How to help close the racial wealth gap
4 min | 24 October 2022
Black Caribbean households hold 20p for every £1 of White British wealth. We explore why the racial wealth gap exists and what you can do to help eradicate it.
Research by the Resolution Foundation shows a huge wealth gap between ethnic groups in the UK. People from Black African backgrounds typically hold the least wealth, less than one-eighth of the wealth held by White British. The racial wealth gap in the UK is a by-product of discrimination that has existed in society for decades. However, it's not a problem unique to the UK; in the US, African American households have, on average, ten times less wealth than the average White American household. The wealth gap is a result of societal and policy failures that keep Black families from making financial gains.
Why we should all care
Wealth inequality affects every aspect of life for people who hold the least. One of the biggest causes of health inequality in the UK is a lack of money because it impacts the goods and services people buy, and studies have shown that higher income leads to better health. Children from poorer backgrounds are more likely to underperform in school and less likely to progress into higher education, which can impact their earning potential going forward. In some ways, it's a ’chicken and egg’ scenario, where other inequalities prevent communities from gaining wealth, thereby creating more inequalities.
For example, home ownership has been a driver of wealth accumulation in the UK. Recent research has shown that home ownership in Black African communities is 20% compared to 68% in White British communities. However, with rising rent prices and deposit requirements, it's becoming increasingly difficult for people to get onto the housing ladder, keeping wealth inequalities in place.
The ethnic pay gap is another way in which wealth distribution is prevented in the UK; although the pay gap has fallen, there are still stark differences, with ethnic minority employees losing a total of £3.2 billion each year in wages for the same work as White colleagues. Additionally, inherited wealth contributes to the differences – White families inherit more money than any other ethnic group in the UK, reputedly four times as much as Black Caribbean families.
How you can support by buying from Black-owned business
We spoke with Khalia Ismail, founder of Jamii (Opens in new window), an online marketplace and discovery platform for Black creators and makers in the UK. Ismail started Jamii to help people find Black-owned businesses and creators. “When we started Jamii, it was notoriously difficult to find Black-owned businesses to support, let alone give them repeat custom,” she tells me. Engaging with businesses such as Jamii has become a meaningful way to support Black communities financially as it's been difficult for Black communities to create sustainable businesses.
“The Black community historically doesn’t have positive experiences seeking business loans from banks, nor do many entrepreneurs have success pitching their business ideas – which are often innovations specific to Black culture – to non-Black investors. Instead, Black-owned businesses are mainly financed by sales, so a loyal customer base is crucial,” Ismail explains. Because of this, patronising Black businesses is so important, as it allows them to create opportunities for Black workers and families. “Buying Black is not a radical or revolutionary act; it’s a way to level the playing field and afford all communities the same opportunities.”
How you can support Black Pound Day
Campaigns such as Black Pound Day (Opens in new window), started by music artist Swiss, are explicitly focused on tackling the wealth inequality in Black communities by championing business and commerce. The Black Pound Day initiative encourages consumers to support local and online Black-owned businesses on the first Saturday of the month. This small effort has had a demonstrable impact on the businesses involved. In the first month of launching, the ten Black businesses surveyed saw a 369% increase in revenues which helped them grow and reach new customers. Even if you don’t have money to spare, they encourage you to raise awareness through the hashtag #BlackPoundDay and signpost businesses you know that could do with support.
The racial wealth gap is the foundation for many social issues we see today, however, it doesn’t have to be this way. There is more we can all do to support and demand a better, more equal financial landscape for everyone in society.