How businesses can help fix the racial wealth gap
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The racial wealth gap in the United States is staggering.
In 2016, white families had an average net worth of $171,000; Black families averaged a net worth of $17,150—almost exactly one-tenth of their white counterparts’. That divide can make all the difference in education, health care, professional opportunities, and more, studies show.
As the nation reckons with its treatment of Black people following the police killing of George Floyd, business leaders are examining ways to reduce the wealth gap amid the coronavirus pandemic that has contributed to a 41% decline in the number of Black business owners from February to April. White business owners, meanwhile, saw just a 17% decline during the same period.
This disparity was the topic of discussion at Thursday’s Fortune Bold virtual conference, in partnership with McKinsey & Co., and moderated by senior editor Ellen McGirt. Joining her was John Rogers, chairman, co-CEO, and chief investment officer of Ariel Investments, and Lareina Yee, senior partner and head of diversity and inclusion at McKinsey. The question at hand: How can businesses help reduce the Black wealth gap?
“It’s a very, very complicated question, but the one key thing I always start with is that the wealth gap is getting worse and worse,” Rogers said. The coronavirus pandemic has further contributed to this, recent studies have shown.
It’s true, Rogers acknowledged, that some corporations have created supplier diversity programs pledging to work with African-American companies. “But in reality, they typically do that only in the supply chain part of the spend,” Rogers said. “Construction, catering, janitorial services, corporate gifts—the lowest-margin part of the spend. And as we know, our economy has moved to a professional services, financial services, and technology-based economy. That’s where all the high margins are. That’s where the cash flow is. That’s where the jobs are.”
The solution, Rogers said, was to get rid of “supplier diversity” and focus more on “business diversity.” That will be challenging in itself, he added, because of implicit biases against Black people. “So it’s not just language. People continue to think that we’re not qualified to do the complicated tasks, the legal services, the accounting services, money management,” Rogers said. “When people close their eyes and think about an African-American leader, they think about someone in sports or entertainment, not an investment banker.”
At the end of the day, Rogers said, education about implicit biases cannot be done in just one seminar. Rather, it needs to be taught continually at companies on a regular basis to hold employees—including CEOs—accountable. Another aspect of education that Black people need more access to: financial literacy.
At the current rate of progress, said McKinsey’s Yee, it would take 35 years for Black employees in the U.S. and U.K. to “to see any sense of racial equity,” she said, citing McKinsey data.
“By then, John and I will have been retired for a long time. And when you look a little more closely at the disparities in the corporate workforce, it’s pretty shocking,” Yee said. In particular she cited the difficulty for Black employees who get hired to achieve what she calls the “first rung” promotion. Implicit bias, she says, “has to play a role because they haven’t actually been in your company long enough for there to be such a big performance gap, unless you don’t believe in your recruiting standards, which I think we all do.”
Yee said that white and non-Black allies need to educate themselves—and not rely on Black people to do the teaching for them.
And part of that is making that implicit bias not implicit anymore; make it explicit, Yee added. “Because once you see it, you’re not going to ignore it. And it’s not about whether people are good people or whether they have good intentions. The fact of the matter is, we don’t have the right outcomes. So we’ve got to fix the inputs.”
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