The United States’ history of systemic racism has woven its way into innumerable aspects of American life: education, the criminal justice system, healthcare, the economy — and yes, the world of banking and finance.
Yesterday, Zogo released a statement in solidarity with the Black Live Matter movement. We openly recognize the unquestionable link between financial well-being and racial justice.
Today, we’re listing just a few ways that existing racial inequalities affect the world of finance, in hopes of helping our users and clients reflect on the presence of these oppressive systems in their own lives.
This is not an exhaustive list — these patterns are the topic of thousands of research papers and books and articles. We’ve linked several here, and encourage you to continue reading on this topic.
Here are three ways that race and finance intersect to support and exacerbate racial inequality in the United States:
The Wealth Gap: In 2016, the net worth of a typical white family was ten times greater than that of a Black family. This wealth gap is the result of several factors, all of which have their root in the United States’ history of racism: first in the form of slavery, then in Jim Crow laws and other state-sanctioned discriminatory practices that continue to persist today.
This legacy of racism plays out in the disparities among monetary inheritances and inherited family wealth, among other factors that influence wealth generation. Even with equal income, the racial wealth gap persists.
Why does a disparity in wealth matter? Here’s how the team at Brookings, a non-profit public policy organization, put it:
“Wealth is a safety net that keeps a life from being derailed by temporary setbacks and the loss of income… Family wealth allows people (especially young adults who have recently entered the labor force) to access housing in safe neighborhoods with good schools, thereby enhancing the prospects of their own children. Wealth affords people opportunities to be entrepreneurs and inventors. And the income from wealth is taxed at much lower rates than income from work, which means that wealth begets more wealth.”
You can read that full article here. Think the gap can be easily explained by lack of educational attainment, or poor spending habits, or another simple, surface-level reason? Read this myth-debunking report from the Samuel Dubois Cook Center on Social Equity at Duke University.
Student Debt: Student debt is not just a generational issue, as this 2019 article from MarketWatch explains in detail. Black students still face systemic obstacles to enrolling at wealthy, elite higher education institutions, and the racial wealth gap described above means they’re more likely to take out loans to attend college. On top of all this, predatory for-profit colleges — with poor records of career placement and default-ridden student loan outcomes — continually target their marketing campaigns to Black, low-income students.
For further reading, take a look at this report on how student loan debt and the racial wealth gap work to reinforce each other.
Credit Access: A 2018 study found that Black people are far more likely to be denied conventional mortgages at rates far higher than their white counterparts. Another concluded that multiple credit scoring algorithms have a discriminatory effect on borrowers of color, neglecting to use consumer data like rent, utility and cell phone payments as potential indicators of creditworthiness.
Disparity in homeownership is also connected to — you guessed it — the wealth gap. And obstacles to credit access make it more difficult to build good credit, take out a loan, purchase a home or multiple other actions that could serve as a step to financial freedom.
At Zogo, we want young people across the country to build a better financial future for themselves. We understand that the financial freedom we work to promote everyday is categorically connected to racial equality and the fight for racial liberation.
What is your financial institution doing to consciously dismantle these systemic inequalities? How are you working to support your institution’s Black members — as an institution and an individual?