Latinx Equal PayDay
Editor’s Note: At Nav.It, we have one goal: change the narrative around money to be inclusive, positive and practical. We can’t do that without acknowledging the inequities plaguing members of our beautiful Community and also creating a plan to change it. That’s why we’re excited to present Courtney Blodgett’s piece in honor of Latina Equal Pay Day – the day when Latina pay catches up to that of white, non-Hispanic men from the previous year. More than 50 years after the passage of the Equal Pay Act of 1963, Latina’s typically earn 55 cents for every dollar earned by white, non-Hispanic men. We must reiterate, we’re not done yet.
by Courtney Blodgett | 29 October 2020
Racial Inequality is Bad for Everyone. Here’s Something Investors Can Do to Fix It.
Wealth inequality negatively affects our economy, harming more than just Black, Indigenous and People of Color (BIPOC). The wealth gap between BIPOC and White Americans is dramatic. Systemic obstacles in the labor market have led to the massive wealth gap. Increasing racial diversity and providing equal pay for all in corporations will decrease the wealth gap and increase profitability. Corporations must be held accountable for taking action to increase racial diversity and provide equal pay. Investors must demand corporate accountability for racial diversity and equal pay.
Why Does Wealth Inequality Matter?
This blog post will not discuss the moral imperative of racial justice. For discussions about the moral imperative, please visit “America, This Is Your Chance” and Forbes’s list of antiracism resources. This post will instead focus on how wealth and other forms of inequality affect our economy and financial system.
In “Unbound: How Inequality Constricts Our Economy and What We Can Do about It”, the author chronicles how inequality undermines economic growth in three ways.
- It obstructs the supply of talent, ideas, and capital as wealthy families monopolize the best educational, social, and economic opportunities.
- It subverts private competition and public investment. Powerful corporations muscle competitors out of business, in the process costing consumers, suppressing wages, and hobbling innovation, while governments underfund key public goods that make the American Dream possible, from schools to transportation infrastructure to information and communication technology networks.
- It distorts consumer demand as stagnant wages and meager workplace benefits rob ordinary people of buying power and pushes the economy toward financial instability.
Wealth Gap Between Hispanics and White Americans
Considering Hispanic Heritage month, this post focuses on the income and wealth gap between Hispanic and White Americans. Further information about the Black – White wealth gap can be found here.
As seen in Figure 1, on average, the income gap between Hispanics and White Americans is 37%.
Figure 1: Hispanic – White Income Gap. Figure source: ABPN, Data source: Board of Governors of the Federal Reserve System
Latinas carry a greater burden of the Hispanic-White income gap. In the U.S., Latinas are on average paid 46% less than white men. This gap applies to Latinas who are doing the same job as white men, as seen in Figure 2.
Figure 2: Latina and White Male Wealth Gap comparison by profession. Figure source: Lean In, Data source: U.S. Bureau of Labor Statistics
In addition to there being a Hispanic – White income gap, there is a significant wealth gap. Wealth gap is defined as the sum of one’s assets minus debts. Figure 3 shows the Hispanic-White wealth gap. The 88% wealth gap is partially caused by lower income. Other factors include lower rates of home ownership, higher education, business ownership, and inheritance.
Figure 3: Hispanic – White wealth gap. Figure source: ABPN, Data source: Board of Governors of the Federal Reserve System
What Happens if We Increase Diversity and Decrease Inequality in Corporations?
One way that the income and wealth gaps can be narrowed is through corporations hiring more Hispanics and providing them equal pay. Positive results are demonstrated by increasing racial diversity in corporations and, subsequently, decreasing inequality. A McKinsey report has found that ethnically diverse companies are 35% more likely to outperform those in the bottom quartile. Additionally, the biggest takeaway from a BCG survey of 1,700 companies found that diversity in management translated to innovation. Innovation revenue of companies with diverse management was 19 percentage points higher than that of companies with below-average leadership diversity.
Corporate Accountability for Racial Diversity and Equal Pay
It is time that corporations are held accountable for increasing racial diversity and providing equal pay. A limited number of corporations report on racial diversity metrics.
Refinitiv, an environmental, social, and governance (ESG) ratings company, published in 2019 “Measuring Diversity and Inclusion Progress”. The report provides insight into corporations’ transparency of diversity and inclusion. 3,652 companies around the world were analyzed for the report. Key findings include:
- 31% of companies report on board diversity
- 39% of companies report on diversity and opportunity policies.
- 17% of companies report on diversity and opportunity targets.
Demand Transparency and Corporate Accountability for Racial Justice
For the sake of the economy, improved financial performance, and being on the right side of history, corporations must increase racial diversity and provide equal pay for all. Corporations must be held accountable for these actions. As a result of outside pressure put on companies in 2020, an increasing, but still limited, number of corporations reported on their employee make up. As of June 2020, 25% of the S&P100 corporations reported on their employee racial composition. However, 25% is insufficient.
John Streur, the CEO of Calvert Research and Management, a leading sustainable investment fund manager, stated that Calvert will call on companies to provide the information required to accurately assess their racial diversity. Streur also stated “More open and forceful action is required by investors and by corporate leaders and boards.”
We as investors should heed the call. Contact your fund managers and demand them to also commit to asking companies to disclose data about racial diversity metrics. ‘
A sample letter can be found below.
Dear Fund Manager,
As an investor, I demand that you ask companies in my fund for greater transparency around racial justice.
A McKinsey report has found that ethnically diverse companies are 35% more likely to outperform those in the bottom quartile. The biggest takeaway from a BCG survey of 1,700 companies found that diversity in management translated to innovation. Innovation revenue of companies with diverse management was 19 percentage points higher than that of companies with below-average leadership diversity.
In addition to potential improvement in financial performance due to increased racial diversity, companies have a moral imperative to improve racial diversity.
Calvert Research and Management has committed to asking companies about racial diversity metrics. We demand that you do the same.
Companies should be asked to provide data about:
- Racial diversity on your board and in your workforce
- Pay equity disclosure across race and gender
- Diversity and opportunity policies
- Diversity and opportunity targets.
The time to act is now. Be on the right side of history.
Your Name Here, Investor
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Courtney Blodgett has worked around the globe in sustainable finance for more than 15 years. Her experience includes helping to design the rules of the carbon offset market, creating a $50 million program to facilitate clean energy in developing countries, and leading the impact investing team of Paul Allen, Microsoft’s co-founder. Courtney is on the Board of Directors of Oikocredit US, a non-profit that enables impact investing in developing markets. She has also done her own personal sustainable investing for more than 15 years. Courtney’s frustration with the lack of information available for individuals who want to invest sustainably led her to found Yield Positive, a blog to help everyday investors do sustainable investing.
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