows homeowners to deduct their mortgage interest from their income, to lower their tax bills. The MID is supposed to be an “incentive” for homeownership, but if you’re taking advantage of the MID, then you’ve already bought a home. Furthermore, homeowners can only claim the MID if they itemize deductions on their federal income tax returns. To put it a different way, people who don’t itemize their deductions won’t be able to take advantage of the MID. Only 30 percent of all households in 2016 itemized deductions. Of the households that did itemize deductions, 7 percent had incomes under $30,000, while 93 percent had incomes over $500,000. Therefore, the MID works in favor of the wealthy who own homes and itemize deductions: in 2018, most of the tax filers claiming the MID had incomes above $100,000. Think of the MID as an open house for wealthy homeowners. *And scene.*
Tthe MID is less of an incentive for homeownership and more of a reward for people who are already wealthy enough to be able to buy a home in the first place. Unfortunately, the MID is typical of tax subsidies that “incentivize” savings and wealth-building. The subsides don’t do much to help the low-and-moderate-income families who need help saving and building wealth – which exacerbates wealth gaps for women and people of color.
“I worked hard and sacrificed to get what I get. Ladies, it ain’t easy being independent” – Destiny’s Child.
Structural racism and sex discrimination make it harder to build wealth. Women and people of color are paid less and face barriers to wealth building, such as ever-increasing levels of educational debt and discriminatory and predatory lending, which results in delayed wealth building and significantly less wealth.
Wealth gaps by race and gender are a significant problem because the gaps are so large: In 2013, the median net worth of single white, non-Hispanic men, $28,900, vastly exceeded the median net worth of single Latinx women ($100) and single Black women ($200). Single Black men and single Latinx men also face stark wealth disparities (with a median net worth of $300 and $950, respectively). In 2013, moreover, white households held twelve times the median assets held by Black households, and almost ten times the median assets held by Latinx households.
The data on racial and gender wealth gaps is startling, and policymakers are taking notice. The U.S. House Committee on Financial Services, Subcommittee on Diversity and Inclusion held a hearing on racial and gender wealth gaps earlier this fall. What would really be exciting is to see policymakers proposing steps they can take to shrink these huge gaps. Now that would be music to my ears.