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District Dialogues Explores the Wealth Gap

Renee Haltom and guest speakers on stage for the May District Dialogues: Addressing the Wealth Gap

The Richmond Fed recently hosted this year’s second installment of District Dialogues, which engaged a panel of experts on the causes of the nation’s Black-White income and wealth gaps and some potential solutions for resolving these disparities.

Those experts were:

  • Kristen Broady, an economist and director of the Chicago Fed’s Economic Mobility Project
  • J.P. Julien, an associate partner with McKinsey & Company and a lead for McKinsey’s Institute for Black Economic Mobility
  • Amir Kirkwood, president and CEO of Virginia Community Capital

Richmond Fed Regional Executive Renee Haltom moderated the event, which included both in-person and virtual attendance.

“Why does the Fed care about this topic?” Haltom asked. “The Federal Reserve has two goals – price stability and maximum employment. Employment outcomes differ for different groups of people, so we have to understand what affects the likelihood of any group to be employed in order to support employment.” 

Haltom also shared that the Federal Reserve has a mandate regarding community development, which stems from the Community Reinvestment Act (CRA) of 1977. The CRA charges the Federal Reserve and other regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income communities. She also noted that other groups, including Hispanics and Native Americans, face similar economic disparities.

During the program, panelists shared data points that demonstrated there is a median earnings gap of about $14,000 between Black and White full-time workers. The wealth gap is significantly larger and has been persistent over time. This has a profound influence not only on individuals, but also on the economy as a whole, impacting individuals’ ability to invest in their children’s education, to plan for retirement or to protect themselves against shocks such as job loss.

As the panelists discussed, the causes are complex. For example, education reduces some but not all of the gap. Broady highlighted that student loans could contribute to that.

“Black people are less likely to get an education, more likely to borrow to get that education and likely to borrow a higher amount, and also more likely to go to for-profit institutions than their White counterparts,” she said.

They also noted research pointing to evidence of discrimination and the fact that Black families are less likely to leave an inheritance — and when they do, that inheritance tends to be smaller.

“In any given year, there is a $330 billion difference in the wealth that flows from White families versus Black families, and there is this compounding over time,” Julien said.

The panelists suggested tangible next steps, which included recommending that business owners begin recruiting potential hires at earlier stages and encouraging professionals to visit schools and share their paths to the careers they’ve chosen. Kirkwood also spoke about “opening the credit box” to help aspiring homeowners and entrepreneurs, and the role that CDFIs can play in filling lending gaps.

Toward the end of the evening, audience members raised questions about the issues explored and offered their perspectives as local community and business leaders.

“This mutual sharing of information and ideas is what this series is intended to yield,” said Sarah Gunn, director of the Richmond Fed’s Economic Education department, which organized the event. “We hope the audience departed with information that will help them explore solutions.”

To learn more about the Richmond’s Fed work on Addressing the Wealth Gap, visit the District Dialogues webpage. The next District Dialogues program will take place on August 9 and will focus on the Economics of Aging.

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