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Welcome back to Invest in You: Ready. Set. Grow's supplemental Money 101 guide to financial wellness during these trying times. Today we’re focusing on the racial wealth gap and what President Joe Biden’s new administration is hoping to do to close it and advance racial economic equity.
The gap is glaring, as evidenced by Federal Reserve’s 2019 Survey of Consumer Finances, released in September 2020. The median wealth for a white family was $188,200, compared to $24,100 for Black families and $36,100 for Hispanic families.
Biden signed several executive orders on the issue and has called on Congress to raise the federal minimum wage although he faces some opposition. During the campaign, he also laid out proposals, including small business investments and achieving equity in education opportunities.
Below, we outline several components of his plans.
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Sharon Epperson
THE BIDEN ADMINISTRATION AND THE RACIAL WEALTH GAP
Compensation Biden‘s first order of business was making a $15 federal minimum wage part of his stimulus plan. However, it has to pass Congress and was not included in the Senate's most recent proposal. At the same time, Democrats have reintroduced the Raise the Wage Act which will incrementally increase the minimum wage to $15 by 2025.
Whether either is ultimately implemented is up to Congress.
The pay boost would give 31% of Black and 26% of Latino workers a raise, according to the Economic Policy Institute, a left-leaning research group.
The Congressional Budget Office, however, projected a $15 minimum wage increase by 2025 could mean a median of 1.3 million jobs lost in the U.S. due to a fall in business revenues.
Biden also issued several proposals to address pay equity on the campaign trail, including advocating and signing into law the Bringing an End to Harassment by Enhancing Accountability and Rejecting Discrimination in the Workplace (BE HEARD) Act.
Housing The president has directed the Department of Housing and Urban Development to examine the effects of President Donald Trump’s regulatory actions that “undermined fair housing policies and laws.” Based on that analysis, HUD will take steps to implement requirements of the Fair Housing Act.
As a candidate, Biden proposed creating a new refundable, advanceable tax credit of up to $15,000 to help families buy their first home. He also promised to scale up support for federal programs that financially support and revitalize distressed neighborhoods, as well as spur the construction of 1.5 million homes and public housing units.
Infrastructure During the campaign, Biden pledged a $2 trillion accelerated investment to create jobs to build modern, sustainable infrastructure in Black and Brown communities. That includes not only roads and bridges, but schools, drinking water and broadband access.
His goal is that 40% of the overall benefits go to disadvantaged communities and that jobs are filled by diverse, local and well-trained workers.
“A cry for racial justice some 400 years in the making moves us. The dream of justice for all will be deferred no longer.” — President Joe Biden
Small Businesses In addition to calling for grants to more than 1 million of the hardest hit businesses in his Covid-19 relief package, Biden is also looking at longer-terms solutions for small business owners of color.
During the campaign, he outlined several proposals, including making permanent the New Markets Tax Credit which provides an incentive to invest in low-income communities.
Biden has called to allocate $10 billion from the new Small Business Opportunity Fund to state and local venture capital programs. Based on past government investments, he believes that can spur $50 billion in new equity investment for small businesses.
Only 10% of funding from the Small Business Administration’s major lending programs went to Black, Latino, and Native American entrepreneurs in 2019, Biden has said.
To address inequities in the federal contracting system, Biden pledged as a candidate to triple the federal goal for contracting with all small disadvantaged businesses—from 5% to at least 15% of all federal procurement dollars by 2025.
Opportunity Zones In effort to reform Opportunity Zones, which was designed to spur economic growth in low-income communities, Biden wants the Treasury Department to review the program to ensure the tax benefits are only going to communities where there are clear economic, environmental and social benefits.
He also wants Opportunity Funds to partner with nonprofit or community organizations and focus on benefits such as job creation.
Banks Communities of color have long been under-served by banks. In 2019, 14% of Black households and 10% of Hispanics had no bank accounts, according to the Federal Reserve.
Biden is aiming to strengthen and expand the Community Reinvestment Act. It currently regulates banks “but does little to ensure that fintechs and non-bank lenders are providing responsible access to all members of the community,” his campaign website stated.
He also wants to expand access to $100 billion in low-interest business loans by funding state, local, tribal and non-profit lending programs in Black and Brown communities. He proposes expanding the role of Community Development Financial Institutions (CDFIs) in underserved communities.
Education opportunities In addition to proposing some sort of student debt forgiveness Biden also proposed making public colleges and universities tuition-free for all families with incomes below $125,000. He also wants to nix tuition at two-year community colleges.
Nearly 85% of Black bachelor’s degree recipients carry student debt, compared with 69% of white bachelor’s degree recipients, according to the Center for Responsible Lending.
Institutions that are historically Black and Hispanic, as well as others, will also see an investment under Biden’s plan. It includes building high-tech labs and digital infrastructure, as well as investing in programs that increase enrollment, retention, completion and employment rates.
For entrepreneurs, he would like to establish intensive, semester-long business development programs at every public community college in the U.S.
Workforce training is also part of his focus, including a $50 billion investment that will include community-college business partnerships and apprenticeships.
The bottom line While there is no doubt Biden wants to start closing the gap, the final outcomes of many of his proposals are unclear since they require Congressional action.
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