Reducing the Racial Wealth Gap

December 8, 2020 by Andrew N. Whitney

The first seven years of my career were in Finance and I enjoyed it. I was constantly pushed to learn and grow and make and defend positions. That said, I did leave the industry and I did it by choice. Kedra Newsom Reeves is still in the industry. And perhaps had we met, or had I heard the perspective shared by Reeves from even a few folks in the industry I might have stayed longer. Reeves is a Managing Director & Partner (big deal!) at The Boston Consulting Group and recently recorded the TedTalk, How to reduce the wealth gap between Black and white Americans. Four solutions are presented that financial institutions can implement to begin closing the racial wealth gap. While these solutions are focused on what some of the biggest businesses can do, we all have work to do to reduce this gap.

At Seed, we interact with students in two main ways: internships and career prep. Through both experiences we present opportunities to learn, and learn quickly, in a way that can help inform and launch careers and bring meaningful incomes. Systemically, we have a long way to go and a lot of historic injustice to overcome. For the purpose of this post, let’s focus on a couple of tangible ways wealth inequities can be addressed on an individual level. We are going to highlight two areas where you can self-advocate and prioritize your own goals.

Salary Negotiations

For most people asking for more money is an uncomfortable conversation. For people of color, particularly Black woman, it can be demoralizing. It is still important to stay persistent and to be prepared with a few key tools when advocating for yourself.

Know your worth, or at least know the worth of the career field you are moving into. Use resources like Glassdoor to look up industries and specific employers, and even job titles. The more information you have to make an informed decision and negotiate, the better. It is admittedly more difficult to negotiate your salary if you are recent graduate with limited experience.

Do your homework to find a salary range you would be happy with and stick to it. Saying no to a job because of a low salary offer takes conviction and a strong sense of worth. It is difficult but know that job offer is unlikely the last you will receive in your professional career and it could set you up for more opportunities. Keep in mind your first salary out of school sets the starting point for your next raise from your current company or your next. A 10% annual raise on a starting salary of $60,000 vs. $45,000 after three years goes from a $15,000 difference to almost $20,000. Not to mention most companies set retirement and other benefit contributions based on salary. Do your homework, know your worth, set a salary range, and do not be afraid to say no.

Save, Invest, and Build a Team

Reducing the wealth gap goes beyond income. It is about overall wealth. Investing for retirement, controlling assets like a home or a business, are all ways you can increase your wealth. They take time and consistency – and income. We touched on income earlier, now let’s get into what you can do with it.

Depending on your save vs. spend disposition the happiness gained from getting your first apartment, car, new clothes, etc. will wear off in a few months or a few years. As you find a good rhythm for the way your income comes and goes it is a good idea to start making some financial goals. These could include saving and investing, buying a car or home, and possibly opening a business. A byproduct of your goals will hopefully be increasing net worth – but that is not always the case. The first opportunity to invest will likely come from your employers through an employment sponsored retirement plan like a 401k or 403b. You can learn about those opportunities from your employer’s human resources or benefits department or from on-line resources. By investing you are accumulating assets that have historically increased in value faster than cash. These assets along with an eventual home or condo purchase, if that is something you determine is the right fit, are tools to increasing your wealth. Unfortunately, most cars, clothing, and shoes will depreciate and do little to help you build wealth – plan accordingly.

There are many online resources you can use to educate yourself and make a plan. Look to build out a team around you including supportive friends and family, professionals you trust to provide advice, and others with whom you can eventually share your learnings. Building wealth for most of us is more than a personal goal, it is for our families and communities. As you learn how to find success – share that information.

At Seed we focus on the prep work necessary to get the interview, the internship/job offer, and then learn quickly on the job. Hopefully these extra tips and Reeves’ TedTalk provide more perspective and clarity on what steps you can take to reduce the racial wealth gap and hold those in positions of power accountable to do the work too.

Further reading/watching:

Explained – Racial Wealth Gap

McKinsey – The economic impact of closing the racial wealth gap