By Carolyn M. Brown
Chloe McKenzie is a millennial money warrior who has taken up the gauntlet to fight for wealth equity and to close the wealth gap for women of color. The former Wall Street securities trader turned educator is helping women—and young girls—win the battle against diminished wealth by getting a better handle on their finances. Her nonprofit, BlackFem, transforms school-based learning so that girls of color in underserved communities have the skills, habits, and resources to sustain and build wealth.
Meanwhile, through her consulting firm, On A Wealth Kick, she gets some of the largest financial institutions to be more inclusive and less predatory in their product offerings.
McKenzie has been a wealth manager for some six years. On Wall Street, she was trading mortgages, student loans, credit card receivables, and auto loans. Then a reckoning of sorts occurred. “We were in a post-2008 financial crisis world, but I was still managing the portfolios of precrisis collateral [millions of dollars] and was awestruck about how Wall Street is able to create liquid assets that we can make money on when people are struggling to pay their debt obligations,” she recounts. She tapped into an overwhelming feeling of complicity and felt a need to do something to help those less fortunate, including serving as a financial counselor at a homeless shelter.
“We have to completely rethink our own consciousness about the inherent contradiction of our profession, which is to make wealthy people wealthier and price low-income people out of the market,” says McKenzie. “That’s why my particular model, as a financial adviser, is to work only with low-income people in ridiculously deep-discounted ways.”
BlackFem trains teachers to become Certified Wealth Educators via a centralized summer Teacher Academy. After BlackFem was founded five years ago, individuals and institutions outside the education sphere began reaching out to McKenzie with a crucial question: what could they do to close the wealth gap? Her response was to create her On A Wealth Kick consultancy, which helps them to understand how they are overlooking disadvantaged populations or are exploiting them through, for instance, excessive fees on financial products.
Fixing the gap
McKenzie is among a growing contingent of women—and men—who are deeply troubled by the ever-widening wealth gap, particularly for women of color. The US wealth gap is the disparity in family holdings of wealth and debt, which varies significantly by race. Simply put, your personal net worth is the combination of what you own (your assets) minus what you owe (your liabilities). The median net worth for white households was $171,000 as of 2016, which is nearly 10 times that of African American households at $17,150 and about eight times that of Latinx households at $20,700, reports the Federal Reserve Board.
Two sides of the balance sheet are used to calculate your net worth. The asset side consists of your cash on hand, savings account, certificates of deposit, and investments (stock options, bonds, real estate). On the liability side are your student loans, car notes, credit card balances, mortgage, and anything else you owe. McKenzie believes that “we’re not highlighting enough the severity of the wealth gap,” pointing to findings showing that there is intragroup inequity. “In examining the wealth gap using the two vectors of race and gender, the numbers are staggering,” she says.
McKenzie’s research shows that the wealth gap is such that for every dollar a single white man owns, a single white woman only owns 46 cents. For every dollar single black men own, single black women only own 42 cents. For every dollar a single Hispanic man owns, a Hispanic woman owns nothing. And for every dollar a single Asian man owns, a single Asian woman only owns 53 cents. Other research shows that in comparison to white men, women of color own pennies on the dollar (two cents for black women and eight cents for Latinas). Millennial matters
What’s more, the wealth gap is hitting female millennials hard, especially women of color. Despite important gains in college attendance rates and career opportunities, millennial women’s wealth lags behind that of men. Millennial women (born between 1980 and 1997) represent 31.5 percent of the female population in the United States, yet they do not benefit from many economic policies and systems designed and built to meet the needs of men as primary breadwinners, according to “Clipped Wings: Closing the Wealth Gap for Millennial Women,” a report by the Asset Funders Network in collaboration with Closing the Women’s Wealth Gap and Insight Center for Community Economic Development.
The report reveals identifiable key drivers or wealth-stripping factors that contribute to the wealth inequity between millennial women and men: skyrocketing education costs; continued pay inequity and occupational segregation; changing family structures, expectations, and norms about contributing to parents’ and extended family’s economic needs; and systematic criminalization of poverty and rise of mass incarceration.
Student debt is a huge means of wealth stripping, as the cost of education is way higher than the cost of living, notes Jhumpa Bhattacharya, coauthor of the report and vice president of programs and strategy at the Insight Center for Community Economic Development. The average student debt for millennial women is $20,000, four times the level for baby boomers. While education does contribute to greater success, there’s a caveat. “What we’re finding is that the myth that higher education is an economic equalizer is proven to be false, particularly for women of color,” says Bhattacharya.
Not only are highly educated women still getting paid less than men, but the equity pay gap is widening for women of color in the workforce, reports the Economic Policy Institute.
In 1979, for instance, white women and black women earned 62 cents and 58 cents, respectively, for every $1 that white men earned. US Bureau of Labor Statistics data show white women earning 82 cents on the dollar as of 2015 compared to black women earning 65 cents and Hispanic women earning 58 cents. Asian American women make 87 cents on the dollar earned by white men. Yet, when stacked up against Asian American men with the same level of education and work roles, Asian American women earn 78 cents on the dollar.
Women of color tend to be placed in low-paying occupations. “There’s this thing that we’re seeing called occupational segregation, where women are being funneled or forced into jobs that don’t pay as much,” adds Bhattacharya. “This has a lot to do with how we value women in our economy . . . how we value different types of work. Teachers are paid less because we as a society have decided that’s ‘women’s work,’ for example.”
Barriers to wealth
McKenzie, however, believes that “we fixate too much on the pay equity side and forget about the equity we need in order to achieve wealth.” Yes, she explains, “Women need to be demanding more wealth equity as it relates to the way they are paid and compensated in the workplace. Just because we make more does not mean our wealth or net worth goes up.”
The wealth gap is wide for women of color in comparison to their white female counterparts. The net worth of college-educated single African American women ages 40–59 ranges from $6,000 to $9,500; it is just $11,000 for those age 60 and over. Comparatively, college-educated single white women ages 40–49 have a net worth of $25,000; for those ages 49–59, it rises to $117,500, and for age 60 and up, to $384,400.
The wage gap tells us what women earn. The wealth gap tells us what women own. “While income is important, focusing on earnings is not enough to ensure women’s long-term prosperity, because that’s only one part of the puzzle,” says Dr. Suparna Bhaskaran, a visiting scholar at the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University and a lecturer in the Women’s Department of Gender and Sexuality Studies. “Low-paying jobs also typically have weak or no benefits—health insurance, retirement savings, and child care,” she explains. “Add to that rising rental costs or a mortgage and high property taxes. The chances of you saving are pretty low when faced with these wealth-stripping factors.”
Systemic criminalization is a wealth-stripping factor because, Bhaskaran says, women are paying the price of mass incarceration, given that 60 percent of related costs such as bail money and numerous fines and fees (phone calls and health care) are paid by a family member, of which 80 percent are women, particularly those of color. “Women are paying for brothers, uncles, and fathers who are incarcerated.”
Since the 1994 crime bill, broken windows policing, and stop and frisk, “we’ve seen a huge uptake of people being arrested and jailed, mostly black and brown folks,” Bhaskaran says. “I think most people think about incarceration as a man’s issue. There’s the reality that millennial women are now 10 times more likely to be incarcerated than previous generations.”
Other obstacles to accumulating wealth are the financial strain from contributing to family economic needs. In addition to the cost of raising children on their own, women are caring for an elderly parent or relative, especially those who are immigrants or the children of immigrants. In fact, 25 percent of the nation’s millennials are Latinx, and 30 percent of them say they are supporting two or more generations of their family. Bhaskaran further notes that contributing to the gender and racial wealth gap are structural factors and policy decisions. The United States has a long history of promoting property ownership, but many individuals and communities have been and continue to be excluded. Women couldn’t take out loans to buy a home or start a business without needing a male signature. Systems of slavery, Jim Crow laws, and redlining were barriers to property ownership for African Americans.
In a report she authored titled “Pinklining,” Bhaskaran describes how aggressive and predatory lending (subprime loans) has stripped wealth from women of color. The financial services industry has expanded and deepened the divide. For many women, a home is their biggest financial asset. But when it comes to homeownership, most people fail to take into account that their mortgage is depleting their net worth. If your house is valued at $300,000, for instance, and the mortgage is $250,000, your equity is only $50,000, not $300,000. “If you face a financial emergency, you can’t all of a sudden sell your house to get the cash you need,” McKenzie notes.
McKenzie says that a solution pertinent to financial advisers like herself is the need to focus on creating strategies to provide people with more liquid wealth: making sure they have access to bank accounts, retirement accounts, brokerage accounts, even cash values in life insurance policies, and other assets. All that liquid wealth will translate into safer and securer platforms for future gains.
Instead of putting the focus on individual behaviors, says Bhattacharya, we need to look at infrastructural change—how companies and shareholders continue to put profit over people. Her proposed solutions to alleviating various wealth-stripping practices and policies include pushing for equal pay and making sure companies are transparent about their payrolls; advocating for universal child care up to age five; promoting debt-free financing for student loans and/or eliminating college tuition costs, especially for public universities; getting guaranteed comprehensive extended paid leave for caring for newborns and family members; and criminal justice reform to address mass incarceration.
“Getting rid of wealth-stripping practices is how you get more money into people’s hands,” says Bhattacharya, at which point “you can educate them on how to better manage their finances.” DW
Carolyn M. Brown is an award-winning journalist, author, and playwright. She is the coauthor of the career self-help book Climb: Taking Every Step with Conviction, Courage, and Calculated Risk to Achieve a Thriving Career and a Successful Life (Open Lens, 2018).