There is a strong push for Diversity, Equity, and Inclusion programs in workplaces today. 2020 highlighted ongoing challenges with providing fair access to opportunity for all employees.
One area that has not yet received much attention is Economic Inclusion. The Federal Reserve, FDIC, and incoming administration are all poised to thrust this issue into the limelight in the near future. And it is massively important.
Even during a pandemic, the Black Lives Matter movement, and tumultuous political year, financial health remained the dominant stressor. And while race, gender, and even asset level can be huge factors in economic exclusion, it can happen to anyone.
Economic Inclusion means having access to safe, affordable tools that make financial progress accessible. Commonly, the term is associated with racial justice and gender equity—and for good reason: Black households have about 1/10th the average net worth of Whites, and women lag in financial literacy and outcomes. But it surprises many to learn that a majority of workers struggle with this issue. Consider these real-life examples:
- Self-employed individuals facing medical events. Without access to affordable, group insurance, many contractors and gig workers suffer financial ruin when a medical need arises.
- Anyone who was raised in a household or culture of poverty. Many immediately think of black, urban communities, but there are millions of white, rural communities that struggle with similar issues. Yes—geography absolutely can lead to economic exclusion.
- Two income trap families. Housing and health care are so expensive that many working couples find their budget stretched to the limit—and then they have a baby. Child care, education, and costs of living increase and put finances in jeopardy.
- Consumer debt cycles. About 1/3 of American workers making over $200,000/year are living paycheck-to-paycheck, trapped in debt cycles in an attempt to keep up with their wealth peers’ lifestyles. Many of these are long-term commitments that keep economic progress out of reach: second homes, automotive leases, primary residences, timeshares, club memberships, etc. Those with lower incomes can have an even harder time escaping these cycles.
- Unbanked, Underbanked, and Credit Poor. The foundation of financial progress is the ability to save, spend, and track your finances in a secure way. Bankruptcy and debt problems can also lock you out of the ability to access capital solutions at a reasonable cost. The average payday loan has an interest rate of 391%.
- Loss of spousal earnings. Whether through death, divorce, disability, or even legal issues, losing household income can make it impossible to stay afloat financially.
- Economic and global events. Obviously, the pandemic has driven many into poverty, but more common events such as obsolescence, cyclical markets, and even government mandates can end careers. Even positive innovation events can disrupt industries and leave many workers without comparable income options.
- Substance abuse, addiction, disability. Prescription drugs and addictive illicit substances are issues for workers, but also for their family members. If your spouse or child gets trapped in addiction, it can mean you need to pause employment and even leads to homelessness and impoverishment.
There are many more. Children with disabilities, long term care events, liability issues such as car accidents, mental disorders…sadly, there are dozens of relatively frequent events that can lead to financial ruin. It is important to try to understand these issues and what causes them, but it is more important to provide solutions.
To put it another way, “why?” is not a bad question when it comes to economic exclusion, but “how do we fix it?” is a much better question. Whether it is lack of education, luck, responsibility, or mentorship is far less important than creating the opportunity for and a culture of Economic Inclusion.