The Economy

The phrase “steady improvement” best describes the economic health of our nation in the seven years since the end of the Great Recession. Unemployment is down, new jobs are being created, and household wages are rising. However, a closer look at economic indicators shows that families and communities of color did not just fall behind during the recovery; they have not recovered from the recession at all.

The authors of a recent analysis published jointly by the Corporation for Enterprise Development and the Institute for Policy Studies found that if current federal wealth-building policies remain in place, it will take African American families 228 years to amass the same amount of wealth that white families have today, and it will take Latino families 84 years to reach the same benchmark.1 The authors also found that by 2043, when households of color are projected to account for more than half the US population, the wealth divide between white households and African American and Latino households will have doubled, from about $500,000 in 2013 to $1 million.2 Their report details how these household wealth disparities may play out over the coming decades. If current trends continue, the authors conclude, the entire economy will suffer: “By the time people of color become the majority, the racial wealth divide will not just be a racial and social justice issue impacting a particular group of people—it will be the single greatest economic issue facing our country.”3

The Economy Design Team

The W.K. Kellogg Foundation has been a leader in addressing persistent outcome gaps in communities of color, most recently through its Truth, Racial Healing & Transformation (TRHT) enterprise. By focusing on historical and contemporary policies that have created persistent barriers to success, healing old wounds, and working to create opportunities for all, TRHT seeks to move the nation beyond simple conversations about race and ethnicity in order to confront the complex root causes of racism. To spur such a movement, the foundation will work with select communities to conduct racial healing activities that address the unique issues facing each community and cultivate a shared vision for the success of all citizens. The foundation will support community-based efforts that inform public policies and practices to sustain and expand positive outcomes for children and families.

As part of this broader effort, the Economy Design Team is focused on informing practices and policies to contribute toward building a stronger economy for all communities. The team is composed of subject matter experts and thought leaders who are dedicated to creating a thriving economy in which the nation’s diverse people and communities will have equal and fair access to resources and opportunities, as well as influence on systems and policies that affect them.

What would the American economy look like if the belief in a hierarchy in human value were to be replaced by the truth of who we are as human beings, as a nation of people who deserve equal opportunity and treatment? The design team is developing clear answers to this question:

• The American economy would be stronger and would reflect the needs of all citizens, there would be full participation in all sectors of the economy, and we would be better able to achieve peace and justice.

• The quality of our neighborhoods, schools, jobs, health, and other community institutions would no longer be determined by our zip codes or ethnicities.

• Everyone would have access to quality, well-paying jobs and to the essential tools and resources hard-working families need in order to move up the career ladder and earn family-sustaining wages—e.g., employee training, family-friendly workplaces, and career advancement opportunities.

• People would not be perceived as less worthy, less able, less qualified, or less deserving of opportunities—in education, employment, immigration status, health care, the food system, and other components of the economy—because of their race or ethnicity; there would be equity in the selection of people for positions in all tiers of authority, decision making, and influence.

• Public policymakers would fully understand their role in preventing and responding to inequity, would be equipped to address issues of race and equity, would be more explicit about how structural racism occurs, and would recognize the importance and value of creating inclusive communities.

This vision of an American economy that works for everyone would reflect the results of uprooting the belief in a racial hierarchy of human value that has been embedded in, and sustained by, the economy. For centuries, this belief has been used to empower some and disenfranchise others. People of color in the United States have been denied equal access to resources and opportunities not by default, but by design. The US economy is built on a foundation that is structurally unequal and imposes systemic barriers to economic opportunity for many communities of color. This began with the cruel and unjust treatment of thousands of Native Americans who were forcibly removed from their lands. It continued with slavery, an institution that fostered the idea of African Americans as personal property and as exploited laborers with no democratic rights. Communities of color continue to be hindered by the structure of the economic system and by unfair policies. This discrimination is rooted in, and contributes to the perpetuation of, the belief that the victims, based on their race and ethnicity, are of lesser value than other human beings.

Agricultural workers exemplify the victims of racial hierarchy. In the South, slavery was followed by the exploitative sharecropping and tenant farming systems that deprived African Americans of fair compensation for their work and opportunities for economic betterment. During the 1930s, as part of the New Deal, federal legislation established a minimum wage, overtime pay, child labor restrictions, and collective bargaining rights. But agricultural workers—mostly African Americans—were excluded from these protections. Today, farmworkers (on larger farms) are covered by the federal minimum wage, but they continue to be excluded from many labor laws that protect most other workers, making their jobs less attractive to anyone with other options.

Today, the majority of farmworkers are Mexican immigrants. Due to our broken immigration system, these farmworkers lack authorized immigration status—for which they are often demonized—and most are too fearful of deportation to challenge unfair or illegal working conditions. Confronted by these obstacles, it is not surprising that many farmworkers suffer wage theft, work in unhealthy or dangerous conditions, and live in substandard housing.

The Economy Design Team envisions an economy that eliminates all traces of racial and ethnic discrimination. Ensuring the economic security of families and communities of color is in the best interest of our nation.

Closing the wealth gap for families and communities of color

The TRHT enterprise is designed to cultivate racial equity and healing, alongside community and civic engagement, in order to remove barriers to success and improve outcomes for all children and families. TRHT supports the principle that all children should be raised in economically secure families—that is, families with incomes that are at least above 200 percent of the federal poverty level. The success of this enterprise will depend on our nation’s ability to close the persistent gaps faced by families and communities of color.

The connection between wealth and well-being is undeniable: lack of wealth, or access to wealth, translates to poorer outcomes in health, education, and employment. Even over generations, families without access to wealth are highly unlikely to escape economic instability and insecurity. Accordingly, the Kellogg Foundation supports efforts to provide families with access to the resources necessary to obtain well-paying jobs, develop smart financial habits, and save for their future. To close gaps in income and wealth that have endured for generations, the Economy Design Team believes future investments should be focused on community-based solutions that address key wealth-building issues faced by low-income families and families of color. When parents have opportunities to obtain quality jobs, earn family-supporting wages, advance in their careers, and access the resources they need to stay out of debt and save money, they can better support their families and help ensure their children can succeed in school and life.

Real lives, real economic transformation

The Economy Design Team recognizes the need for expanding opportunities for business ownership by low-income parents so they can boost their earnings and create long-term wealth for their families. The Opportunity Fund of Northern California, which is supported by the Kellogg Foundation and committed to building the capacity of entrepreneurs of color, exemplifies such efforts. As California’s largest nonprofit microlender, the Opportunity Fund offers a unique blend of products and services that help residents of underserved communities who do not qualify for traditional bank loans improve the economic stability of their businesses. According to the Small Business Administration, about half of all small businesses survive five years or longer.4 Yet, clients of Opportunity Fund have a performance rate of 90 percent; on average, borrowers’ success translates to a 20 percent or more increase in take-home income.5

Melchor Landin embodies this success. Moving to the United States from Mexico in the 1950s, Landin sought to create a better life for his family. Despite steady work as a baker in a grocery store, however, he and his family lived paycheck to paycheck. Wanting to gain more from his hard work and experience, he decided to start Mexico Bakery in San Jose. When Landin was ready to grow the business, the Opportunity Fund stepped in to provide the funding that his own bank had declined to provide. With access to capital, he went on to own and run successful bakeries in three locations in San Jose and to hire twenty employees. Today, the next generation of Landins is running the family business. “We knocked on so many doors, and we were so close to giving up,” said Jose D. Landin, Melchor’s son and the treasurer of Mexico Bakery. “Another fellow business owner directed us to Opportunity Fund. After the first meeting, we felt a reassurance that this was the place that would support our American dream.”6

Propelling families forward

Building an inclusive and equitable economy is essential if the United States is to overcome the long-term impacts of the Great Recession and to dismantle the historical legacy of structural racism that perpetuates gaps in economic outcomes. Doing so will require good public policy and innovative programs that solidify what we in the philanthropic and nonprofit sectors know to be effective in closing these gaps for families and communities of color. But there is no silver bullet. What is required is a national commitment to an interconnected set of solutions that will boost income, savings, and wealth accumulation for low- and middle-income families of color today—and which, in turn, will benefit their children and their children’s children for generations to come.

When families of color are able to succeed, we all succeed. Our country’s future is riding on us—and waiting for us to build an economy that works for everyone.

Notes

1. Dedrick Asante-Muhammad, Chuck Collins, Josh Hoxie, and Emanuel Nieves, The Ever-Growing Gap: Without Change, African-American and Latino Families Won’t Match White Wealth for Centuries (Washington, DC: CFED and Institute for Policy Studies, 2016), 11.

2. Ibid., 5.

3. Ibid., 11.

4. Office of Advocacy of the US Small Business Administration, Frequently Asked Questions About Small Business (Washington, DC: US Small Business Administration, 2016), 1.

5. The Opportunity Fund participates in EntrepreneurTracker, an annual borrower survey created by the Aspen Institute’s FIELD program. The survey is administered to a sample of the Opportunity Fund’s borrowers one to two years after they receive their loans; it asks them questions about their businesses, including whether they are still in operation. More than 90 percent of these respondents consistently report that they are still in business.

6. Jose D. Landin, interview by Ken Sain (senior vice president, Widmeyer Communications).

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