In the summer of 1963, Martin Luther King, Jr. delivered one of the most famous speeches in American history. A line that is often forgotten still rings true for many African Americans today: “America has given its colored people a bad check, a check that has come back marked ‘insufficient funds,'” King said. “But we refuse to believe that the bank of justice is bankrupt.”
In the following six decades, the wealth gap has stagnated. “No progress has been made in reducing income and wealth inequalities between black and white households over the past 70 years,” said authors Moritz Kuhn, Moritz Schularick, and Ulrike I. Steins in their report for the Federal Reserve Bank of Minneapolis analyzing inequality in America from 1949 to 2016. Between 2019 and 2022 the racial wealth gap increased by nearly $50,000.
Economic inequality for Black Americans goes back to chattel slavery, but one doesn’t need to go back 400 years to encounter obstacles to wealth creation. A 2003 study by the National Bureau of Economic Research confirmed that Black applicants are less likely to receive callbacks and get hired. When controlling for age, gender, experience, and other factors, the Economic Policy Institute found that Black employees were paid 14.9% less than white employees.
These discrepancies cascade into Black Americans’ access to the real estate market; it impacts the money available to invest in the stock market; and it makes it harder to pay down major debts like student loans. But what can be done to address this? Three leading Black financial experts shared their insight.
1. Go beyond financial literacy
“Gone are the days that we can hide behind the illusion that more financial literacy is enough,” says Rahkim Sabree, AFC, financial therapist and counselor. Currently, 25 states require financial literacy education for students; however, rarely, if ever, does financial literacy address larger systemic issues that exist.
“We’ve tried education,” says Kristin Afelumo, owner of HerPlaninng. “We’re wildly well educated with a ton of student loan debt and underpaid for the amount of debt that we took out.”
Black students owe an average of 188% more than what white students borrowed by the fourth year after graduation. By 2016, the wage gap for Black Americans compared to whites was larger than it was in 1979, according to the Bureau of Labor Statistics.
2. Introduce special programs and remedies
In response to a wave of protests in 2020 and 2021 around racial justice in America, many organizations, including major companies like Netflix, announced programs to help address inequalities. In 2021, Netflix announced that it would move nearly $100 million into “Black banks and other Black-led financial institutions.”
The desired impact was that Black-owned banks could provide more home and small business loans, thus providing more opportunities for the Black community. The same year, Evanston, Illinois, became the first city to pay reparations to Black residents. “You have to solve an unfair disadvantage with an unfair advantage,” says Afelumo.
3. Adjust the perspective
“The narrative is that we can’t [build wealth], and clients feel that, but we are equal and capable,” says Lazetta Rainey Braxton, MBA, CFP, founder of Lazetta & Associates. The wealth gap was not created overnight, and will not be solved overnight.
One 2016 study found that if current trends continue, closing the wealth gap would take more than 200 years. Stats like this can feel overwhelming, but it doesn’t mean there aren’t areas and opportunities to make meaningful gains.
Younger Black Americans have now become the fastest-growing demographic of new investors in the stock market. During the Great Recession, the lack of assets in the stock market was cited as one of the primary reasons African Americans did not financially recover at the same rate as whites. “Focus on what you can control and set effective strategies behind it,” Braxton says.
