03/27/2012 03:20 pm ET Updated May 27, 2012

Wealth Inequality and Women of Color: A National Emergency

Black History Month and Women's History Month are often viewed as separate entities. But black women and other women of color know that their economic circumstances are affected by being both a person of color and a woman. Nowhere is this more evident than with respect to wealth (the value of a person's assets minus debts). Women of color are affected not only by the racial wealth divide, but by the women's wealth divide as well. A report released by the Insight Center for Economic Development revealed that the median wealth for single women of color is significantly less than their male counterparts with black and Latina women fairing the worst. In fact, the racial wealth divide for black women is particularly stark as wealth for black women under age 65 was $100, amounting to a penny of wealth for every dollar of wealth owned by single black men and a fraction of a penny for every dollar of wealth owned by single white women or men.

The wealth gap between black women and men in may be surprising since black women have surpassed black men in rates of college attendance and completion. Given these achievements, how can the median wealth for single black women be so low?

Even though black women are preparing for their economic futures by pursuing higher education, they, like women of color overall, continue to face significant challenges in wealth building. Like men of color, women of color are burdened by the historical legacy of the racial wealth divide. But as women, they face additional obstacles to building wealth. These obstacles are not just related to income. In fact, the women's wealth divide would exist even if men and women had the same incomes for two reasons: Women are more likely to have custody of children and women are less likely to be on the "wealth escalator."

First, because women are more likely to have custody of children, they bear the disproportionate financial burden of being a single parent. Their incomes have to meet the expenses of more people and all else being equal, there is simply less discretionary income to save or invest.

Second, women -- and especially women of color -- are less likely to be on the "wealth escalator" benefiting from things that translate income into wealth more quickly such as fringe benefits (e.g., employer contributions to retirement plans), favorable tax codes (e.g., lower capital gains tax), and valuable government benefits (e.g., social security). To illustrate, women of color are less likely to work in jobs with fringe benefits. Twenty-eight percent of black women and 31 percent Latina (compared to 12 percent of white men and 19 percent of white women) work in service jobs which are the least likely to offer fringe benefits to their employees. For instance, only 39 percent of service workers have paid sick leave (compared to 57 percent of workers overall) and only 44 percent receive retirement benefits (compared to 66 percent of workers overall). Without paid sick leave, people are often forced to make choices between their health and their rent, and unpaid sick days drain their savings, making it even more difficult to build wealth. And lack of retirement benefits means that women of color are not receiving the wealth boost of having their employer help them save for retirement. They not only miss out on the wealth generated directly from their employer's contributions, but they miss out on the compounding interest that these contributions generate over time.

While women of color may face greater obstacles to wealth-building, there are some practical tips that they (and the rest of us) can take to benefit from the wealth escalator:
-Pay down credit card debt. Rid yourself of the debt anchor, freeing up money to save or invest
-Be optimistic, but plan for the worst. Aim to have six months of income in savings in case of job loss or illness
-Strengthen your financial knowledge by reading articles and books about personal finance
-Find out if you're eligible for the Earned Income Tax Credit, a tax credit for people with low-to-moderate incomes that allows you to keep more of what you earn
-Enroll in an employer-sponsored retirement plan if it's available, especially if they match contributions

As the nation moves increasingly toward a nation that is majority racial minorities the wealth poverty that women of color find themselves in must be looked at as one of the fundamental economic challenges for the country. There is no economic issue that more drastically effects the nation than having its future grow up without the resources necessary to provide basic economic sustainability.

By Dedrick Muhammad,
Senior Director of the NAACP Economic Department

and Mariko Chang, author of
"Shortchanged: Why Women Have Less Wealth and What Can Be Done About It"

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