[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE RACIAL AND GENDER
WEALTH GAP IN AMERICA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON DIVERSITY
AND INCLUSION
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
----------
SEPTEMBER 24, 2019
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Printed for the use of the Committee on Financial Services
Serial No. 116-51
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
42-351 PDF WASHINGTON : 2020
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California PETER T. KING, New York
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut ANN WAGNER, Missouri
BILL FOSTER, Illinois ANDY BARR, Kentucky
JOYCE BEATTY, Ohio SCOTT TIPTON, Colorado
DENNY HECK, Washington ROGER WILLIAMS, Texas
JUAN VARGAS, California FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas LEE M. ZELDIN, New York
AL LAWSON, Florida BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan WARREN DAVIDSON, Ohio
KATIE PORTER, California TED BUDD, North Carolina
CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
Subcommittee on Diversity and Inclusion
JOYCE BEATTY, Ohio, Chairwoman
WM. LACY CLAY, Missouri ANN WAGNER, Missouri, Ranking
AL GREEN, Texas Member
JOSH GOTTHEIMER, New Jersey FRANK D. LUCAS, Oklahoma
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida TED BUDD, North Carolina
AYANNA PRESSLEY, Massachusetts DAVID KUSTOFF, Tennessee
TULSI GABBARD, Hawaii TREY HOLLINGSWORTH, Indiana
ALMA ADAMS, North Carolina ANTHONY GONZALEZ, Ohio, Vice
MADELEINE DEAN, Pennsylvania Ranking Member
SYLVIA GARCIA, Texas BRYAN STEIL, Wisconsin
DEAN PHILLIPS, Minnesota LANCE GOODEN, Texas
C O N T E N T S
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Page
Hearing held on:
September 24, 2019........................................... 1
Appendix:
September 24, 2019........................................... 31
WITNESSES
Tuesday, September 24, 2019
Asante-Muhammad, Dedrick, Chief of Race, Wealth, and Community,
National Community Reinvestment Coalition (NCRC)............... 6
Cook, Lisa, Professor of Economics, Michigan State University.... 11
Kijakazi, Kilolo, Institute Fellow, Urban Institute.............. 5
Krawcheck, Sally, Co-Founder and Chief Executive Officer,
Ellevest....................................................... 9
Pyle, Mariko Chang, Researcher, Author, and President, Mariko
Chang Consulting, Inc.......................................... 8
APPENDIX
Prepared statements:
Asante-Muhammad, Dedrick..................................... 32
Cook, Lisa................................................... 94
Kijakazi, Kilolo............................................. 105
Krawcheck, Sally,............................................ 117
Pyle, Mariko Chang........................................... 34
Additional Material Submitted for the Record
Beatty, Hon. Joyce:
Written statement of the Asset Funders Network............... 121
Written statement of the Chenoa Fund......................... 211
Report of the Closing the Women's Wealth Gap Initiative...... 273
Written statement of Compass Working Capital................. 308
Written statement of FreeFrom................................ 318
Written statement of Inclusiv................................ 321
Report of the Institute for Women's Policy Research.......... 332
Written statement of the National Coalition of Asian Pacific
American Community Development............................. 422
Written statement of the National Women's Law Center......... 425
Article from The New York Times.............................. 433
Written statement of the Ohio Women's Policy Network......... 444
Written statement of the Pew Research Center................. 449
Written statement of PL+US................................... 457
Written statement of Prosperity Now.......................... 529
``Ten Solutions to Bridge the Racial Wealth Divide''......... 535
Written statement of Uber.................................... 571
Written statement of UnidosUS................................ 576
Written statement of the Women's Fund........................ 581
EXAMINING THE RACIAL AND GENDER
WEALTH GAP IN AMERICA
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Tuesday, September 24, 2019
U.S. House of Representatives,
Subcommittee on Diversity
and Inclusion,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:07 p.m., in
room 2128, Rayburn House Office Building, Hon. Joyce Beatty
[chairwoman of the subcommittee] presiding.
Members present: Representatives Beatty, Clay, Green,
Gottheimer, Gonzalez of Texas, Pressley, Adams, Dean, Garcia of
Texas, Phillips; Wagner, Kustoff, Hollingsworth, Gonzalez of
Ohio, Steil, and Gooden.
Ex officio present: Representatives Waters and McHenry.
Chairwoman Beatty. The Subcommittee on Diversity and
Inclusion will come to order.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Also, without objection, members of the full Financial
Services Committee who are not members of this subcommittee are
authorized to participate in today's hearing.
Today's hearing is entitled, ``Examining the Racial and
Gender Wealth Gap in America.''
I now recognize myself for 4 minutes to give an opening
statement.
Today's hearing is centered around a critical mission of
why this subcommittee exists. The racial and gender wealth gap
is real, unacceptable, and actually much larger than people
think.
True wealth can be defined by adding up total assets
including cash, retirement accounts, or your home, and then
subtracting liabilities such as credit card debt, student
loans, and mortgages, to reach your net worth.
But according to the United States Census Bureau, the
median net worth of white households was $130,800, while the
median net worth of Latino households was $17,530, and for
Black households, it was $9,590.
For nearly all working families, the most powerful wealth-
building tools are homeownership and retirement savings.
However, due to structural racism, redlining practices,
outright discrimination, disparities, and the list goes on,
along with predatory lending practices that disproportionately
affect women and communities of color, it has been more
difficult for certain families to actually build wealth across
multiple generations.
There is always talk about disparities in income between
women and people of color as compared to their white peers, but
socioeconomic differences do not explain away racial
inequities.
Today's reality is that the homeownership rate for Black
households today is the same as it was in 1967, when race-based
discrimination in housing was legal and did not happen by
accident. And we have all heard those stories. Racial and
gender inequities are not caused by individual behavior, but
steeped in systems and policies that perpetuate past
injustices.
This subcommittee was founded to help leaders and Members
of Congress confront the reality that our systems, our
institutions, and our outcomes emanate from an unjust hierarchy
on which the United States was built.
According to Richard Rothstein, who authored, ``The Color
of Law: A Forgotten History of How Our Government Segregated
America,'' ``We have created a caste system in this country
with African Americans kept exploited and geographically
separated by racial explicit government policies, and although
most of these policies are now off the books, they have never
been remedied and their effects endure.''
So, for that reason, I am proud to have today's hearing to
help identify an underlying issue that perpetuates the racial
and gender wealth divide, and to help set the stage for bold,
comprehensive solutions to this pressing problem facing the
nation.
Barriers to wealth accumulation remain a growing issue
facing our communities, in particular my constituents in the
Third Congressional District of Ohio, and the nation at large.
There is no one size that fits all. And I call on my colleagues
within this committee to give this topic the full attention it
deserves and to work together to implement multifaceted Federal
policy solutions.
I reserve the balance of my time for the Chair of the full
Financial Services Committee, Chairwoman Maxine Waters.
The Chair now recognizes the ranking member of ther
subcommittee, Congresswoman Ann Wagner, for 5 minutes for her
opening statement
Mrs. Wagner. Madam Chairwoman, thank you so much for
putting together this hearing today. It is a critical hearing
as we direct congressional efforts towards addressing the
racial and gender pay and wealth gaps.
In 1976, one in twenty women were the sole breadwinners in
their households. By 2013, it was one in four. And today, women
are the breadwinner or co-breadwinner in nearly two-thirds of
families with children.
Given these substantial gains in the percentage of women
participating in the workforce and growing our economy, we must
ensure that women have equal access to opportunities to support
their families, save for the future, and build assets.
The good news is that we have seen a tremendous improvement
in how women are compensated in the past few decades. A 2018
pay scale study--which I would ask, Madam Chairwoman, that we
submit for the record--
Chairwoman Beatty. Without objection, it is so ordered.
Mrs. Wagner. --comparing men and women with similar
experience, industry and job level, found that women actually
receive 98 cents for every dollar earned by men. This is
fantastic progress. But there is still much to be done,
particularly in addressing the wealth gap and the managers gap
and ensuring that the American workforce is more flexible and
family-friendly so that mothers can participate without facing
unnecessary hurdles or sacrificing the well-being of their
children, America's next generation.
As a working woman, I worked before, during, and after I
had my children. I have always been a passionate defender of
equal pay for equal work. And in order to close the pay gap and
empower more women and people of color to be leaders in our
workforce, I am a proud cosponsor of H.R. 1935, the Wage Equity
Act.
This legislation would empower employees to utilize
flexible work arrangements, proactively incentivize businesses
to fix pay disparities, protect individuals in negotiating
employment based upon merit, not salary history, target
negotiation education for women, and protect employees in
discussing their compensation with their colleagues.
In 2017, the U.S. Government Accountability Office (GAO)
found that women are underrepresented in the financial services
industry, especially in management.
In this industry, mathematicians, engineers, and physicists
work alongside financiers and economists, but women receive far
fewer degrees in math, statistics, computer science, and
engineering, compared to men. The underrepresentation of women
and minorities in well-paid Science, Technology, Engineering,
and Math (STEM) careers is one of the underlying causes of the
wealth gap.
Creating greater diversity in STEM education and doing it
at an early age is critical, not only for improving
opportunities for women and minorities in finance, but across
all workforce sectors. It is key to sustaining robust economic
growth in the United States.
That is why I sent a letter yesterday to the GAO--which I
would like to submit for the record, Madam Chairwoman--
Chairwoman Beatty. Without objection, it is so ordered.
Mrs. Wagner. --requesting a study to assess how firms are
supporting increased participation among women in STEM programs
at the secondary, undergraduate, and graduate levels, and what
best practices firms are using to recruit and retain women with
STEM degrees. This study will help us continue to find
solutions as we strengthen the U.S. financial services
industry.
I thank you. And I will now yield the remainder of my time
to the ranking member of the full Financial Services Committee,
Ranking Member Patrick McHenry from North Carolina.
Mr. McHenry. I thank the ranking member, and I thank the
chairwoman for holding this subcommittee hearing.
This subcommittee's principle is pretty simple: Every
American should have full and equal access to the same economic
opportunities. The data indicating that there are gender and
racial wealth gaps tells us that that is not the case.
Financial firms and other companies of all types have
recognized the negative consequences of the wealth gaps in this
country. Firms are taking proactive steps to address the
underlying conditions which result in women and minorities
earning less, and thus saving less. Initiatives such as
financial literacy training, and changes to family leave and
childcare policies, that I have been supportive of, and pushes
for higher participation in STEM programs have been effective,
but we need to do more.
So, thank you for your participation, thank you for your
initiatives, and we look forward to a good hearing.
Chairwoman Beatty. Thank you.
Today, we welcome the testimony of a very diverse and
distinguished panel of five witnesses. Thank you.
First, we welcome the testimony of Dedrick Asante-Muhammad,
the chief of race, wealth, and community at the National
Community Reinvestment Coalition (NCRC). He oversees the NCRC's
fair housing, fair lending, and small-business programs. Prior
to his role, he was the senior director of the economic
department and executive director of the Financial Freedom
Center.
Second, we welcome the testimony of Kilolo Kijakazi, who is
an institute fellow at the Urban Institute. Ms. Kijakazi's
research is focused on economic security, structural racism,
and the racial wealth gap. She is the author of the book,
``African-American Economic Development and Small Business
Ownership.'' She is also an advisor for the Closing the Women's
Wealth Gap Initiative, and was a member of the bipartisan
Commission on Retirement Security and Personal Savings.
Third, we welcome the testimony of Dr. Mariko Pyle, a
researcher and independent consultant specializing in external
evaluation of grants that seek to increase faculty diversity
and bring underrepresented groups into STEM. Dr. Pyle is a
national expert on the wealth gap, especially gender and racial
dimensions of wealth and equality. She is also a founding
member of the Closing the Women's Wealth Gap Initiative, and a
member of the Insight Center's Experts of Color Network.
Fourth, we welcome the testimony of Sally Krawcheck, who is
the Chair of the Ellevest Network, a 135,000-strong global
professional women's network. Ms. Krawcheck is the CEO and co-
founder of Ellevest, a digitally first mission-driven
investment platform for women.
Before launching Ellevest, Ms. Krawcheck built a successful
career as the CEO of Merrill Lynch, Smith Barney, U.S. Trust,
Citi Private Bank, and Sanford C. Bernstein. She was also chief
financial officer for Citigroup.
And finally, we welcome the testimony of Dr. Lisa Cook, an
associate professor in the Department of Economics at the James
Madison College at Michigan State University. She served as
president of the National Economic Association from 2015 to
2016, and currently serves as co-director of the American
Economic Association Summer Training Program.
Prior to this academic appointment, and while on the
faculty at Harvard University's Kennedy School of Government,
she was also the deputy director for African Research and
Programs at the Center for International Development at Harvard
University. Wow!
The witnesses are reminded that their oral testimony will
be limited to 5 minutes.
And without objection, your written statements will be made
a part of the record.
The witnesses are reminded to turn on their microphones and
abide by the three lights in front of you: Green means go,
yellow means wrap up, and red means stop.
We are going to start with Ms. Kijakazi. And you are now
recognized for 5 minutes to give an oral presentation of your
testimony.
STATEMENT OF KILOLO KIJAKAZI, INSTITUTE FELLOW, URBAN INSTITUTE
Ms. Kijakazi. Chairwoman Beatty, Ranking Member Wagner, and
members of the subcommittee, thank you for inviting me to
testify today.
The views expressed are my own and should not be attributed
to the Urban Institute, its trustees, or its funders.
This hearing represents a critical step in work that has
been done to bring the racial and gender wealth gaps to
national attention.
My remarks will focus on three key points. First, the
racial wealth gap is not the result of bad financial choices by
people of color. It was created through structural racism.
Second, to understand and effectively address the racial wealth
gap, we need more expansive data collection that is federally
funded. Third, the gap can be closed, but it will require bold
equitable solutions that focus on policy change, not changing
people's behavior.
The racial wealth gap is the difference in net worth
between families of color and white families. The median wealth
of white families in 2016 was 10 times the wealth of Black
families, and 8 times the wealth of Latinx families.
Research demonstrates that the racial wealth gap was
created by policies, programs, and institutional practices
designed to facilitate wealth accumulation by white families,
while impeding wealth-building by, or stripping wealth from,
families of color.
These policies include human trafficking and bondage of
people of African descent to build wealth for white people,
followed by policies that restricted Black home and business
ownership, employment, and educational opportunities. Latinx
families experienced extensive land loss, especially during the
Manifest Destiny period and displacement through deportation
thereafter.
Native Americans lost much of their land and natural
resources through wars, treaties, and forced displacement,
including through the Homestead Act. Asian Americans faced
special fees, taxes, and regulations that made them less
competitive with white people, and Japanese Americans were
interned during World War II, losing their freedom and their
assets.
It was not until 1900 that all States passed legislation
allowing women to control their property, and codified labor
market discrimination existed into the 1970s. More recently,
families of color were targeted for subprime mortgages, even
when they qualified for prime loans, resulting in a loss of
homeownership and equity.
The racial wealth gap persists even when Black families
make all of the ``right'' choices. Black people with college
degrees have less wealth than white high school dropouts. Black
people who work full-time have less wealth than unemployed
white people. Two-parent Black families have less wealth than
single-parent white families.
The Ford Foundation funded the first research that was
specifically designed to measure the racial wealth gap and to
disaggregate the data not only by race and ethnicity but also
by country of origin and Tribal affiliation. But the study was
limited to 5 cities, for 1 year.
We need federally funded data collected periodically to
better understand the drivers of the racial and gender wealth
gaps and to inform policymakers. A possible solution is to
expand the Federal Reserve Board's Survey of Consumer Finances.
The racial and gender wealth gaps are not unsolvable
problems, but they require bold, equitable policy solutions to
eliminate them.
``Baby bonds'' are a bold solution proposed by Darrick
Hamilton that would give all newborns a publicly funded
endowment ranging from $500 to $60,000 based on the family's
wealth. These bonds would be held by the Federal Government
until the child becomes a young adult and can use them to pay
for an asset like higher education or a home. One analysis
showed that baby bonds nearly closed the racial wealth gap. The
cost of baby bonds could be covered by a more equitable use of
existing tax expenditures for asset building.
Over 70 percent of tax expenditures intended to help
families build wealth go to the top 20 percent of income
earners. A more equitable use of these tax subsidies would
cover the cost of baby bonds.
So, in summary, wealth gaps are caused by discriminatory
policies and practices.
Thank you.
[The prepared statement of Ms. Kijakazi can be found on
page 105 of the appendix.]
Chairwoman Beatty. Thank you so much, Ms. Kijakazi.
And now, I would like to recognize Mr. Asante-Muhammad for
5 minutes.
STATEMENT OF DEDRICK ASANTE-MUHAMMAD, CHIEF OF RACE, WEALTH,
AND COMMUNITY, NATIONAL COMMUNITY REINVESTMENT COALITION (NCRC)
Mr. Asante-Muhammad. Good afternoon, and thank you for
inviting me here, as chief of race, wealth, and community at
the National Community Reinvestment Coalition, to speak about
the racial wealth divide and what must be done to address this
critical issue.
NCRC was formed in 1990 and has grown into an association
of more than 600 community-based organizations that promote
access to essential banking services, affordable housing,
entrepreneurship, job creation, and vibrant communities for
America's working families.
Thanks to the groundbreaking work of colleagues like Dr.
Kilolo Kijakazi and Dr. Mariko Chang Pyle, there is growing
recognition of the ongoing challenge of a deep and too-often
growing racial wealth divide.
As I often state, the foundation of racial inequality is
racial economic inequality, and the foundation of racial
economic inequality is racial wealth inequality.
As the country's demographics continue to change, the
racial wealth divide is no longer primarily a challenge of
disenfranchised minorities but rather a threat to the American
middle class. As the report, ``Dreams Deferred,'' notes, since
the early 1980s, median wealth among Black and Latino families
has been stuck at less than $10,000, while white household
median wealth grew from about $105,000 to $140,000.
In spite of the growth of white wealth, national median
wealth has slightly declined from about $84,000 to $82,000,
showing how the racial wealth divide is weakening the American
middle class as a whole.
Similar to the racial wealth divide, there has been ongoing
racial inequality for the two largest assets in Americans'
wealth portfolio: business ownership, and home ownership.
For the last 40 years, Black and Latino homeownership rates
have stayed below 50 percent while white homeownership has
remained at about 70 percent. In the second quarter of 2019,
whites had a homeownership rate of 73 percent, with Latino
homeownership at almost 47 percent, and Black homeownership
near 41 percent.
In regard to business ownership, although 13 percent of the
U.S. population is Black, only 10 percent of African Americans
are businesses owners, and only 2 percent of businesses with
employees are Black-owned. Hispanics comprise 17 percent of the
population, but own only 6 percent of small businesses with
employees.
As was done to jump-start the white American middle class,
significant investment capital must be invested to build
African-American, Latino, and Native-American wealth. The
report, ``Ten Solutions to Bridge the Racial Wealth Divide,''
reviews proposals to bridge racial and economic equality as a
whole, and the racial wealth divide in particular.
This report was a collaboration between NCRC, the Kirwan
Institute for the Study of Race and Ethnicity at the Ohio State
University, and the Inequality Project of the Institute for
Policy Studies. These proposals include ``baby bonds'', as was
previously mentioned, similar to those in Senator Cory Bookers'
2018 bill, the American Opportunity Accounts Act.
We also propose a significant investment into affordable
housing and homeownership, as exemplified in Senator Elizabeth
Warren's American Housing and Economic Mobility Act, and
Senator Bernie Sanders' Housing for All plan. Our paper also
promotes the passage of H.R. 40, to establish a commission to
study and develop reparation proposals for African Americans.
Finally, improving data collection on race and wealth is
another proposed solution.
NCRC strongly advocates for improving data collection in
regards to the racial wealth divide, such as the full
implementation of Section 1071 of the Dodd-Frank Act, which
would require the CFPB to collect and disclose better data on
loans made to minority, women-owned, and small businesses.
Similarly, NCRC advocates for the provisions of the
previously mentioned American Housing and Economic Mobility Act
that requires banks be examined where they are making a
significant amount of retail loans outside the geographical
area of bank branches and leveling the playing field for
financial institutions by requiring nonbanks to be examined
under the Community Reinvestment Act (CRA).
Bold policy proposals are needed to address the national
crisis of racial wealth inequality, and we thank the House
Financial Services Committee's Subcommittee on Diversity and
Inclusion for the opportunity to discuss these necessary
reforms.
[The prepared statement of Mr. Asante-Muhammad can be found
on page 32 of the appendix.]
Chairwoman Beatty. Thank you very much.
Ms. Pyle, you are now recognized for 5 minutes to give an
oral presentation on your testimony.
STATEMENT OF MARIKO CHANG PYLE, RESEARCHER, AUTHOR, AND
PRESIDENT, MARIKO CHANG CONSULTING, INC.
Ms. Pyle. Chairwoman Beatty, Ranking Member Wagner, and
members of the subcommittee, my name is Mariko Chang Pyle, and
I am a former associate professor of sociology at Harvard
University, and I'm currently the president of Mariko Chang
Consulting. I appreciate the opportunity to testify about the
women's wealth gap.
The women's wealth gap not only impacts women, it affects
men, families, and especially children. Two-thirds of mothers
are the family breadwinners or co-breadwinners. About one
quarter of children under age 18 live in a single-mother
family. More than ever before, the economic security of
families rests on women's shoulders.
Data from the 2013 Survey of Consumer Finances, provided by
the Federal Reserve Board, revealed a significant wealth gap
between single men and women during their prime working ages of
18 to 64. Single men, those who had never been married or were
divorced or widowed, had a median wealth of $10,150. In
comparison, single women owned $3,210. Expressed as a
proportion, single women had 32 cents for every dollar of
wealth owned by single men. These gaps remain when we take into
consideration other factors that impact wealth such as age,
income, and level of education.
And the wealth gap is magnified for women of color. Single
Black women of prime working age have a median wealth of $200.
And for single Hispanic women, it is $100, which amounts to
less than a penny of wealth for every dollar owned by their
single, white, non-Hispanic male counterparts.
Women of all races also experience a motherhood wealth
penalty, with mothers possessing only 20 percent as much wealth
as fathers. Again, this penalty is much greater for women of
color. Black and Hispanic women with children under age 18 have
a median wealth of zero, and $50, respectively. In contrast,
single white men who are fathers have a median wealth of more
than $41,000.
While wages no doubt contribute to wealth-building, they
are not the sole determinant. To illustrate, never-married
women working full-time have almost closed the wage gap, but
they have only about one-third as much wealth as never-married
men.
Closing the wage gap is insufficient for closing the wealth
gap for two reasons. The first reason is that women bear a
negative economic cost of parenthood. Mothers experience a wage
penalty, and women are more likely to be single parents
supporting more people on a single income. And two or more
people cannot live as cheaply as one.
The second reason is that women lack full access to what I
have termed the ``wealth escalator.'' The wealth escalator is
made up of mechanisms built into our current systems that help
people turn their incomes into wealth more quickly. The wealth
escalator consists of government benefits, such as Social
Security; employer-related fringe benefits, such as paid sick
days and contributions to retirement plans; and tax breaks that
help people retain wealth.
Women, and especially women of color, lack full access to
the wealth escalator because of the types of jobs they have,
because they engage in caregiving, and because they have lower
incomes. Women are also carrying more debt, which further
restricts their ability to build wealth.
Differential access to the wealth escalator cements other
inequities into place, magnifying the impact of the wage gap,
the motherhood wealth penalty, and for women of color, the
racial wealth gap.
To reduce the wealth gap, we need to focus on pay equity,
but we must also expand access to the wealth escalator so it is
more accessible to those of lower income, and so that
caregivers are not penalized.
I will give three examples of ways this can be done. First,
Social Security reforms could incorporate caregiver credits, so
the years spent out of the labor market or working part-time
for caregiving do not lower average retirement benefits.
Second, access to paid family and medical leave is essential.
Third, if asset limits to qualify for public benefits are
raised, or if certain types of assets, such as vehicles, are
excluded from limits, these assets can help low-income women
get back on their feet in times of temporary need rather than
becoming an additional barrier to building wealth.
In summary, reducing the women's wealth gap is not only
about addressing the wage gap. It requires a more comprehensive
approach. Doing so is not only good for women, but it is
essential for improving the well-being of children, families,
and our nation.
I appreciate the opportunity to be here, and I welcome your
questions.
[The prepared statement of Ms. Pyle can be found on page 34
of the appendix.]
Chairwoman Beatty. Thank you very much.
Ms. Krawcheck, you are now recognized for 5 minutes to give
an oral presentation of your testimony.
STATEMENT OF SALLY KRAWCHECK, CO-FOUNDER AND CHIEF EXECUTIVE
OFFICER, ELLEVEST
Ms. Krawcheck. Thank you, and good afternoon to everyone.
Madam Chairwoman, ranking members, and members of the
subcommittee, thank you for the invitation to testify on the
state of the gender wealth divide in America today.
My passion for this topic was the result of a recognition a
few years ago that the retirement savings gap, the retirement
savings crisis in this country, can be looked at through the
lens of gender.
Women today live 6 to 8 years longer than men; 75 percent-
plus of women die single; and women retire with two-thirds the
money of men, and less for women of color.
The wealth gap, as noted by this panel, is the result of
many things: the gender and racial pay gap; the ``pink tax'';
the debt gap; the promotion gap; and the domestic work gap,
among others. And I would add another one to it and to your
wealth escalator, which is the gender-investing gap, in which
women today keep 71 cents out of every dollar of their wealth
in cash, more than men do, rather than invest it.
There are many structural reasons for this and much data
showing this. I would like to address a couple of issues that
aren't typically addressed in terms of the investment gap and
the money gaps.
The first is, in our society today, boys and girls receive
different messages about money. They receive them from
childhood through adulthood. And so we, the genders,
internalize different beliefs about and approaches to money.
Research shows that young boys in our households today are told
to go out and earn money, become a CEO. They are taught to
invest, they see dad invest, and girls are taught to be
careful, clip coupons, and save.
Boys today receive higher allowances for the same chores as
girls, and boys today receive higher grades in math for the
same answers as girls.
Later in life, as girls grow into young women, we tend to
be patronized about money. Articles in women's magazines
explain to us why budgeting is hard; websites tell us to take
the quiz to see your money type; and entire books are written
to guilt women into giving up the latte, with the off-basis
premise that giving up these small luxuries will be the key to
her financial security.
In contrast, young men are told to dare and grow their
money.
So we women tend to, over the course of our lives,
internalize that we are bad with money. In fact, it is today an
attractive feminine characteristic in our society to be bad
with money as a female. Is it any wonder, then, that we are
less confident, and that money today for women is associated
with loneliness and stress and isolation, not with power and
independence?
The second issue relates to the representation of females
in the money industry. In my old industry, the industry in
which I spent more than 2\1/2\ decades on Wall Street, today:
86 percent of financial advisors are men, overwhelmingly white
men; 90 percent of Wall Street traders are men; 90 percent of
mutual fund managers are men; and 98 percent of mutual fund
assets are managed by men. This, despite the fact that the
research tells us that women are as good or better money
managers than men.
But lest one miss the point, the industry symbol of Wall
Street is a bull, a big, snorting, angry, anatomically correct,
hypermasculine bull. And it isn't getting any better.
Instead, the diversity actually went backwards after the
financial crisis. Again, even though research shows that women
are as good or better investors, and even though the research
points clearly to the superior performance of companies with
diverse leadership teams--and by ``superior performance,'' that
includes lowering risk, which is something I think would be
important for all of us to have done for Wall Street.
Given the skew in the industry that serves us all in the
money industry, it should perhaps be no surprise that women
today invest less than men do.
This gender wealth gap is important and is a ripple effect.
For example, the power inequity that allows the harassment of
the #MeToo movement is also a money inequity. I like to say
that the amount of money that women historically could have
earned from investing is ``No More #MeToo'' money; get-your-
hand-off-my-leg money.
And so, getting more money in the hands of women and others
is why we founded Ellevest. We built an investing algorithm
that works to remove gender bias by adjusting for the fact that
women live longer and our salaries peak sooner, and we work to
be as accessible as possible, having very low investing
minimums to make it accessible for more people. And we are
among the most quickly of the digital investment platforms
engaging with more money in a positive, nonpatronizing way.
Today, many women's primary emotions around money are shame
and loneliness, but our research indicates that a key driver of
a woman's confidence in achieving her future goals is whether
they are actually investing and saving.
[The prepared statement of Ms. Krawcheck can be found on
page 117 of the appendix.]
Chairwoman Beatty. Thank you.
Dr. Cook, you are now recognized for 5 minutes to give an
oral presentation of your testimony.
STATEMENT OF LISA COOK, PROFESSOR OF ECONOMICS, MICHIGAN STATE
UNIVERSITY
Ms. Cook. Chairwoman Beatty, Ranking Member Wagner, and
eminent members of this subcommittee, thank you for the
opportunity to testify today about examining the racial and
gender wealth gap in America.
First, 11 to 1: from the survey of consumer finances, this
is the ratio of white median household net worth to Black
median household net worth.
Second, 31,000 to 1: from the Federal Reserve Bank of
Boston, Sandy Darity, Darrick Hamilton, and the co-authors of
the ``Color of Wealth in Boston'' report, this is the ratio of
white median household net worth to Black median household net
worth in Boston.
Third, 50 to 1: from the Census Annual Survey of
Entrepreneurs, this is the number of white to Black
entrepreneurs in the United States.
In a widely covered speech on income and wealth inequality
in 2014, then-Chair of the Federal Reserve, Janet Yellen,
identified four pillars of opportunity or building blocks for
the gains in income and wealth that most Americans hope are
within reach of those who strive for them: resources available
for children, including education; affordable higher education;
business ownership; and inherited wealth. Given the data on
entrepreneurship and net worth, it appears that the pathways to
opportunity in America are blocked for many racial and ethnic
minorities.
What we know from American economic history and current
data is that laws, policies, institutions, and practices that
impede opportunity have emerged, and these are diminishing
their expected outcomes.
To quote the opening to the Roosevelt Institute's 2016
report, ``Rewrite the Racial Rules: Building an Inclusive
American Economy,'' until economic and social rules work for
all, they are not working.
In the short time I have left, I would like to illustrate
how this works through one of the critical inputs to economic
growth, invention and innovation, the focus of my long-term
research.
Despite major gains in the 1970s, women and African
Americans remain underrepresented in the innovation economy.
Allow me to start with a few basic facts about the innovation
economy. In 2014, the median innovation worker earned $81,000
compared to $36,000 for all workers. In general, innovation
economy jobs are growing faster than in other sectors, and
employment rates are lower.
My research suggests that inequality exists at every stage
in the innovation process for women and underrepresented
minorities, that is, education, training, and commercialization
of invention. I will review each in turn.
Education: In 1970, 9 percent of Ph.D.'s in science and
engineering fields were awarded to women, and by 2014, it was
41.6 percent. In 1970, 1 percent of all science and engineering
Ph.D.s went to African Americans. In 2014, the share that went
to African Americans was 3.5 percent. The trends are similar
for master's degrees and bachelor's degrees and are comparable
through 2014.
What is preventing participation in STEM fields? We have
some clues. The recent research of economist Dania Francis
suggests that Black girls are disproportionately
underrecommended for AP calculus classes by math teachers, and
we know these classes are the pathways to STEM careers.
There is a lot more research that suggests that women in
underrepresented minorities (UIRM), are interested in STEM, but
are not consistently supported throughout their academic
careers.
A second stage in participating in the innovation economy
is to be actively engaged in invention. Although participation
has increased at this critical training stage, in 2015, white
women made up only 18 percent of scientists and engineers
working in science and engineering occupations; African
American women, 2 percent; and African American men, 3 percent.
Unemployment for underrepresented minority men at just
above 4 percent is higher than for white and Asian men, and
higher than the average for all scientists and engineers. The
unemployment rate for African American women is higher than the
unemployment rate overall, nearly double that of all scientists
and engineers.
There are big divides with respect to patenting as well.
The third and final stage is the one where wealth is
accumulated.
Finally, my co-author, Yanyan Yang, and I calculated that
U.S. GDP per capita can be 0.6 percent to 4.4 percent higher if
more women and African Americans participated at the beginning
of the innovation process.
[The prepared statement of Dr. Cook can be found on page 94
of the appendix.]
Chairwoman Beatty. Thank you.
And thank you to all of the witnesses.
I now yield myself 5 minutes for questions. I am going to
try to get through several questions quickly.
The first question will go to Dr. Cook, Ms. Krawcheck, and
Mr. Asante-Muhammad.
Evidence shows that an additional way or pathway to
building wealth is through investments and in securities. Yet,
Black families are less likely to own stock than white
families, partly because Black families have less discretionary
income, with little or none to invest.
Several of you mentioned my good friend, Darrick Hamilton,
and the baby bonds issue. In 2014, President Obama established
the My Retirement Accout (myRA) program to help low- and
middle-income workers, regardless of color, who don't have
access to, let's say, a 401(k) or a pension plan, to start
saving for retirement. In 2017, the Trump Administration ended
this program.
So, to the three of you, how could programs like myRA or
other Federal saving programs help families invest comfortably
to build a nest egg in the future?
Ms. Cook. I would just suggest that this program be
reinstituted. It is not exactly my research, but I know the
work of Darrick Hamilton and Sandy Darity--I used to be Sandy
Darity's research assistant, so I am quite familiar with their
research.
But I would say that this is urgent because we are starting
from so far back that we are talking about Boston with a
30,000-to-1 net worth ratio, it is urgent that programs like
this be reinstated.
Mr. Asante-Muhammad. And I would add that I think,
definitely, programs like myRA should be reinstated. We see the
greatest wealth inequality happening in later years, but I
think also additional programs--as was mentioned, for example,
the baby bonds program--that provide investment opportunity and
financial opportunities for people in their young adult lives
are also essential.
And I will just finally note that--and I do believe that
the main challenge around investment for African American and
Latino families is not just lack of discretionary income, it is
that deep asset poverty. If you are not a homeowner, it is kind
of challenging to say, I am going to go invest in stocks,
before you have even solidified your household by owning a
house.
Chairwoman Beatty. Okay. Thank you.
Anything you want to add, Ms. Krawcheck?
Ms. Krawcheck. Yes, I would agree with all of that. I think
more avenues to tax-deferred retirement savings are important,
taking care of the finances of the family, credit card debt,
existing student loan debt, et cetera, which keep individuals
from investing for retirement.
What we are trying to do at Ellevest for the private sector
is keeping our minimums very low. High investment minimums, by
their nature, really are sexist and racist at the end of the
day, because if they are the ones who have the money and are
able to overcome those high investment minimums, and working to
keep it as plain-English, intuitive as possible, as opposed
to--it is about reaching one's goals as opposed to buying this
mutual fund or that stock.
Chairwoman Beatty. And let me say, thank you.
Earlier, we were having a conversation, talking about
disparities, and we were talking about algorithms. And it was
quite interesting that I told the story, as an African-American
female, that when I stick my hands under the water fountain,
that is based on people being in trials, 9 out of 10 times the
water does not come on, and somebody next to me will put their
hands under there and the water would come on.
And so, when we talk about oftentimes people watching want
to know, why do we always talk about race and ethnicity so much
when we talk about disparities? And you finished the story for
me. Do you want to say what you said with--
Ms. Krawcheck. What we were talking about earlier is just
so much medical research was done on a white male's heart
attack, and crash dummies are built in the image of a male, so,
the investing industry, probably not surprisingly, is an
industry that has really been built by and for men. It is
probably no surprise that so much about investing reminds you
of sports, buying low, selling high, et cetera.
Chairwoman Beatty. Thank you.
My last question, because the time is--and Ms. Kijakazi and
Ms. Pyle, we have a lot of young people sitting in the audience
today.
And so, when I think about the future and I think about
debt, I can't help but think about the student loan debt.
Can you share how that affects young people and
millennials, who should be included in wanting to have a
prosperous future?
Ms. Kijakazi. Debt definitely impacts the ability of a
young person to accumulate wealth over their lifetime.
African American students are more likely to incur debt,
which means that they have to delay when they are going to
purchase a home, which means that the rate at which they can
accumulate equity in their home is slower than that of white
students. It absolutely affects how they can move forward in
terms of asset accumulation.
So, going back to baby bonds, if they had that kind of
endowment at the beginning of their young adulthood, they would
be able to invest in higher education without incurring as
much, if any, debt, if that is the choice that they made for
using their investment.
Chairwoman Beatty. Thank you. My time is up.
Ms. Pyle, we may be able to fit you in on someone else's
question. But, thank you.
I now yield 5 minutes for questioning to the ranking member
of the subcommittee, Congresswoman Wagner.
Mrs. Wagner. Thank you, Chairwoman Beatty.
Studies have shown that when children are introduced to
opportunities in different professions at a young age, they are
more likely to enter those fields.
Dr. Cook, because I know you have done research on this--
and I was stunned to hear about the underrecommended for AP
courses for people of color and oftentimes young girls are
seeing.
What efforts are proactive companies undertaking to
increase the number of women and minorities earning degrees in
STEM programs? And what more can be done to increase that
number, in your estimation?
Ms. Cook. Thank you for your question.
I happen to be the director of the American Economic
Association's summer programs. Economics is a STEM field, and
they come to Michigan State University. This is supported by
the National Science Foundation. This is intensive mentoring.
And it is intensive in the sense that I tell them all the time,
``You belong here.''
Mrs. Wagner. At what age do you start?
Ms. Cook. This is for undergraduates. This is to encourage
underrepresented minorities to do Ph.D.s in economics.
Mrs. Wagner. Okay.
Ms. Cook. And one thing they have always been told, many
times throughout their educational career, is that they don't
belong there. They don't belong in higher-level math courses,
they don't belong in economics classes, in econometrics
classes, in data science classes, in AI classes, for example.
So, a lot of this has to do with mentoring, and that is
what I do in this 2-month-long course. And I think most
programs that are similar to it have a similar focus. And they
also focus on different pathways to these careers.
One that I would suggest, in addition to my own, is going
to the Lemelson Center for the Study of Invention and
Innovation at the National Museum of American History, to
Spark!Lab, where children can go through the steps--there are
about eight steps related to invention and innovation, and the
last thing they do is develop innovation.
So I think you are exactly right, in terms of the beginning
of your statement. The earlier the exposure--Raj Chetty and his
co-authors have work showing that children who are exposed to
invention early have much better life outcomes, and they
accumulate wealth. There are many outcomes that are better. So,
I think that is perceptive.
Mrs. Wagner. Thank you.
Diversity and inclusion are two distinct but equally
important factors with respect to hiring and retaining a
diverse workforce.
Dr. Cook, research has shown that recruitment efforts are
only effective for increasing overall diversity when the
company's culture is such that women and minorities want to
stay. What strategies have you seen as effective for creating a
more inclusive workspace?
Ms. Cook. I am glad you asked.
I think one of the biggest problems with respect to
invention and innovation, if we are just talking about one
sector of the economy, is workplace climate. You mentioned
making workplaces more friendly for women. I interview
entrepreneurs and tech firms every October, and one thing that
I find is that women are kept out of a lot of the project
management, a lot of the projects, because they have to go home
and take care of children, for example. They have household
duties. And the men on those teams tell me that they get
punished--they see it, and they get punished. It might be
implicit, but they get punished for not being there. So
changing workplace climate, I think, is critical.
Mrs. Wagner. Flexibility is absolutely key, workplace
flexibility without there being repercussions because of that.
I read your issue brief published in the Washington Center
for Equitable Growth in July. And one topic that you discussed
related to retention within STEM participation is the peer
effects in doctoral STEM programs. You touched on it a little
bit and how these efforts can impact whether women graduate
within 6 years or potentially leave after the first year of a
Ph.D. program.
Can you elaborate briefly--we are going to run out of
time--on these efforts and how we can improve this retention?
Ms. Cook. One key thing with respect to science and
engineering programs--and I will include economics in that--is
that you can't just admit one woman into each cohort, because
what you do is, allow them to be isolated. And if there are no
women faculty--and that is true for many economics
departments--you don't have the kind of mentorship or even role
modeling that you need. So it is not only getting more in; it
is getting them seen by others.
Mrs. Wagner. It goes back to the whole concept of not just
diversity but inclusion and acceptance.
I have run out of time, and I have to run to the Floor,
Madam Chairwoman, to give a Floor speech. I believe Mr.
Gonzalez will be taking my seat, and then I will come back. I
have more questions. I yield back.
Thank you all very, very much.
Chairwoman Beatty. Thank you very much.
The Chair now recognizes the gentleman from Missouri,
Congressman Clay, who is also the Chair of our Subcommittee on
Housing, Community Development, and Insurance.
You are now recognized for 5 minutes.
Mr. Clay. Thank you, Madam Chairwoman, and thank you for
holding this hearing. And thank the panelists for your
participation today.
Let me start with Ms. Pyle.
I recently hosted a panel on the racial wealth gap. One of
the panelists held the belief that we cannot discuss closing
the wealth gap without acknowledging that middle- and upper-
class Black families have lost and are still losing wealth due
to the segregation and denied benefits of African Americans.
What do you think about that, and what are some solutions
to amend these actions?
Ms. Pyle. I see the racial and the gender wealth gaps as
intricately interconnected. They have distinct components, but
yet there are very similar structural causes that continue to
exacerbate existing inequities. So, I feel that we can't talk
about one without talking about the other.
Women of color are experiencing both gaps. And actually, I
argue that you cannot close the racial wealth gap unless you
also close the gender wealth gap. Because women of color are
more likely to be single, they are more likely to be raising
the next generation, and so the two are intricately related.
Mr. Clay. Thank you.
Mr. Asante-Muhammad, how do we close the racial wealth gap,
in your opinion?
Mr. Asante-Muhammad. As mentioned, we helped produce a
report entitled, ``Ten Solutions to Bridge the Racial Wealth
Divide.'' And I think, what is very helpful in looking at
inequality in the frame of wealth is that wealth helps us see
the kind of multifaceted aspect, that it is not just getting
the person into the right education program; it is not just
household composition, because with all of these things, we
still see deep wealth inequality. And that is because, again,
wealth is an economic indicator that kind of factors in over
generations.
So, if we are going to address this issue, it is going to
have to be kind of a comprehensive program to deal with these
issues, things like, again, as mentioned, baby bonds, and full
employment. I think one of the most important things government
can do is make sure there is good, adequate information and
understanding of our economic data in a racialized way.
Mr. Clay. One of the other topics of discussion among the
panelists and audience--and I am curious to hear your view--was
of reparations and its role in closing the wealth gap.
Do you have a view on reparations?
Mr. Asante-Muhammad. Yes, I do. I believe reparations for
African Americans, and separatereparations for Native Americans
are essential. I think it is an important component of bridging
racial wealth equality, and it is an important component of
this country moving forward in terms of racial justice.
I will make a note, though, that I think in a very
regressive economy like we have today, even with a strong
reparations program, we still could have ongoing racial wealth
inequality. We need reparations and comprehensive progressive
policy to actually help make sure we have more equity.
Reparations alone won't do it, but it is definitely an
essential step, I believe.
Mr. Clay. Thank you for that response.
Dr. Cook, what kind of solutions would you offer for
closing the racial wealth gap? And are reparations included in
any of those equations?
Ms. Cook. I haven't studied many of the proposals for
reparations closely. But I agree with what my colleague just
said, that it can't be just money; it has to be reducing these
barriers to participation in the economy.
But one solution that I would suggest would be to augment
community development financial institutions (CDFIs) that are
particularly focused on closing the racial wealth gap. For
example, Rende Progress Capital, in Grand Rapids, Michigan, is
specifically focused on closing the racial wealth gap.
They look at projects that have positive externalities for
the community. They are profit-maximizing, but some of these
would get overlooked by traditional credit committees when they
were put forward. This is a less-than-2-year-old business, and
I think that it has the right kind of focus on addressing the
racial wealth gap. And I think there can be more of those.
Those can be encouraged.
Mr. Clay. And with closing the homeownership gap, to help
families build equity and build investment.
Ms. Cook. Absolutely. Entrepreneurship is a pathway to
inherited wealth, for example. Homeownership--if we had the
same conditions that we had pre-2008, I would not want
homeownership. I would want--well, okay, I wouldn't want
business ownership either. But I try to address broadly the
conditions that are associated with financial crises.
But I would say that the path to inherited wealth is
entrepreneurship, not just homeownership, because lots of
African American families and Hispanic families lost their
entire intergenerational wealth in one home.
Mr. Clay. Because they were steered into toxic mortgages.
Ms. Cook. Absolutely.
Mr. Clay. I yield back. Thank you.
Chairwoman Beatty. I now recognize the gentleman from
Indiana, Congressman Hollingsworth, for 5 minutes.
Mr. Hollingsworth. Good afternoon. I am excited to see such
a great panel, and I really appreciate the Chair and the
Majority holding this very important hearing.
This is a discussion that needs to be ongoing. I know much
research has been dedicated to this area, and I really
appreciate the work that everybody on the panel has done and
all the conversation thus far.
I was having a debate with a far-more-intelligent friend of
mine a few months ago, and he was chastising me and maybe
chiding the whole system a little bit in that we in public
policy too frequently ask the question of, what has gone wrong,
instead of asking a more thoughtful question about what went
right in individual cases where something went well for either
an individual, a group of individuals, or the country overall.
And his point was that there are a lot of ways that things
can go wrong, a lot of places where people can get stuck in an
exit or an off-ramp from a pathway to success. But typically, a
lot of things have to go right in order for an individual to
break free and get to that success, get to their American
Dream. Kind of that old Tolstoy principle: ``Happy families are
all alike; every unhappy family is unhappy in its own way.''
And his point was we should find what works and extrapolate
from that, and that microcosm, that smaller setting, instead of
talking about grand, broad, sweeping policies that are based on
research, based on theory, but might not pan out in practice.
So I wondered if each of you might talk a little bit about
a specific example, maybe a program, maybe a group or community
that came together and was able to break through some of these
barriers, and was able to get people to success because I, like
you, share that passion and that crusade to make sure every
American, no matter their ZIP Code, no matter the color of
their skin, has the opportunity to be able to hope for a
brighter and better future.
So, I wonder if each of you might talk a little bit about
that?
Ms. Kijakazi. I would say, an initiative that worke was
children's savings accounts, which was proposed by Michael
Sherraden, and he really shifted our focus from just income to
recognizing the importance of asset accumulation.
Mr. Hollingsworth. These have been implemented?
Ms. Kijakazi. Yes. There was a demonstration of children's
savings accounts which demonstrated that low-income
households--and the test was with low-income households--do
save and invest. The issue is that we cannot save our way out
of the racial wealth gap because it was not created as a result
of people not saving. It was created as a result of structural
racism, discriminatory policies and practices.
Mr. Hollingsworth. Okay. What are some--
Ms. Kijakazi. What we need--
Mr. Hollingsworth. Reclaiming my time, what are some of the
examples--that is a great example, and I appreciate you
bringing that up. What are some other examples of practices
that have worked and perhaps fully closed the gap or helped
individuals get to a better place in their own lives?
Ms. Kijakazi. The proposal of baby bonds has not been
tested--
Mr. Hollingsworth. Correct.
Ms. Kijakazi. --but has been analyzed, and the
determination was that it would almost close the wealth gap.
Mr. Hollingsworth. Yes, a lot of theories.
Yes, please, anybody?
Mr. Asante-Muhammad. Yes, sir. One thing that has
historically really moved millions of people forward and really
created the white American middle class was the policies of the
1940s and 1950s that created massive subsidies in
homeownership, massive subsidies in education.
I think most of us who study racial wealth inequality
recognize that disenfranchised minorities were not included in
that massive initial investment, so we need that once again,
but for the first time to be inclusive. So I think that is a
historic example of what can really move people forward and
create a strong, secure economic security.
I will also just put forward a more specific example. I
have been in much conversation with the Association for
Financial Planners, and one big challenge we have seen is that
most financial education--as was mentioned by a colleague--has
not been designed to really deal with the depth of racial
wealth inequality.
They make basic assumptions about middle income, high
income, and assign a wealth value that Blacks and Latinos, even
of the same income, are never there. So we have seen some
success in better being able to work with households of color
by actually factoring racial wealth inequality into their
financial planning.
Mr. Hollingsworth. Ms. Krawcheck, I have been a big fan of
your career and followed you closely, and I really appreciate
some of the work that you have done, especially with this new
venture.
I heard something that you said earlier which I found very
interesting, that high minimums are inherently racist and
sexist. That is something I know this committee, and
specifically the Minority has been really, really focused on
is, how do we lower some of the regulatory burdens that hold
firms to these higher levels of investment, because they are
holding people back and keeping people out of the system that
we otherwise want in the system?
I know something that the ranking member, whom I know had
to step out, has been really passionate about is making sure
that we have a thoughtful best interest policy coming out of
the SEC so that we can enable and empower those with more
moderate means to also get the advantages of financial
planners.
So, I appreciate the work that you have done in this area
to ensure that everyone has a financial planner that they can
help rely on, not just a robo-planner. Thank you so much.
Ms. Krawcheck. Thank you.
Mr. Hollingsworth. I yield back.
Chairwoman Beatty. Thank you.
The Chair now recognizes the gentlewoman from
Massachusetts, Congresswoman Pressley, for 5 minutes.
Ms. Pressley. Thank you, Madam Chairwoman. And thank you,
Chairwoman Waters, for creating this subcommittee. And thank
you, Chairwoman Beatty, for your continued leadership in this
space.
And I thank all of you for not only coming here today to
testify, but for what you are doing each and every day. We are
certainly grateful for your counsel and your expertise and your
presentation today. And I apologize that I had to step out for
a moment. I am working with some restaurant workers to
eliminate the subminimum wage, which in many ways, given who
represents that workforce, contributes to the very issue we are
discussing today.
But over the past 4 decades, wealth and income inequality
has skyrocketed. Nearly half of all wealth grown since 1986, as
you well know, has gone to the top 1 percent of our households,
while the top 1 percent controls 42 percent of the nation's
wealth. The wealth held by the bottom 90 percent of Americans
is rapidly shrinking.
You have spoken about my district already, some of you, in
your testimony here today. The Massachusetts Seventh
Congressional District, which includes Boston, is one of the
most diverse and unequal districts in the nation. White
households have a net worth of $247,500, while Black households
have a median net worth of just $8. Yes, you heard that
correctly, and it always bears repeating because it is a
sobering and devastating confirmation of the work that we have
to do.
Now, none of this happens in a vacuum. This reality is as
much an indictment of our inaction as it is of the Federal
Government's role in selectively facilitating the wealth-
building of some while actively excluding others.
But we are not here today just to double down on the
problem; we are here to be prescriptive and solution-focused.
And many of you have referenced the bicameral legislation that
I have introduced in partnership with Senator Cory Booker, on
baby bonds.
And so I just wanted to just do a little bit of a deeper
dive on that. There are some who would dismiss this baby bonds
bill as another radical proposal. The legislation is simple:
Upon birth, every child is given a seed savings account with
annual contributions from the Federal Government until that
child turns 18, and a stable 3 percent return. By their 18th
birthday, children from the poorest families would receive up
to $47,000. That is money towards tuition, a down payment on a
home, or an investment in a small business.
Again, some think this is radical. But in my district--
where median household income drops by $50,000 in a 3-mile
radius, and life expectancy by 30 years--we do need to be doing
something radical and bold to address that.
So would anyone on the panel wish to speak more to the
scale of our nation's wealth inequality and whether or not baby
bonds are a measure proportionate to the problem?
Ms. Kijakazi. Given the inequitable policies that have
caused the racial and gender wealth gaps and the magnitude that
you indicated, you call it radical, I call it bold solutions
are needed, and baby bonds represent one of those bold
solutions.
You mentioned the data from Boston. That data was gathered
by Darrick Hamilton and Sandy Darity with the data collection
effort that was funded by the Ford Foundation that I
referenced. It is information like that that lets us know just
how great this problem is and that there is a strong need to do
something about that.
And I know that Darrick feels that the forming of your bill
has improved on his concept by adjusting annually the amount
that would be contributed to the endowment. So it is
contributing to helping to, one, enlighten us about what is
needed. We need additional data. I argue that additional data
is important. And your bill asks for the Comptroller General to
gather more information about providing additional information
on the wealth of families, and I think that is only beneficial.
Ms. Pressley. Thank you.
Mr. Asante-Muhammad, again, since we arrived here because
of policy, the path forward is going to require policy. So, in
my remaining time here, do you mind just ticking off again the
litany of legislative solutions that you are supportive of,
because you did include baby bonds in that?
Mr. Asante-Muhammad. Yes. I think, again, one of the most
important things about the baby bonds proposal is that it is
sustained long-term investment into households, because the
racial wealth divide is so deep that, unless it is 20 years or
longer, having that type of investment won't deal with this
massive effect of racial wealth inequality.
But we also have things like full employment with a high
minimum wage, as you noted you are fighting for with restaurant
workers. We also have noted Medicare for all because medical
cost is a number-one source for bankruptcy.
We also, again, have--collecting data and making sure that
there is actually a racial wealth divide audit of our policies,
because we can look at our policies and have an understanding
of who it is going to benefit more and whether it is going to
increase the racial wealth divide or bridge it.
Ms. Pressley. And H.R. 40, and Senator Warren's bill, you
also support? Okay.
Mr. Asante-Muhammad. You know my 10 solutions better than I
do, yes, ma'am.
Ms. Pressley. Okay. All right.
Thank you. I yield back.
Chairwoman Beatty. Thank you.
The Chair now recognizes the gentleman from Wisconsin, Mr.
Steil, for 5 minutes.
Mr. Steil. Thank you, Madam Chairwoman, and thank you for
holding today's hearing on a critical topic.
I want to dive in a little bit on the education side, if I
can. I want to look at it from a couple of different angles,
from college and Ph.D., and K-12.
Dr. Cook, in your issue brief, you mainly discussed the
relationship between low female and minority participation in
STEM Ph.D. programs and these groups' comparatively low rates
of patents and inventions.
While it is clearly an important area for us to focus on, I
think there are many well-paying jobs that require STEM skills
that can be obtained with 2-year technical college degrees.
This is especially true in my home State of Wisconsin, where
advanced manufacturing and skills trade jobs can secure workers
a place in the middle class.
Can you comment a little bit on what role a 2-year
technical college education can play in addressing gender and
minority disparities in STEM career participation?
Ms. Cook. Sure, I can say something about that. One thing
that I want to stress is that, while I was giving data on Ph.D.
attainment, that was just signaling. A lot of the jobs in the
innovation economy require 2-year degrees, and they require
specialization. Their programs, as in Massachusetts, at UMass
Law, that focus on, say, advanced manufacturing, and those
degrees are 2-year, 4-year, and so on.
We have to have a workforce that is adequately prepared,
and sometimes that is not always a bachelor's degree. So we
have to be prepared any way we can be prepared, but that
sputnik moment still has to come no matter whether it is a 2-
year degree or a 4-year degree or a 6-year degree or a 10-year
degree.
Mr. Steil. Thank you. I am going to go backwards in
progression. I want to dive into K-12 here just a little bit
with you, if I can. I look at the legacy of discrimination and
how that plays a role in young students' trajectories through
school and into the workforce.
Providing kids with this exposure to STEM education,
informing them about the career opportunities that are there,
and ultimately chipping away at some of the empirical data that
we have in front of us, that leaves a lot to be desired.
As I look at this, I think there is a lot of kids who are
locked into schools that don't provide them with the
opportunities that can put them on that path to a better life.
And in particular, I look at school choice and some of the
innovative K through 12 programs that exist in the State of
Wisconsin and how school choice is giving, and particularly,
underrepresented minorities an opportunity to obtain an
education that is not locked into their specific ZIP code,
giving them the opportunity to live out a broader American
Dream.
Could you comment if any of your research has looked into
school choice, in particular as it would impact
underrepresented minorities pursuing a career in the STEM
field?
Ms. Cook. My research hasn't touched on that. I know that
the evidence is fairly mixed with respect to school choice. But
there are a lot of things that can be done right now that don't
involve sort of grand plans related to, say, school choice on
that level.
If we just had lanes and stores where there weren't all of
the cool toys, scientific toys associated with boys rather than
with girls, and all of the pink things, fluffy and
uninteresting things related to girls, and all of the ones
related to Star Trek related to boys, there are simple things
that could be done, or going to Spark!Lab at the Lemelson
Center at the Smithsonian.
There are simple things that can be done that don't require
much money. The next time you run into Party Center, ask
someone why all the rockets are over there in the boys' center.
Mr. Steil. And I am not doubting that there is not--I think
a lot of the things that we have brought up here today are
actually really informative and helpful to think about. I do
think that there could be additional research, in particular as
to the impact the school choice could have, in particular for
underrepresented minorities to be able to obtain that early
education to get them on the track early.
I have had the opportunity to see that firsthand in
southeast Wisconsin, in the community of Racine and other areas
in our State, where I believe school choice has given
individuals who are from areas where maybe their local school
isn't the right fit for them, an opportunity and a helping hand
up, and I think that could be uniquely impactful. And so as we
go forward, I hope that is an area we can continue to explore.
I appreciate everybody being here, I appreciate the
hearing, and I yield back.
Chairwoman Beatty. Thank you.
The Chair now recognizes the gentlewoman from North
Carolina, Ms. Adams, for 5 minutes.
Ms. Adams. Thank you, Madam Chairwoman, and thank you for
convening this hearing. It is a topic that we need to be
talking about. I want to thank all of the witnesses for being
here.
Many of us here have been shouting about, fighting for, and
researching these issues for decades, and so having this
conversation with this focus is long overdue. Let me just get
right to my questions.
Ms. Cook, in what ways have local and Federal policies
created the racial and gender wealth gaps, and what are some of
your proposed solutions?
Ms. Cook. I can give one example with respect to Federal
policy. The intentional destruction of Black neighborhoods with
revitalization cannot be understated.
One of the things that we know about patent teams--and I
will get to my argument quickly. This won't take long--the
highest number, the peak year for patenting for African
Americans was 1899. There is still a median size of a patent
team with African Americans on it of one.
What you did was to break all of these social networks that
African Americans had. These were independent inventors. They
interacted with inventors. And what you did with
revitalization, what happened with revitalization was that
these communities were further separated from businesses, from
economic activity. So that is one policy. African Americans not
being able to take full advantage of the GI bill, that is
another policy. These are broad policies, but they are
everywhere. They are not in just one place.
Were you asking me for recommendations, or were you asking
me just to name some of those policies?
Ms. Adams. Well, recommendations.
Ms. Cook. Okay, recommendations. I mentioned CDFIs. But
also, again, this is from my research, the Small Business
Innovation Research (SBIR), and the Small Business Technology
Transfer (STTR) programs have been effective in bringing new
invention and innovation to the fore. That is something that
can be pushed more, and there can be more outreach and
engagement with respect to women.
I thank you all for passing the SUCCESS (the Study of
Underrepresented Classes Chasing Engineering and Science
Success) Act, which was based on my research, from my reading
of it. And the IDEA (Individuals with Disabilities Education)
Act is before you now. Those can encourage innovation by women
and underrepresented minorities simply by counting them. That
is an important part of it.
And I would say that more support for programs like my own,
the American Economic Association Summer Program, that provide
mentoring and provide training with respect to STEM fields, I
think, would be very useful, but that is long term.
Ms. Adams. Thank you very much.
Ms. Krawcheck, what is your opinion on the current
corporate efforts towards closing their own gender pay gaps? We
know that there is not a lot of transparency there. I am
curious about what you think.
Ms. Krawcheck. The research tells us that the gender pay
gaps are decades away from closing for white women; 100-plus
years for Black women; and 200-plus years for Latinx women,
which is very little progress.
Companies today tend to double down on what they have been
doing in order to close it, active inertia, in which they just
do the things they have been doing that haven't been working
and just continue to do more of it. Where it has been
successful is where CEOs like a Marc Benioff at Salesforce have
simply decided to close the gender pay gap and have just done
it.
Ms. Adams. Okay. So does any other witness have a solution
for encouraging companies to become more transparent about
racial and gender compensation data? Because oftentimes, they
don't know what that is.
Ms. Pyle. I think transparency in wages and salary is
absolutely essential for closing all of these gaps. People
often don't know how much the person sitting next to them doing
the same job is earning. I think people should be able to
freely discuss their pay with each other.
I think that the average pay for workers by gender and by
race and ethnicity at certain categories should be publicly
available, not by individual names necessarily but by
categories, so that people have a better sense of where they
fall along the continuum. But that transparency is absolutely
essential.
Ms. Adams. Okay. Does anyone else want to add something?
Mr. Asante-Muhammad. I will just put forward that I think
companies need to boldly name these challenges. JPMorgan Chase
recently created the Advancing Black Pathways program, that is
focusing on a multitude of levels of one having much more clear
data on how African Americans are doing in their company, doing
mentorship, doing direct outreach. So, I think those types of
bold policy programs are required in a corporate sector.
Ms. Adams. Thank you very much.
Madam Chairwoman, I am going to yield back my time.
Chairwoman Beatty. Thank you.
The Chair now recognizes the gentleman from Ohio, Mr.
Gonzalez, for 5 minutes.
Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman, for
leading this important hearing, and thank you, everybody, for
your participation.
The data is clear and overwhelming, and I, for one, am
thrilled that we are starting to have serious conversations
about what the drivers are and how we can fix this. We may have
different answers ultimately, but the fact that the
conversations are taking place in a serious manner, I think is
really important, and so I just want to thank you all for all
your contributions today and in general.
One area that I would like to focus on with respect to
wealth inequality is borrowing costs and lending costs. The
reality is, if you are borrowing at a 5-percent rate, a 4-
percent rate, or a 3-percent rate, compounding capital and
building wealth can occur. If you are disconnected from that
environment, it can be awfully difficult if your rates are 10,
20, or 100 percent. Warren Buffett can't build wealth that way.
So I guess with that, I will start with Dr. Pyle.
Specifically, in your testimony, you discuss how women are more
likely to receive high-cost loans such as subprime home loans.
How could the use of financial technology help address this
problem by providing more access to credit? And I know we have
some issues there too, but I just want to talk about the
opportunity.
Ms. Pyle. I think, given appropriate financial information
and education, women are extremely savvy financial decision-
makers. I think that they were unfairly targeted, and at the
same levels of credit score and repayment ability they were
targeted with much higher interest rates, and this really
undercut their ability to build wealth.
I think there are a lot of opportunities out there for
products and for services for women to really help close that
gap. And I think it is absolutely, absolutely essential because
wealth is not just about how much you are earning in terms of
interest; it is how much you are not paying in these other
types of fees and interest rates.
So I feel that women are really savvy, but they need a
little bit more information and a little bit more transparency
in the products that are being offered to them.
Mr. Gonzalez of Ohio. Great. And I think that is one of the
great promises about technology. Technology--I think people
have ascribed value to it, but I think it is value- neutral. It
depends on how you apply it. And in this instance, I think it
creates some really exciting opportunities.
Dr. Cook, in your report you discuss how mentorships can be
a valuable tool for retention within the STEM fields. Can you
give some specific examples, kind of to Representative
Hollingsworth's questions earlier? What specific examples have
you seen that have worked really well?
Ms. Cook. One example that comes up in my research is that
of James West at AT&T. He mentored at least two generations of
Ph.D. students who were at AT&T, and AT&T used to have one of
the most sweeping programs for Ph.D. students, for
undergraduate and Ph.D. students promoting equity, so lots of
women, and lots of underrepresented minorities.
And he had a distinguished career of invention and
including those students on patent teams, for example. So this
is where a lot of women and underrepresented minorities get
excluded.
My research shows that single-sex teams are less productive
than coed teams, patent teams. So we are leaving a lot of money
on the table if we have either single-sex male or single-sex
female patent teams. So that is a sort of concrete way in which
there can be changes made in patenting.
Mr. Gonzalez of Ohio. That makes a lot of sense. Thank you
for sharing that.
And then, Dr. Pyle, I was looking through your testimony,
and you provide the mean and median wealth for couples, single
men, and single women. And there is obviously a huge gap
between single males and single females: $10,000 in median
wealth for single males versus $3,200 for single females.
What I believe is that the bigger gap, or the one that I
really wish we could solve, is the couples one. So the couples,
$78,000. And when I say that, what I mean is this: I believe
one of the main drivers to a lot of the problems we have in our
society today is the breakdown of the family. I think we have
seen that across ethnic minorities, but also across the entire
society.
And this is why I think this is so important. We know that
one of the biggest drivers to family breakdown is financial
stress. And so, if we get this right and we find ways to be
more inclusive in the financial system, my hope is that what we
will see is a world where we have more families forming and
staying together, because it is my belief that if we truly want
to rebuild this country, we have to rebuild our families.
And with that, I yield back.
Chairwoman Beatty. Thank you.
The Chair now recognizes the gentlewoman from Texas, Ms.
Garcia, for 5 minutes.
Ms. Garcia of Texas. Thank you, Madam Chairwoman. And thank
you for holding this hearing on such an important topic to many
of us, and it is not just to some of us who may be women or may
be minorities, but really it does impact all of us and, more
importantly, the nation's economy.
I want to thank all of the panel members today. And, quite
frankly, Madam Chairwoman, I don't know about you, but I am
still trying to digest the last statement that Ms. Krawcheck
made--it will take Latinas 200 years to catch up? And African
Americans, 100 years? Madam Chairwoman, I don't think we are
going to be around to make any of those rewards or gains or
whatever that might be.
I am just completely astounded by that. I knew it was bad,
but, quite frankly, until you see the numbers, you really don't
get the message about how bad it is. And I know there seems
sometimes a narrative that, well, it is all individual choice,
if the individual just took responsibility, if they just
decided to do what they could.
But the reality is that, even though we can say that we
should make opportunities so that no one, no matter what their
ZIP Code, that they can achieve, the reality is that your ZIP
Code makes a big difference, doesn't it?
Because what we are faced with is not something that can be
fixed overnight or that one law or two laws can pass and we fix
it. It is the infrastructure. It is all of the things together
that have existed, not just today but many years ago, and have
been building and building.
So I am just somewhat perplexed trying to figure out, of
all the things all of you all have mentioned--because all of
those are great policy interventions, but we have done some of
that already. And in Texas, we have this saying that you can
take the horse to the water, but you can't make the horse drink
the water.
So my question to you is, with which of these policies can
we get that horse to drink the water, not only to see that
there is a CRA and there are housing incentives, that there is
equal pay for equal work, how do we get that damn horse to
drink the water and really get engaged and buy-in? And quickly,
everybody, I think we have maybe less than a minute for each of
you.
Ms. Kijakazi. Thank you. I think that it takes a package of
policies to dismantle the structural racism that exists. So it
is not just one policy, and perhaps it didn't work because one
policy was tried at a time, but the combination or a package of
change in policies that are intended to change.
Ms. Garcia of Texas. Great.
Mr. Asante-Muhammad?
Mr. Asante-Muhammad. Yes. And to take your analogy, I don't
think the issue so much--I am not exactly sure who is the horse
and what is the water, but I don't think so much the analogy is
that the horse isn't taking the water, meaning communities of
colors aren't willing to take the investments needed to
actually create a stable middle-class economy for themselves.
It is that the country has never provided water to these
communities that would allow this type of stability.
And so, again, for the first time, we have to do a massive
middle-class investment that was done for white America in the
1930s, 1940s, and 1950s, but has never been done for
disenfranchised minorities.
Ms. Garcia of Texas. Okay.
Ms. Pyle?
Ms. Pyle. I took the horse-and-water analogy a little bit
differently, talking about how leaders could come together and
drink the water.
Ms. Garcia of Texas. And the institutions, the banks can
really embrace and take ownership and really do something with
the Community Reinvestment Act. Housing developers can really
take the housing incentives and other tools to really build
communities for lower, affordable housing, et cetera. We can
put it there, but they may not do it. They don't do it.
Ms. Pyle. I think what we have to realize is that these are
not just policies that benefit a small subset of the
population. These are policies and these are actions that will
benefit the entire nation.
So, if there is a community in the nation that is not
living up to its full potential because they are being denied
opportunities in STEM or in the labor market, for example, or
if they are being denied housing because of discriminatory
policies, that impacts not just that particular person or that
particular community, it really impacts our entire nation, our
entire ability to grow economically. So I think that we are
very shortsighted when we think about these types of policies
as benefiting only a small subgroup rather than the nation as a
whole.
Ms. Garcia of Texas. Agreed.
Ms. Krawcheck?
Ms. Krawcheck. I would like to add one very quickly that we
haven't talked about today. Coming at it from a private-sector
perspective, if there was one thing I could change, it would be
to have mandated paid parental leave. That is where we see the
gender pay gap really kick in, as women begin to have babies.
And this is despite the research that just a minority of
companies in this country have this type of paid leave. Despite
the research that shows us that it is not an expense, it is an
investment that pays for itself in less than a year. Because if
a woman and her family are allowed to bond and come together in
those early days, weeks, and months, she is more likely to
return to work. The company therefore doesn't have to find a
replacement and pay for them and train that replacement. So if
I could do one thing, that is what it would be.
Ms. Garcia of Texas. Ms. Cook, quickly, because I might run
out of time, and I am working on the Chair's indulgence at this
moment.
Ms. Cook. Okay. I would make one quick, narrow suggestion.
Private universities can't or don't reveal their data like
public universities have to. All of them have 501(c)(3) status
or 40--whatever their nonprofits.
Ms. Garcia of Texas. Or at least a foundation.
Ms. Cook. Right. And they receive Federal funding. So if
they don't supply these data, so we can talk about voluntarily
doing this, but those are huge universities, and they have a
lot of influence. And this affects the entire stream that we
are talking about, the entire innovative process, the financial
literacy, financial education. Those universities should be
made to make their wage data public as well.
Ms. Garcia of Texas. Thank you.
And thank you, Madam Chairwoman.
Chairwoman Beatty. Thank you.
And thank you to all of our witnesses today for your
testimony: Ms. Kijakazi; Mr. Asante-Muhammad; Ms. Pyle; Ms.
Krawcheck; and Dr. Cook.
I have several articles that, without objection, I would
like to enter into the record.
Without objection, it is so ordered.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is now adjourned.
[Whereupon, at 3:39 p.m., the hearing was adjourned.]
A P P E N D I X
September 24, 2019
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