Last week, I wrote an article about how the compensation system perpetuates and exacerbates racial (and gender) wealth gaps.  Without knowing it, companies (and employees) are participating in retirement plans that are one of the biggest reasons that people of color have only a fraction of the wealth of their white counterparts.

Finances are the No. 1 stress in life for most Americans, but current financial wellness solutions heavily favor those that are already doing well: white males.  Beyond retirement, most employee benefits designed to address financial health are driven by an industry that is overwhelmingly white and male, and solutions that are actually useful for disadvantaged populations often receive little or no investment from employers.

The bottom line: employers and employees spend tens of billions of dollars on a retirement system that favors white men and spend only a tiny fraction of that on resources for those with other financial wellness needs.

So, what is the solution?

Sadly, there is not a definitive answer to that question yet, because we have not spent enough time asking LMI (low-and-middle-income) workers what they need or spent enough time researching solutions.  There has been encouraging innovation in areas like earned wage access, savings incentives and matching, and financial education, but these app-based resources require a level of financial and technical literacy to even get started, let alone extract the full potential value.  Furthermore, investment in these tools is insignificant when compared to retirement plans.

Real progress starts with learning about what disadvantaged populations need, and that means asking them.  Any financial wellness initiative that does not open access to relevant, understandable solutions for people of color is perpetuating the current, racist system.  If outcomes are not improving for struggling employees, what good is the program?

It is far easier to offer a resource than to spend the time to discover what people really need.  And, even if an organization does provide impactful tools, their value is limited by peoples’ ability to navigate those resources and their opportunity to use them.  This made even more challenging by the fact that employees do not want to share or discuss some of the personal issues around their finances with their employer.

Organizations that are serious about addressing this issue and being part of the solution need to take the following steps:

  1. Get outside help. People do not trust business, and employees do not trust their employer.  Getting support from a confidential, third-party is essential to get honest and useful feedback from your team.
  2. Learn about peoples’ needs. To know what people need and want, you must ASK.  Every company should know—on a global, not individual level—how much progress their team is making from their compensation.  This data needs to be transparent around outcomes by race, gender, and wages.  Metrics like net disposable income, savings benchmarks, benefit utilization, and debt-to-income ratios can be helpful in identifying where compensation is succeeding and where it is failing.
  3. Make meaningful, fair investments in useful resources. The average spend on wellness programs, per employee per year, is just $238—less than half-a-percent of median salary, and that includes ALL wellness programs, not just financial.  Compare that with the average employer 401(k) contribution of 4.6% of salary—about $3,560/year—and it is immediately clear that organizations are investing much more heavily in retirement readiness than they are the immediate needs of their people.  Organizations who want to be equitable should get data on where their people need help and then invest fairly in those resources instead of pouring money into retirement plans that favor white men.
  4. Provide the necessary guidance and opportunity. Financial issues are complex, and Americans are financially illiterate.  Great resources will be wasted if people are not given personal guidance on how to optimize those opportunities in the context of their unique circumstances.  And, if employers really want their employees to use the benefits, they need to offer the time to do so instead of adding to their off-hours to-do lists.
  5. Measure the outcomes. Is your compensation system providing access to progress for everyone, or just for a few?  The only way to know is to measure.  Which benefits are favoring certain populations?  Which programs are perpetuating race and gender gaps?  It is not enough to offer resources, organizations need to drive outcomes for their people.

This process will lead to very different programs for each organization based on their workers’ needs, and that is a good thing.  But reallocating some dollars spend on retirement matching, CSR grants, or even raises for top-line employees to programs that more evenly benefit the employee population is essential.  For example, a 500-person company averages about $1.8 million per year in 401(k) matching.  Consider investing the same amount in emergency savings matchings, no-interest loans/grants for financial emergencies, and discount and expense reduction programs.  And, no matter which resources are provided, add personal, on-the-clock guidance and assistance from a confidential, third-party in order to make sure your people get the most from these opportunities.

This is not easy work, but it will add-up to an inclusive culture that helps organizations become part of the solution instead of unintentionally making it harder for women and people of color to achieve success.