All families need wealth to be economically secure and to create opportunities for their next generation. Wealth allows families to advance forward by moving to better and progressive neighborhoods, invest in businesses, save for retirement, and support their children's aspirations for advanced education. Wealth plays a critical importance in the ability to weather economic emergencies and help move families along a path towards long-term financial security and opportunity. The average white American family has been afforded access to generational wealth accumulation by leveraging education, family wealth to fund college education with limited debt, and the job market to establish credit, savings, and homeownership. Constrastingly, these key drivers have been systemically withheld from Black Americans and people of color. For the last thirty years, the wealth gap between white and Black households has remained disparate: net worth for white families has been between $115,000 and $200,000, compared to black families, whose household net worth has hovered between $15,000 to $25,000. Wealth is vastly unequally distributed across the United States.
Based on the Panel Study of Income (PSID), major drivers behind this dramatic difference in wealth accumulation points to public & private policy decisions and the configuration of barriers in workplaces, schools, and communities that reinforce deeply entrenched racial dynamics in how wealth opportunities are made available and accumulated. More specifically, the study identified factors that account for the disproportionate distribution of wealth: 1) the number of years of homeownership, 2) household income, 3) unemployment, 4) college education, and 5) financial support/inheritance from family.
So, it should not be a surprise to understand that independent business ownership is one pathway for the accumulation of wealth. According to a 2020 University of NC study, business ownership has historically been a strong wealth builder for communities of color. Nationally, the median net worth of Black and Latinx business owners is more than 10x that of their peers who don't own a business. But ownership is not enough. The number of employees in a business increases overall success -- businesses with more employees have higher sales than businesses without employees (94% of black owned small businesses are sole proprietorships).
Making the economy work for more people is not only a moral obligation – it is a business imperative
Chairman and Chief Executive Officer of JPMorgan Chase
Typically, Americans do not significantly advance beyond the context of their families and communities. This means that creating financial sustainability for communities of color requires breaking the chain of generational poverty perpetuated by community circumstances, namely lack of knowledge or access to available resources. For Corporate America it is a moral responsibility and a business imperative to support purposeful reform of societal wealth-building mechanisms within our systems and structures, including amplifying the transparency and collaboration across our collective minority supplier and vendor practices in support of growing minority owned businesses.
One important barrier to financial success for people of color involves racial wage disparities. According to Pew Research Center data, Black Americans earned just 75% as much as White Americans in average hourly earnings among full- and part-time workers in the U.S. Corporate America can help level the playing field by simply paying people of color equitably for their work. Data compiled by the Institute for Women's Policy Research showed in 2020, on average, Black women working full-time were paid 62 cents for every dollar a white, non-Hispanic man earns and Latinx earn just 55 cents. This wage gap is perpetuated by the fact that people from these groups are less likely to be promoted into senior-level positions. Equal Rights Advocates reported that while 6% of white men and 4 percent of white women make it to the C-suite, only 3% of Black women and 2 percent of Latinx do. While it has been illegal for quite some time, to pay people differently based on things like sex, race, or national origin, Corporate America should consider going beyond compliance and focus on pay equity. Those organizations that do are seeing strong business outcomes as a result, including stronger employer brand, improved employee engagement and productivity, and increased retention.
Supplier diversity programs are also important ways for Corporate America to combat social injustice by promoting an inclusive approach to their procurement. A diverse supplier is a business that is at least 51% owned and operated by an individual or group that is part of a traditionally underrepresented or underserved group. Instituting scalable and long-term initiatives that actively support minority-owned enterprises (MBEs) can be a part of a company's efforts to maintain high moral and ethical standards. Based on a recent Harvard Business Review [https://hbr.org/2020/08/why-you-need-a-supplier-diversity-program] inclusive procurement practices deliver broader societal benefits by generating economic opportunity for disadvantaged communities. The National Minority Supplier Diversity Council reports that certified MBEs generate $400 billion in economic output that lead to the creation or preservation of 2.2 million jobs and $49 billion in annual revenue for local, state, and federal tax authorities. Supplier diversity programs are also a selling point when hiring. Fifty-two percent of respondents to a survey conducted by UPS said they want to work for a company that has a supplier diversity and inclusion program. Aside from the "do the right thing" argument, companies that have inclusive procurement strategies widen the pool of potential suppliers and promote competition in the supply base, which can improve product quality and drive costs down.
Take On Race is a collective commitment from its corporate members and business partners from different sectors to define, declare, and demonstrate through action, the role we can play to urgently and proactively address wealth inequities within corporate structures and systems.
Information sharing on the internet and a consumer's desire for transparency has brought us to an age where people expect their purchases to reflect their values. It is increasingly important for Corporate America to continue to step up to meet those expectations of diversity, sustainability and ethical procurement practices.
An increasingly diverse global population means that not only are minority audiences becoming a larger target for companies, but minority-run businesses are comprising a larger portion of the small business sector. With the partnership of corporate leadership, we can define, declare, and demonstrate solutions that lead to more equitable access to wealth for all Americans.
Economic opportunity is out of reach for many Black Americans, who lack access to resources that can help put them on a path to great careers, build wealth, grow a business, and participate in the benefits of a growing economy. Organizations are recognizing that investing in diverse suppliers can provide exponential returns. Walmart sourced almost $250 million internationally from women-owned businesses in 2016 through it's Women's Economic Empowerment Initiative. Companies with a focus on doing business with MBEs can gain a competitive edge by increasing the economic standing and buying power of diverse consumers. Advancing Black Pathways combines JPMorgan Chase’s business and philanthropic resources to accelerate economic opportunity for Black Americans in three ways: 1) Strengthen Education and Job Training, 2) Growing Career Advancement, and 3) Building Wealth.