June 24, 2021 under FPWA In The News

The Racial Wealth Gap Has Cost Trillions. How Companies Can Help Close It.

June 23, 2021 – The U.S. wealth gap spurred by racial inequities has cost the U.S. economy $16 trillion over the past 20 years, according to a Citi report. A panel of leaders convened at a Barron’s event on Tuesday to share their insights on how to close it.

Ideas to Action, the third event in Barron’s Wealth Gap series, featured conversations with six leaders working to combat inequity.

“We looked back 20 years, but these gaps stem from 400 years of slavery in the U.S., the Jim Crow era,” Dana Peterson, who co-authored the Citi report, told attendees. A former global economist at Citi, Peterson is now chief economist at The Conference Board.

Peterson said she and the report’s co-author studied gaps in wages, income, and credit access between Black Americans and white Americans to arrive at the past and future cost of racial inequities. Closing the racial wealth gap, the report said, could add $5 trillion to the nation’s economy in five years.

Peterson said companies can help narrow the wealth gap by expanding to areas with large Black populations or hiring Black employees remotely. “If you want to find great Black talent to help close the wage gap, then all you have to do is hire that person remotely, and that’s very possible,” Peterson said.

Other panelists pointed to disparities in compensation. “When you have this great wage inequity, it doesn’t allow Black women to invest in their families; it doesn’t provide for the resources, the income, the assets after paying basic living expenses, to invest in a home, to possibly invest in a business,” said Jennifer Jones Austin, CEO and executive director of FPWA. “We have to close this wage and inequity gap because if we don’t, we’re never going to get to the racial wealth gap closing.”

One of the event’s speakers, Exelon senior executive vice president Calvin G. Butler Jr. , detailed efforts the energy provider has undertaken to prioritize diversity, equity, and inclusion. Among the company’s actions: the creation of a learning program for company executives called White Men and Allies Lab and a racial equity task force to examine diversity in the workplace.

“We have to break that old adage that if someone is gaining then someone else is losing,” Butler said. “The White Men and Allies Lab really allowed for that conversation to take place.” The company is now rolling out the program to directors and managers, Butler said, because it is important to establish a culture of openness and thoughtfulness within the organization.

Panelist Ai-jen Poo, executive director at the National Domestic Workers Alliance, discussed the impact of the wealth gap on Asian American and Pacific Islander women who work in the industry. “Most AAPI women who work in the sector have no savings and have no healthcare,” Poo said. Investment in the care sector at a governmental level could help raise wages and close the gap, she said.

Philanthropy can also make a difference, said Darren Walker, president of the Ford Foundation. The president highlighted the importance of giving without restrictions. “The highest, scarcest capital in the capital stack is unrestricted support,” Walker said.

Donors are often not interested in paying for a nonprofit’s overhead, which can include expenses like technology infrastructure, rent, and maintenance, Walker said. “These things, while they’re not sexy, are essential and are urgent in terms of the nonprofit sector.”

The panelists also discussed disparity in wealth by gender and identity, and ways to combat those. Check back later this week for video replays of the sessions.

By Shaina Mishkin