America’s Wealth Gap: What It Is and What We Can Do To Close It
December 12, 2017
Recap of a critical discussion
On Monday, December 11, we hosted a #BridgingtheGap twitter chat. Special guests, Heather McCulloch, director of Closing the Women's Wealth Gap, and Tom Shapiro, author of Toxic Inequality and thought-leader on the racial wealth gap provided us with a deeper dive into America’s wealth gap and gave us a platform to discuss what we can do to close it.
If you weren’t able to attend, we encourage you to share or retweet these insights, look for more opportunities to engage in these types of conversations, and expand your own knowledge and skills so you can better advocate for those whom you serve.
What is the wealth gap and what can we do to close it?
- Wealth is a household’s assets (e.g., cash, stocks, bonds) minus liabilities (e.g., mortgage, credit card debt). It’s savings for emergencies or retirement; equity in a home or business; and it can be passed to future generations.
- Wealth is stored resources like savings, investment, and business equity. We should think about an asset poverty line. That is if we have no sources of income, can our wealth take us to about three months at the poverty line? 42% of households are asset poor--most families vulnerable.
Causes or perpetrators of the wealth gap:
- The pay gap is a huge driver of the wealth gap. Women are 2x as likely to work PT so less likely to have access to employer-based benefits. Most lower-income women don’t itemize so they can’t access tax deductions that subsidize wealth building.
- Income is a useful tool to help build wealth, but it doesn’t guarantee it – must be utilized properly.
@saveforgem (An important testament to the work of AFCPE® certified professionals!)
- Leaving work to care for children and other family members are key contributors to the women's wealth gap, especially given the fact that we don't have adequate systems in place in the U.S. for paid family leave.
Home Equity, or lack thereof:
- Biggest driver is family wealth! Home equity is about 2/3rds wealth for broad 60 % of families, not individual savings. So we are talking institutions and policy and history.
Inability to save: The Debt Trap:
- Millions of lower-income women, women of color, & their families are trapped in a cycle of debt that is undermining their capacity to build wealth,” @womenswealthgap report
Lower Financial Knowledge or Confidence
- Women often have lower financial knowledge and or confidence. #BridgingtheGap #FinEd #ValueofanAFC
- In response: “A man is not a financial plan!”
- @moneytalk1 shared slides from a talk she did with this same title, A Man Is Not a Financial Plan.
- [Financial] education needs to start sooner -- I believe that many of our school systems are failing at reaching these populations at a younger age when learning is in full force and opportunities are available to reach larger #s of captive audiences.
Systemic & Historical Issues
- Many policies and as far back as slavery, less inherited wealth accumulated to pass down to generations, unlike white families.
- Wealth is generated by opportunities in specific historical eras. Largest wealth-building ops have been Homestead Acts (land), FHA (Homes), GI Bill (educations, business, homes), Social Security (retirement,). All systematically excluded people of color.
- Financial advice is subsidized for wealthier households, as cost of advisor is deductible. Only 1/3 of families itemize so most can't access that subsidy. Is this fair? What if we had a refundable credit for financial coaches?
- Systemic issues force many to turn to alternative financial services. Studies show that 46% of Black households & 40% of Latino households rely on these services @FDICgov @IPS_DC
All these challenges are intensified for women of color, who are impacted by racial and gender discrimination.
- It's critical to understand these systemic factors and not “blame the victim”. Historic discrimination - in access to credit etc. - have played a huge role for women/people of color (slavery, Jim Crow, redlining, expulsion of farm and domestic labor from Soc Sec). @womenswealthgap
Ways we can #BridgetheGap:
- Access to affordable/appropriate financial products and services could help them to reduce expenses - e.g., many have to turn to predatory products b/c don't have access to - or know how to access - mainstream
- It's important to note that many low-income working women don't have access to tailored financial advice. So much good work underway - and to be done - to broaden access to financial coaching. Thanks to @AFCPE and @sagemoney.
- Broad-based education isn't enough. Wealthier families don't sit in financial education classes--they get one-on-one, tailored advice. Broadening access to financial advisors, counselors and coaches is so critical.
- Worth pointing out that many policy solutions will address both wealth gap, racial wealth and gender gaps, like paid sick leave for starters!
- “If public policy successfully eliminated racial disparities in homeownership rates, the wealth gap between Black and White households would shrink 31%” @tmshapiro @_RebeccaWiggins
- Eyes on the Prize. Racial and gender justice. Filter policy and proposals and narrative on how it impacts race and gender.
Lend your voice: Advocate
- A LOT can be done to change systemic drivers of gap...and people are mobilizing for change - see http://www.womenswealthgap.org - more than 240 leaders active at the local, state and national levels
- Advocacy starts with understanding situations of those we serve.
Address Personal Attitudes and Narratives
- I think a fundamental challenge in all of this is in addressing our cultural attitudes & narratives that justify these inequities.
- Bridges are best built by spanning from both sides; change our own behaviors (#ValueofanAFC) and engaging underserved.
- Challenge your assumptions about why clients do or don’t have wealth. Learn about savings and investment norms of different cultures. Help women navigate financial systems that are working against them.
- Real responsibility to educated ourselves so that facts, history is accessible, logical explanation. Too often we rely on simply values. Lead with values, backed by information.
- As professionals, we need to be aware of our own biases, especially when we're dealing with women and woc.
Putting it all together:
- These challenges can be addressed through strategies, programs, products and services targeted to women.
- We also have important opportunities to lend our voices & efforts to positive social change for those we serve, beyond our opportunities to educate & motivate on an individual client level.
Want to follow the entire conversation? Search #BridgingtheGap on Twitter.
Additional reading & professional development resources:
- Harvard Implicit Bias Test
- Stanford Online America's Poverty and Inequality Course
- Prosperity Now Report: The Ever-Growing Gap
- Closing the Women’s Wealth Gap Initiative
- Tom Shapiro’s new book, Toxic Inequality
- Racial Wealth Audit, a tool measuring how policies have shaped the racial wealth divide
- 2017 AFCPE Symposium General Session Recording: Closing the Racial & Gender Wealth Gap
- Bridging the Gap: National Hispanic Heritage Month Webinar Series
- Difficult Dialogues in Personal Finance: African Americans and Financial Literacy