Bridging the Wealth Chasm

How far will $5 go toward an unexpected emergency? Or even $100? Sadly, for many women of color, not even a single dollar stands between them and financial destruction.

For black women the median wealth (savings and assets minus debit) is only $100, according to a new report. For Hispanic women, it is $120. But the numbers get even worse. For black and Hispanic women ages 36 to 49, the median wealth is $5. For nonwhite women who have never been married, the amount was zero. In the report -- "Lifting as We Climb: Women of Color, Wealth, and America's Future," the Insight Center for Community Economic Development explores the horrifying financial situation faced by women of color. It shows how lower median wages and a lack of intergenerational wealth reserves contribute to the disparity between women of color and everyone else. The difference amounts to "one penny of wealth for every dollar owned by their male counterparts and a tiny fraction of a penny for every dollar of wealth owned by white women."

While lawmakers are focused on alleviating the effects of the recession -- closing the wage gap, extending unemployment insurance -- those efforts often sidestep women of color, because they concentrate on earnings, not the underlying asset gap. And the issue of wealth is critical, because it's wealth, or lack thereof, that is passed from one generation to the next. Addressing the pay gap, like recent legislation has done, will help women who are working. But fixing the wealth gap, which dramatically affects women of color, is necessary if lawmakers want to alleviate poverty.

The causes of the wealth gap are complex. The Insight Center report cites multiple factors, but they boil down to institutional barriers that prevent women from earning money and obtaining assets. All of them deny women of color access to "the wealth escalator" -- specifically, "fringe benefits, favorable tax codes, and valuable government benefits that are tied to employment, income, and marital status." (The report defines women of color as blacks and Latinas, but with breakout information on Asian American and Native American women.) Janis Bowdler, the deputy director of the Wealth Building Policy Project for the National Council of La Raza, summarizes the thrust of the report: "The barriers that women of color face are twofold: They face the same barriers to employment and building wealth that their male counterparts face. . . . They also have another set of barriers for being a woman."

Pay and wealth disparities mean women of color are helped less by current policies than they should be. Take the extension of unemployment insurance. It has been a lifeline for many Americans trying to stay afloat amid double digit unemployment figures, but workers need to have had jobs in the first place, and many states have an earnings threshold for benefits that is hard for lower-income workers to surmount. Women with children are particularly affected; a 2007 study found mothers were 79 percent less likely to be hired for jobs, even if they had the exact same resumé as a childless counterpart, and single mothers pocket 60 cents for every dollar a man makes. These low-wage workers are less likely to qualify for benefits, but even if they do qualify, they're less likely to file for them, says Andrew Stettner, deputy director of the National Employment Law Project. When they do, companies often fight the claims.

Combine this disparity with the harsh reality that young women, of all races, enter adulthood with either zero wealth or negative wealth (whereas white men enter adulthood with a median wealth of $5,600; for nonwhite men it's $1,000), and we have a recipe for economic disaster.

The report also challenges some common assumptions about assets for the working poor. The Center's calculations, for example, excludes vehicles as assets. While including the blue-book value of vehicles boosts the median household wealth of single black women to $5,000 dollars and the median household income for Hispanic women to $2,680, this figure is misleading. In a telephone interview, Chang explained that cars depreciate in value, and cannot be leveraged in the same way as home equity or cash reserves. A car is necessary for many workers to get to and from work and to access better jobs, particularly in areas underserved by public transportation, but it does not help to build wealth. Owning a working vehicle can even be detrimental for women of color who are trying to climb out of poverty. In 15 states, having a vehicle worth more than $5,000 disqualifies individuals from state benefits.

These disparities are exacerbated by the current recession. Women of color were disproportionately hit by foreclosures, and the slow down in the housing market has hit the Hispanic community especially hard. Hispanic men are losing jobs in the construction, labor, and service industries. "We talk to a lot of women who are in the work force part-time, but at lower wages and without benefits. [This] becomes problematic when the family begins relying on the women's income alone," Bowdler says. The lower income and decreased opportunity for Hispanic women comes into sharp focus when they are suddenly thrust into the role of sole breadwinner.

Once the numbers are laid bare, it's easy to see how women of color have such difficulty building wealth, which is a cushion in hard times and a foundation for the next generation. Reform is needed at every level in order to bring the wage and wealth gap under control. As the center states in its report: "Policies today are not overtly discriminatory against certain groups as they were in the past. Nevertheless, government policies, social insurance, and the tax code have a differential impact on women of color because for structural reasons, they are least likely to benefit from them." Since this type of data is often overlooked -- particularly as many agencies do not parse out data and solutions by race, gender, and class status -- the wealth difference is yet another way for women of color to fall through the cracks.

The Insight Center provides specific policy-based recommendations to improve employment opportunities for women of color, support self-employment and micro-enterprises, and provide low-income women with subsidies and incentives to save more money. However, in our current political climate, which focuses on easy, noncontroversial extensions instead of broad reforms, it is unlikely that relief for women of color will come any time soon.