Race and Money: Why Some People Get More Money

Let's dive into the debate about race and money. Social economics being debating for generations on the reasons why some social and racial groups have more money than others. This blog is all about that mess and shining some light on why some groups got majority of the money and opportunities and some are stuck in the squalor.

The Wealth Gap:

A report from the Federal Reserve in 2021 (Dettling et al., 2017) talks about Black families having way less money than their white counterparts. It's not just a recent thing, through out the history it felt like it was nearly always the case. Stuff like redlining, which basically is discriminatory practice that consists of the systematic denial of services such as mortgages, insurance loans, and other financial services to people based on their race or ethnicity or where they live (Cornell Law School, 2022).

Schools and Money: what race gets better and more:

People always say education is the gate to success and an opportunity for everyone to make it out, but turns out that is not very true. The National Centre for Education Statistics (2019) found that schools in minority neighbourhoods have fewer resources and less funding. That means limited access to quality education, so not exactly fair competition or equal opportunities.

Jobs and Discrimination:

Now, let's talk jobs. A study by Bertrand and Mullainathan (2004) talked on how people with names that sound a bit too "ethnic" have a tougher time getting not only a job but even an interview for one. Employment discrimination is like this invisible force, holding people back, making it harder to climb that career ladder and contributing to wage gaps.

This study is arguably quiet dated but recent history and news showed that in 2024 racism is very much not extinct in many areas, so why would be any different in job sector? Taking a walk down canary wharf can quiet easily prove that high paying sector is still occupied predominantly by white people. However, Hunt et al., 2015 study tried to show that having a diverse team pays off – financially! Companies with diverse executive boards are outperforming their peers. So, it's not just about being woke, and ticking minority boxes, it's about the fact that performance might not be affected by minorities.

Entrepreneur Life: Starting a Business Is No Walk in the Park:

Dreaming of starting your own business? Well, good luck if you're from a minority community. The Minority Business Development Agency found out that access to money, resources, and opportunities is tough. And that links back to redlining, if it is a struggle to even get a mortgage, business loan must be close to impossible for some people. How can we talk about decreasing the wage and wealth gaps if some communities and races are denied the opportunities to go from working class to class that hires workers.

Where You Live Matters: Housing Drama:

Oh, and let's not forget housing. Turns out, where you live can make a big difference. That study in the Proceedings of the National Academy of Sciences (Sampson et al., 2008) spoke on how racial segregation is still alive and kicking, keeping some neighborhoods down and others up. There is always that nature vs nurture debate. If person grows up in a ghetto and ends up living there, what are his chances, opportunities and even desire to become a banker or a doctor?

Government Policies:

What's the government doing? Well, turns out, a lot but the issue is that governments are trying to fix their own old mistakes and it feels very forced. Every new law and legislation that is trying to combat racism and discrimination feels just like they throwing a bone to the dog and trying to shut the crowd up. Too little and too slow, everyone seems to know what the issue is but instead of just making a plan and doing something, they debate on same old topics for years.

Conclusion:

So, this is my take on race and money. I have preferred to focus on providing information rather than opinion, rest is for people to deduce. It's messy, it's complicated, but talking about it is the first step. By understanding the not-so-fun facts, maybe, just maybe, we can start to straighten out this world and make it an appealing life for everyone.

By Dmitri

References:

Dettling, L.J., Hsu, J.W., Jacobs, L., Moore, K.B. and Llanes, J.P.T. with assistance from E. (2017). Recent Trends in Wealth-Holding by Race and Ethnicity: Evidence from the Survey of Consumer Finances. www.federalreserve.gov. [online] Available at: https://www.federalreserve.gov/econres/notes/feds-notes/recent-trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-consumer-finances-20170927.html.

Cornell Law School (2022). Redlining. [online] LII / Legal Information Institute. Available at: https://www.law.cornell.edu/wex/redlining#:~:text=Redlining%20can%20be%20defined%20as.

National Center for Education Statistics (2019). Status and Trends in the Education of Racial and Ethnic Groups 2018. [online] Available at: https://nces.ed.gov/pubs2019/2019038.pdf.

‌Bertrand, M. and Mullainathan, S. (2003). Are Emily and Greg More Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination. [online] National Bureau of Economic Research Working Paper Series. Available at: https://www.nber.org/papers/w9873.

‌Hunt, V., Layton, D. and Prince , S. (2015). Why diversity matters. [online] Available at: https://www.mckinsey.com/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/why%20diversity%20matters/why%20diversity%20matters.pdf.Sampson, R.J. and Sharkey, Patrick. (2008). Neighborhood Selection and the Social Reproduction of Concentrated Racial Inequality. Demography, 45(1), pp.1–29. doi:https://doi.org/10.1353/dem.2008.0012.