Overcoming Racial Inequity: It’s Time to Focus on Economic Levers

This year I have been reflecting on recent research from the Pew Research Center that uncovers what Black Americans think is needed to overcome racial inequality. The study participants identify several important levers, including voting and criminal justice reform, but I believe the study misses one critical lever related to the path to economic equity.

Ensuring that Black Americans have an unencumbered right to vote and do not have their freedoms and liberties restricted by our criminal justice system are foundational components. However, if we truly want to create an equitable society, we must also prioritize economic mobility and closing the persistent wealth gaps that are holding back Black Americans. In this month’s newsletter, I offer a few ways to shift our collective mindset about racial equity to help catalyze systemic change needed to close the racial wealth gap.

Supporting Black Owned Businesses Isn’t Specific Enough

The one purely economic lever that cracked the top five according to the Pew study is supporting Black-owned business and having Black-led community organizations. My assumption is that most of the businesses in Black communities that survey respondents had in mind were small businesses. While I feel strongly we should be doing everything we can to support and expand Black-owned small businesses, doing so is not enough to demonstrably close the racial wealth gap. The reality is that two-thirds of Americans work in mid-size to large companies and the percentage who are employed by small businesses has been steadily declining since the ‘90s. Given that 75% of the racial wealth gap is driven by lifetime earnings and company benefits (per the Federal Reserve Bank), our strategy to close the gap must prioritize two areas. First, we need to get more African-Americans placed in jobs in mid-size to large companies that operate in higher growth economic sectors, lead to long term careers with an upward trajectory, and provide stock/equity-ownership and savings plans that enable wealth creation over and above W2 earnings.  Second, we need to develop a comprehensive ecosystem to support Black entrepreneurs who are building companies that, when scaled, provide hundreds or thousands of people of color with careers that change their economic trajectory. These high growth companies should be employing people living in Black communities while operating well-beyond our communities (as well as inside).

Incentivizing employers to use their platforms to push back on efforts that worsen racial inequities

The power that large companies hold goes well beyond their ability to hire and provide career paths. The actions and decisions that corporations make – such as where they base their offices, which suppliers they work with, or legislation they endorse – have an outsized impact on those who purchase their products and services and the members of communities where they do business. Encouraging companies to fully leverage their platforms to improve equity for Black communities – and calling them out when they do harm – can be a powerful lever for change.

Let’s take voting rights for example. The Pew study shows that most Black Americans believe voting is an effective strategy to advance racial equity.  Recently there have been a series of voter suppression laws passed in multiple states that make it harder for Black Americans to vote. Voter suppression has a long history in this country, but major corporations leaning into important social issues is a more recent development. We saw this play out in 2021 when Georgia was set to host the NBA All Star game and the state legislature was considering a series of voter suppression laws. In response, corporate sponsors threatened to pull out and the NBA considered moving the game. The proposed laws were tabled, which shows how companies can influence legislative outcomes that are important for racial equity.

The same can be said for the power that companies’ products and services hold when it comes to impeding (or advancing) racial equity. For example, Black mortgage applicants are more than twice as likely to be rejected as their white peers, creating a significant barrier to home ownership, where many Americans store, generate, and preserve a significant portion of their wealth. Several banks have announced significant efforts to close this gap in recent years. We’re also seeing an increase in large corporations doing more to support Black-owned small businesses. For example, Sephora has dedicated 15% of its shelf space to Black-owned brands and has developed an accelerator program to help BIPOC-owned brands grow and succeed.

Redefining the “Goal Posts” for Black America

One of the fundamental problems is that when it comes to defining what success looks like for Black Americans, we fall prey to what George W. Bush referred to as the “soft bigotry of low expectations”. We need to move the “goal posts” beyond holding a solid wage job, not being denied the right to vote, or not being unjustly swept up in the criminal justice system. All of these are important stepping stones, but they shouldn’t be the end goals. The pandemic exposed the flaws in our historical definition of success. Front line workers in hourly jobs were put in lose-lose situations: stay home from work to avoid exposure to covid and lose your job or go to work and put your entire family at risk (especially elderly parents) and not be home to supplement your children’s remote K-12 learning that was detrimental to academic progress of low- & moderate-income students.  

We need to place the goal posts for Black people at “thrive”, not at “survive”. That means at least solidly middle class where we can manage through a pandemic or economic downturn without disproportionally losing our lives, endangering our children’s future, and crushing our aspirations for a more comfortable life.

We need a comprehensive approach that enables millions more Black Americans to move from the fringes of poverty to family-sustaining jobs and creates wider pathways to a level of financial flexibility where we can focus most of our bandwidth on achieving our full potential and helping others pursue theirs.

The Path Forward

We believe that companies can and must play a meaningful role in advancing racial equity in this country. We’ve seen many companies state their commitments to racial equity in recent years, but follow-through has been inconsistent at best, and it isn’t particularly clear what it actually looks like for a company to be committed to racial equity in the first place. That is why MLT launched its Racial Equity at Work Certification initiative so that employers have a framework, benchmarks, and a rigorous plan to advance racial equity within their organizations and be a force for lasting change. I look forward to continuing to work with our 80+ participating partners that are committed to achieving racial equity in the workplace and our society.

We hope that you will support us on this journey. What do you think we need to do more of to advance racial equity in America? Please leave a comment below.

The MLT Hispanic and Black Equity at Work Certifications are the industry leading standard for what successful racially equitable employer practices look like and are designed to be accessible for all employers regardless of where they are on the DEI journey. Whether you are just getting started or have been working on DEI for years and are not making enough progress, now is the time to start taking a rigorous approach with MLT’s leading how-to support and best practice insights.