On the surface, there are some encouraging signs that the nation’s economy is improving: job creation is trending upward, unemployment is steadily falling and wages are slowly increasing. However, a deeper look into the numbers reveals that communities of color are not benefiting equally from these broad economic trends.
Recent research from the Corporation for Enterprise Development (CFED) shows that households of color continue to live in a persistent state of financial insecurity despite the positive trends we’ve seen over the past several years. Today, households of color are 2.1 times more likely to live below the federal poverty level and 1.7 times more likely to lack the liquid savings necessary to whether a long-term financial emergency. Essentially, many of these households are just one paycheck away from falling into serious financial distress.
Unfortunately, for communities of color the issue of financial instability has been further exacerbated by a racial wealth gap that has continued to grow at alarming rates. Over the past two decades, the wealth gap between white households and that of African-American and Hispanic households has more than doubled from $230,000 in 1986 to more than half a million dollars in 2010.
Adding to this growing gap is a recovery that has done little to close this divide, as research now shows that for every dollar of wealth owned by white households, African-American and Hispanic households own six cents and seven cents, respectively—an increase of just one cent for each group since the end of the recession. Moreover, while much of the recovery narrative—or lack thereof—has focused on Black and Hispanic Households, Asian American and Pacific Islander (AAPIs) have not been immune to economic insecurity. As research from the National Coalition for Asian Pacific American Community Development (National CAPACD) has found, since the wake of the recession the number of AAPIs living in poverty increased by more than half a million, representing an overall increase of 38%.
These trends are not just reflected in the numbers, but in the voices of the communities themselves, as our recent study, “Reaching Communities of Color on Real Finances,” has shown. African-American, Hispanic, Asian respondents reported feeling that the American Dream was simply beyond their reach, with no sense that things are getting any better for them. For many, their financial focus is on the short-term—paying this month’s bills or weathering an emergency—rather than buying a home or saving for retirement.
These problems affect us all. The U.S. Census Bureau estimates that in just 30 years, people of color will make up the majority of the U.S. population. That means that, if communities of color continue to lack the opportunities to escape poverty and build wealth, the entire U.S. economy will suffer. In order to build an economy that works for everyone, we need strong public policies to close the racial wealth gap in order to ensure that all Americans have access to real opportunity.
This is why expanding economic opportunity for communities of color is the central goal of the Asset Building Policy Network (ABPN), a coalition comprising Citi and eight of the nation’s leading civil rights and asset-building organizations. In 2016, we will redouble our efforts to close the racial wealth gap through advocacy that aims to reform tax and consumer finance policy, among others—as well as through research and the implementation of programs that generate savings and promote financial capability. Our individual and collective energy and efforts include:
- Expanding the federal tax code’s effectiveness as a tool to build the asset base of households of color.
- Protecting consumers from unscrupulous and predatory financial products and services that strip wealth from vulnerable communities.
- Promoting policies and programs that expand access to affordable, responsible financial tools—including saving and credit products—for all consumers, including immigrants and entrepreneurs, as a means of promoting wealth building and long-term financial security.
- Providing municipal governments and community advocates with vital data and policymaking tools to better understand and improve household financial security at the local level.