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COMMENTARY: America’s Racial Wealth Gap Could Cost Economy $1.5 Trillion

NNPA NEWSWIRE — “Black families are underserved and overcharged by institutions that can provide the best channels for saving,” states the McKinsey Global Institute (MGI) report, The economic impact of closing the racial wealth gap. “For instance, banks in predominantly black neighborhoods require higher minimum balances ($871) than banks in white neighborhoods do ($626). Unsurprisingly, 30% of Black families are underserved by their banks, and 17% are completely disconnected from the mainstream banking system because of a lack of assets and a lack of trust in financial institutions.”

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Charlene Crowell is the Center for Responsible Lending’s communications deputy director. She can be reached at Charlene.crowell@responsiblelending.org.

By Charlene Crowell, NNPA Newswire Contributor

America’s nagging racial wealth gap has been the focus of many research reports and economic policy debates. Now 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 socioeconomic inequity with its accompanying racial and gender dynamics along with family savings, incomes, and community context.

“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). Unsurprisingly, 30% of Black families are underserved by their banks, and 17% are completely disconnected from the mainstream banking system because of a lack of assets and a lack of trust in financial institutions.”

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.

Black America’s “racialized disadvantage” was created through historical forces – including private business practices and public policies that together advantaged white consumers while often excluding or relegating Black Americans. For example, the National Housing Act of 1934 limited housing options for Black Americans by assigning a D-rating to neighborhoods in general decline and occupied by lower-income residents.

Fast forward to more recent times, the Federal Reserve in 2017 found that Black consumers are 73% more likely than whites to lack a credit score due to “credit redlining”. This term refers to where a consumer lives to be the central determining factor in whether to approve credit, rather than the actual credit profile.

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% of Black Americans reside in one of only 16 states. The states are also areas that score below the nation’s national average of 77 state performance metrics spanning economy, education, economic opportunity, fiscal stability, infrastructure and more: Alabama, Arkansas, Delaware, Florida, Georgia, Illinois, Louisiana, Maryland, Michigan, Mississippi, New Jersey, New York, North Carolina, South Carolina, Tennessee, and Virginia.

“This study represents a critical look at the key components of wealth-building: access to community and family assets, ability to save, access to homeownership and availability of good jobs,” said Tom Feltner, Director of Research with the Center for Responsible Lending (CRL). “At every step it points to a widening racial wealth gap between Black families and white families.”

“With today’s Black homeownership rate hovering around 40%, while 73% of similarly situated whites own their homes, access to responsible mortgages remains more of a dream than a reality,” added Keith Corbett, a CRL EVP.

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% — 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.”

For Black women, gender brings a dual “wage penalty”, according to the report. Median earnings for Black women are only 65% as much as those earned by white men, and 89% 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.

“Education, while quite beneficial to those who attain it, is not an equalizer,” said Aracely Panameño, CRL’s Director of Latino Affairs. “And financial innovation and debt, even if well underwritten, can never undo historical racial discrimination that results in financial marginalization. Moving forward this situation can only be addressed through bold federal and state laws and policies that create equity of opportunity for all.”

Authors of the MGI report would likely agree.

“A number of simultaneous and mutually reinforcing initiatives will likely be necessary,” states the report. “This work will be neither simple nor easy, but targeted, productive efforts will likely strengthen the economy, increase economic and social equity, and improve the quality of life for families.”

Charlene Crowell is the Center for Responsible Lending’s communications deputy director. She can be reached at Charlene.crowell@responsiblelending.org.

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Black Woman to Lead United States Park Police

 Chief Smith’s experience serving in leadership roles in every U.S. Park Police field office has provided her with an unmatched foundation to lead the diverse agency,” said Flynn, who oversees law enforcement programs at USPP.

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Pamela A. Smith

Pamela A. Smith, a 23-year veteran of the United States Park Police, will lead the nation’s oldest federal law enforcement agency.

Smith, who became the first African American woman to lead the 230-year-old agency, immediately remarked that she would establish a body-worn camera program for USPP within 90 days.

The program will initially begin in San Francisco and be implemented across the country by the end of the year, Smith said.

“Body-worn cameras are good for the public and good for our officers, which is why I am prioritizing implementing a body-worn camera program within my first 90 days,” Smith offered in a statement.

 “This is one of the many steps we must take to continue to build trust and credibility with the public we have been entrusted to serve.”

Smith earned a bachelor’s degree in Education from the University of Arkansas at Pine Bluff and graduated from the FBI National Academy. She is a member of the National Organization of Black Law Enforcement Executives and the International Association of Chiefs of Police.

During her law enforcement career, the proud Zeta Phi Beta Sorority sister has served as a patrol officer, field training officer, canine handler, and academy instructor at the Federal Law Enforcement Training Center.

 According to a news release, Smith also served as executive lieutenant to the chief of police, assistant commander of the San Francisco Field Office, commander of the New York Field Office, acting deputy chief of the Homeland Security Division, and deputy chief for the Field Operations Division.

Smith was the first woman to lead the New York Field Office as its Major.

At the USPP, she will lead a 560-member workforce that protects the public, parks, and the nation’s most iconic landmarks in Wash., D.C., New York City, and San Francisco metropolitan areas.

“Chief Smith’s commitment to policing as public service and her willingness to listen and collaborate make her the right person to lead the U.S. Park Police at this pivotal moment in our country,” Shawn Benge, deputy director exercising the delegated authority of the NPS director, noted in a statement.

 “Over the coming months, the leadership of the National Park Service will explore opportunities with Chief Smith designed to strengthen our organization’s commitment to transparency. Her personal and professional experience make her acutely aware of and ready to meet the challenges and responsibilities that face U.S. Park Police and law enforcement agencies across the nation.”

 Jennifer Flynn, the associate director for Visitor Resource Protection at the National Park Service added that she’s looking forward to Smith’s leadership.

“Chief Smith’s experience serving in leadership roles in every U.S. Park Police field office has provided her with an unmatched foundation to lead the diverse agency,” said Flynn, who oversees law enforcement programs at USPP.

 “As federal law enforcement officers, the U.S. Park Police officers have a new opportunity each day to give their best to the American people. Chief Smith exemplifies that approach as a colleague and mentor, and she will be instrumental in refining and shaping the future of the organization,” Flynn said.

Smith declared that she would lead by example and expects all officers to display integrity.

 “I have dedicated my career to the professionalism of law enforcement, and it is my highest honor and privilege to serve as chief of police,” Chief Smith declared. “Today’s officers face many challenges, and I firmly believe challenges present opportunities. I look forward to leading this exemplary team as we carry out our mission with honesty and integrity.”  

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Children’s Defense Fund: State of America’s Children Reveals that 71 Percent of Children of Color Live in Poverty

“While we reported on the 73 million children in the U.S. in 2019, which is 22 percent of the nation’s population, we also note that 2020 was the first year in American history that a majority of children are projected to be children of color,” said the Rev. Dr. Starsky Wilson, the president and CEO of the Children’s Defense Fund.

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Dr. Wilson did note that the Children’s Defense Fund is pleased about President Joe Biden’s American Rescue Plan, which, among other things, makes it easier for parents to keep their jobs and provides a lifeline for disadvantaged children. (Photo: iStockphoto / NNPA)
Dr. Wilson did note that the Children’s Defense Fund is pleased about President Joe Biden’s American Rescue Plan, which, among other things, makes it easier for parents to keep their jobs and provides a lifeline for disadvantaged children. (Photo: iStockphoto / NNPA)

Part One of an ongoing series on this impactful and informative report.

By Stacy M. Brown, NNPA Newswire Senior National Correspondent
@StacyBrownMedia

The child population in America is the most diverse in history, but children remain the poorest age group in the country with youth of color suffering the highest poverty rates.

“While we reported on the 73 million children in the U.S. in 2019, which is 22 percent of the nation’s population, we also note that 2020 was the first year in American history that a majority of children are projected to be children of color,” said the Rev. Dr. Starsky Wilson, the president and CEO of the Children’s Defense Fund.

Dr. Wilson’s remarks come as the Marian Wright Edelman founded nonprofit released “The State of America’s Children 2021.”

The comprehensive report is eye-opening.

It highlights how children remain the poorest age group in America, with children of color and young children suffering the highest poverty rates. For instance, of the more than 10.5 million poverty-stricken children in America in 2019, approximately 71 percent were those of color.

The stunning exposé revealed that income and wealth inequality are growing and harming children in low-income, Black and Brown families.

While the share of all wealth held by the top one percent of Americans grew from 30 percent to 37 percent, the share held by the bottom 90 percent fell from 33 percent to 23 percent between 1989 and 2019.

Today, a member of the top 10 percent of income earners makes about 39 times as much as the average earner in the bottom 90 percent.

The median family income of White households with children ($95,700) was more than double that of Black ($43,900), and Hispanic households with children ($52,300).

Further, the report noted that the lack of affordable housing and federal rental assistance leaves millions of children homeless or at risk of homelessness.

More than 1.5 million children enrolled in public schools experienced homelessness during the 2017-2018 school year, and 74 percent of unhoused students during the 2017-2018 school year were living temporarily with family or friends.

Millions of children live in food-insecure households, lacking reliable access to safe, sufficient, and nutritious food, and more than 1 in 7 children – 10.7 million – were food insecure, meaning they lived in households where not everyone had enough to eat.

Black and Hispanic children were twice as likely to live in food-insecure households as White children.

The report further found that America’s schools have continued to slip backwards into patterns of deep racial and socioeconomic segregation, perpetuating achievement gaps.

For instance, during the 2017-2018 public school year, 19 percent of Black, 21 percent of Hispanic, and more than 26 percent of American Indian/Alaska Native school students did not graduate on time compared with only 11 percent of White students.

More than 77 percent of Hispanic and more than 79 percent of Black fourth and eighth grade public school students were not proficient in reading or math in 2019, compared with less than 60 percent of White students.

“We find that in the course of the last year, we’ve come to the point where our conversations about child well-being and our dialogue and reckoning around racial justice has really met a point of intersection, and so we must consider child well-being in every conversation about racial justice and quite frankly you can only sustainably speak of racial justice if we’re talking about the state of our children,” Dr. Wilson observed.

Some more of the startling statistics found in the report include:

  • A White public school student is suspended every six seconds, while students of color and non-White students are suspended every two seconds.
  • Conditions leading to a person dropping out of high school occur with white students every 19 seconds, while it occurs every nine seconds for non-White and students of color.
  • A White child is arrested every 1 minute and 12 seconds, while students of color and non-whites are arrested every 45 seconds.
  • A White student in public school is corporally punished every two minutes, while students of color and non-Whites face such action every 49 seconds.

Dr. Wilson asserted that federal spending “reflects the nation’s skewed priorities.”

In the report, he notes that children are not receiving the investment they need to thrive, and despite making up such a large portion of the population, less than 7.5 percent of federal spending went towards children in fiscal year 2020.

Despite Congress raising statutory caps on discretionary spending in fiscal years 2018 to 2020, children did not receive their fair share of those increases and children’s share of total federal spending has continued to decline.

“Children continue to be the poorest segment of the population,” Dr. Wilson demanded. “We are headed into a dark place as it relates to poverty and inequity on the American landscape because our children become the canary in the coal mine.”

Dr. Wilson did note that the Children’s Defense Fund is pleased about President Joe Biden’s American Rescue Plan, which, among other things, makes it easier for parents to keep their jobs and provides a lifeline for disadvantaged children.

The $1.9 trillion plan not only contained $1,400 checks for individuals, it includes monthly allowances and other elements to help reduce child poverty.

The President’s plan expands home visitation programs that help at-risk parents from pregnancy through early childhood and is presents universal access to top-notch pre-K for 3- and 4-year-olds.

“The American Rescue Plan carried significant and powerful anti-poverty messages that will have remarkable benefits on the lives of children in America over the course of the next two years,” Dr. Wilson declared.

“The Children’s Defense Fund was quick to applaud the efforts of the President. We have worked with partners, including leading a child poverty coalition, to advance the ideas of that investment,” he continued.

“Most notably, the expansion of the child tax credit which has the impact of reducing poverty, lifting more than 50 percent of African American children out of poverty, 81 percent of Indigenous children, 45 percent of Hispanic children. It’s not only good policy, but it’s specifically good policy for Black and Brown children.”

Click here to view the full report.

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