New research analyzes the strong connection between disproportionate wealth and financial services and products that are either shared or denied with consumers of color.
Authored by the McKinsey Global Institute (MGI), The economic impact of closing the racial wealth gap, identifies key sources of the nation’s socio-economic inequity with its accompanying racial and gender dynamics along with family savings, incomes, and community context.
Banks more strict
“Black families are underserved and overcharged by institutions that can provide the best channels for saving,” states the report. “For instance, banks in predominantly Black neighborhoods require higher minimum balances ($871) than banks in White neighborhoods do ($626).”
Additionally, according to the MGI report, the nation’s overall economy is affected by racial wealth gaps, estimating that between 2019 and 2028, the cost of economic losses to the general economy will be in the range of $1.0-$1.5 trillion.
Among the MGI report’s other key findings are that:
- Black Americans can expect to earn up to $1 million less than White Americans over their lifetimes;
- Black men with no criminal records are less likely to receive job interviews than are White men with criminal records;
- The median wealth of a single Black women is $200, while that of a single White man is $28,900; and
- Black families are up to 4.6 times more likely to live in areas of concentrated poverty, than are White and Latino families.
Geographically, 65 percent of Black Americans reside in one of only 16 states. All of them score below the nation’s national average of 77 state performance metrics spanning economy, education, economic opportunity, fiscal stability, infrastructure and more.
When student loan debts and criminal incarcerations are factored into the racial wealth divide, an even more bleak scenario is disclosed.
“Incarceration is estimated to reduce annual wages by 40 percent – not including the lost wages during the time served – for the formerly incarcerated,” states the MGI report, “reduces their economic mobility, and even increases the risk of school expulsion six times for their children… [B]lack men without criminal records are actually less likely to receive job interviews than are White men who have criminal records.”
Black women suffer
For Black women, gender brings a dual “wage penalty,” according to the report. Median earnings for Black women are only 65 percent as much as those earned by White men, and 89 percent of median earnings for Black men.
Black women typically borrow more in student loans, so their lower earnings bring stronger financial challenges in repayment years. As a result of these and other factors, the median wealth of a single Black woman is only $200, while that of a single White man is $28,900.
Both male and female Black college graduates are prone to support their families more so than their White college classmates. The financial assistance shared with older family members reduces the amount of disposable dollars that might have contributed more to paying down student debt or beginning financial investments like mutual funds or certificates of deposit.
“Moving forward, this situation can only be addressed through bold federal and state laws and policies that create equity of opportunity for all,” said Aracely Panameño, CRL’s Director of Latino Affairs.
Charlene Crowell is the deputy communications director at the Center for Responsible Lending. Contact her at charlene.crowell@responsiblelending.