Can Employee Benefits Close the Racial Wealth Gap?

Can Employee Benefits Close the Racial Wealth Gap???That was the question I asked and?answered at today’s?#ProsperitySummit2022?in Atlanta GA hosted by Prosperity Now . My answer??Part 1- Employers' core benefits programs are necessary but not sufficient to close the racial gap among their workers' families.?Part 2 - We must call on both Congress and employers to improve both access and the impact of benefits AND innovate new solutions for those that lack access as gig/1099 and part-time workers.?

The Facts:?Black and Latino workers have a significant wealth gap compared to their White and Asian counterparts. (Federal Reserve 2021)?Moreover, the wealth gap is widening. (Heller, 2013)?

The wealth gap is not just because of current income disparities.?(Federal Reserve 2021) The wealth divide's cause includes historical income disparities, lack of savings, lack of homeownership, lack of intergenerational wealth transfer and the systematic barriers and discrimination at root cause of those challenges. (Cleveland Fed 2019)

The Opportunity:?Many employers have recently been investing?in efforts to close the racial wealth gap - through their community development, foundations and services.??Large employers who are also sponsors of the Prosperity Summit include: 亚马逊 , Avandé (a joint venture of 微软 & 埃森哲 ), 美国银行 , 花旗 , Charles Schwab , Fifth Third Bank , Intuit , 摩根大通 PNC , Prudential Financial (my former employer), 塔吉特百货 , Truist , TD and 富国银行 .

I assert these same employers -- and in fact?all employers -- can offer a set of benefits that make a difference in their workers wealth, that is assets less debt.???

The Survey of Consumer Finances?suggests "yes"; families above median wealth in America have as their largest assets - homeownership, pensions and mutual funds/company stock. (U.S. Census Bureau, 2022.)

Which Benefits? I believe there are a set of core employee benefits that make a enormous difference?in creating wealth, managing risk and making optimal decisions about both:

The Unique Benefits of Benefits:? Workers with these workplace benefits have specific wealth building advantages of payroll deduction, company matches, default choices, institutional purchasing power, access to institutional share classes, fiduciary oversight, federal consumer protection, personalized decision support and tax incentives/credits. Workers who try to imitate benefits themselves in the retail marketplace often cannot recreate these benefits of workplace benefits.

So What's the Problem? The challenge of using benefits to close then racial wealth divide is not every worker has access to this core suite of benefits. Many but not all medium and large organizations offer these benefits to full-time W2 workers.?However, most small business, part-time and 1099/gig workers lack these benefits.?Moreover, who is over represented in these jobs that lack benefits??Blacks, Latinos and Women.

What Should We Do Now?

First - we should advocate for and encourage Congress to pass the bipartisan?SECURE 2.0/EARN/RISE & SHINE?act and a federal public private partnership on?Paid Family Medical Leave?so that more employers can offer more benefits to more workers.?With the passage of the SECURE acts and the hopeful passage of SECURE 2.0 this fall - every employer can and should offer at no cost to themselves a 401k or similar plan through an?Open MEP/PEP.?Moreover if the SECURE 2.0/RISE & SHINE/EARN Act passes- employers of all size can offer?emergency savings?and student loan management solutions.?Finally until the US federal government joins every other developed?on the planet in passing federal paid leave,?Paid Family Medical Leave?is dependent on states mandates or employers's voluntary adoption.

Second, we should call on employers to set ESG goals for their own workers' financial wellness and use their core employee benefits to help close the racial wealth divide.?Why should employers offer these benefits? Because there is a real business case beyond altruism; financially secure workers are more productive, less absent, and are easier to attract and retain.

Third, we must experiment with public, private and pooled solutions that target small business, part-time, 1099 workers and sole proprietors with affordable and valuable benefits.?This likely means a combination of unions, associations and state programs to ensure all are covered.

The racial wealth divide?is "the product of centuries of policies and practices that keep people of color from getting ahead."?(Prosperity Now)?Employee benefits whether delivered by private employers, public programs or pooled solutions can't close the gap alone but they are a necessary component to help build a broader and stronger middle class for all American workers' families.?Let's strengthen their availability and impact on all.