In June 2022, Bloomberg reported on data published by the National Bureau of Economic Research showing that gains between Black and white Americans have rolled back to levels not seen since the 1980’s. It’s a major setback, and not due to the twin health and economic crises which began in 2020. The data the researchers modeled ended in 2019 and showed that Black Americans that year held one-sixth the total assets of their white peers.
“In the absence of policy interventions or other forces leading to improvements in the relative wealth-accumulating conditions of Black Americans, wealth convergence is not only a distant scenario, but an impossible one,” researchers stated, according to Bloomberg.
The issue at large is that Black Americans are not benefiting from capital gains, because many families were unable to purchase property and accumulate generational wealth. Other Americans were not hampered by red lining or financial distrimination.
The report by the National Bureau of Economic Research is one of a handful of independent research into the racial wealth gap.
Equality Index Shows Black Americans Losing Ground
The National Urban League releases an “Equality Index” each year to compare disparities between white Americans and Black Americans. The index released in 2022 found that the wealth equity gap has seen little progress since the first report was released in 2005, and Black Americans “still get only 73.9 percent of the American pie white people enjoy,” compared to 72.9% in 2005. The “pie” in the Equality Index is calculated by measuring progress of Black and white Americans in five categories — economics, health, education, social justice and civic engagement – which all contribute to the ability for these families to build generational wealth.
In a PBS NewsHour conversation between PBS correspondent John Yang and National Urban League President and CEO Marc Morial, Yang explains that the 2022 report shows “gains in some areas like economics and health circumstances, both up about 10 percentage points since the first report, [but] in other areas, like social justice and civic engagement, Black Americans have lost ground.”
Because Black Americans are experiencing a decline in these categories, generational wealth for those families has been slow to grow, and the wealth gap remains significant. For instance, the 2022 Equality Index reports that the median household income for Black people in the U.S. “is 37% less than that of white people,” at $43,862 compared to $69,823.
The Solution: Investing in Black Communities
Approximately half of the Black U.S. population lives in six southern communities: Atlanta Georgia; Birmingham, Alabama; Charlotte, North Carolina; Houston, Texas; Memphis, Tennessee; and Greater New Orleans, Louisiana. Based on this information, philanthropist Robert F. Smith led the development of the Southern Communities Initiative to “accelerate racial equity funding, programming, and outcomes” for Black people living in the U.S. The Southern Communities Initiative focuses on investing in Black-owned businesses, access to capital, educational and workforce development opportunities and digital access in those six communities to drive differential impact. So far, the Initiative has already gained wide support across the nation with over 90 partner organizations and over $100 billion in corporate and philanthropic commitments.
The 2% Solution is another initiative spearheaded by Smith in effort to drive lasting, generational change “through a major investment in economic justice for Black communities.” Through the 2% Solution, Smith calls on “large corporations to use 2% of their annual net income for the next decade to empower minority communities, including capitalizing financial institutions that service Black-owned businesses.”
“This is how we turn outrage into action,” Smith tweeted in June 2020. “$100m into Black-owned banks is a giant step forward. If major U.S. companies invest 2% of profits in left-behind communities, we can close the racial wealth gap in 10 years.”
In order to drive impactful change, the private sector has a responsibility to make an intentional effort to improve economic outcomes for Black people in America.
Read more about how companies can and must deliver on their promises regarding racial justice.