The racial wealth gap is real: The data shows the median wealth for white households is roughly eight times greater than for Black households ($189,100 and $24,100 respectively), according to the Center For American Progress. Taking steps to close the racial wealth gap is not only the right thing to do; it’s also good for the economy. Closing the racial wealth gap could increase the U.S. GDP by $1.5 trillion in the next 10 years, according to a McKinsey & Company report.
From systemic bias to credit inequality to policies such as redlining (which essentially sanctioned segregation when the government mapped out “safe” areas to insure mortgages that excluded Black communities), there are many factors contributing to the racial wealth gap. Here is a snapshot of what some companies are doing to help shrink the gap.
Increasing Capital to Black-Owned Businesses & Institutions. The NinetyToZero initiative was named for the approximately 90% wealth gap that exists between Black and white Americans. It’s a collaborative effort by national CEOs and organizations from across business, nonprofit, philanthropy, and academia. Partners include Starbucks, Goldman Sachs, and The Wharton School of The University of Pennsylvania, among others, and is incubated by the Robin Hood Foundation. The initiative provides companies a roadmap to drive real change, including establishing internal goals for hiring of Black talent and measuring progress, as well as pledging to set goals for spending with Black-owned businesses and investments with Black-owned asset management companies.
“Every business has a responsibility—and can influence others—to advance racial equity, create opportunities for others and strengthen the communities it serves,” said Kevin Johnson, Starbucks President and CEO, in a statement. “Starbucks believes in using our scale for good, and we will address the systemic barriers which keep Americans from reaching their full potential.”
Supporting Higher Education. Higher education can be one pathway to greater economic security. Yet the pandemic has hit community colleges especially hard, with enrollment loss more than double the loss experienced by four-year colleges during the public health crisis. About 40 percent of students enrolled in the nation’s community colleges are Black or Latino, and nearly half are low-income.
PepsiCo recently announced a $40 million scholarship and professional mentoring program to support Black and Hispanic aspiring and graduating community college students in 20 cities, with the goal to support 4,000 students over five years.
“Education is a great equalizer that enables economic growth, upward mobility and helps build generational wealth that lifts up communities over the long-term,” said PepsiCo Chairman and CEO Ramon Laguarta in a statement. “With this program, we are creating a differentiated experience for students that goes beyond scholarships by providing critical training, support and other services that will put them on the path to success.
Combating Housing Inequality. Another contributor to the racial wealth gap stems from housing inequality. Homeownership has been a traditional path to building intergenerational wealth. Homeownership by white Americans was already 30 percentage points higher than Black Americans before the pandemic.
To help overcome one of the biggest barriers to buying a home—the down payment—a boutique real estate agency called Flock DC launched the birdSEED foundation to offer down payment grants in the $10,000 range to qualifying Black and Brown first-time home buying residents in the Washington, D.C. area. FlockDC manages the program through a partnership with the Greater Washington Community Foundation, which allows them to accept tax-deductible donations and ties them to other organizations and partners that can help them reach potential applicants.
“It’s up to all of us to repair the damages that have been done in the past,” said Lisa Wise, Founder and CEO of Flock DC, in a previous Forbes article. “We can all make the argument that ‘I didn’t create this problem,’ but each of us has a responsibility to create a more just future that’s more inclusive to everyone.”
Companies can also help lessen the gap by addressing disparities in retirement savings and investing in Black communities. The bottom line is that businesses don’t have to wait for public policy to help close the racial wealth gap. Indeed, customers may be looking to business to help lead the change: About 86% of consumers believe that companies should take a stand for social issues. Racial inequality has cost the U.S. GDP roughly $16 trillion over the last 20 years, according to Citigroup. Leaders and companies can take steps now that will drive greater financial equity, and, in turn, the economy.
Article originally published in Forbes.