More and more employers are considering race, ethnicity and gender when analyzing financial health. Explore how financial wellness might close gaps.
We are in the middle of what could be considered the most significant social justice movement centered around race since the civil rights era.
As more employers embrace this important cause, there is an opportunity to better solve diversity and inclusion challenges through financial wellness programs. And that solution starts with understanding the needs of a diverse workforce.
While we have made great strides toward workplace equality, there are still large gaps. Especially in the shadow of a global pandemic that has disproportionally affected families of color1, it is an important opportunity for employers to recognize any inequalities that may exist and focus on solutions to unify their organizations.
Data from the 2019 Survey of Consumer Finances (SCF) reveals long-standing and substantial wealth disparities between families in different racial and ethnic groups. The typical white family has eight times the wealth of the typical Black family and five times the wealth of the typical Latinx family. The data shows the median net worth of white families at $188,200 compared to Black and Latinx families at just $24,100 and $36,400, respectively.2
To address the wealth gap, employers are increasingly offering a holistic financial wellness program with a wide variety of topics, including debt management, budgeting, saving, retirement planning and more. For more personalized guidance, employers may consider offering the services of a financial counselor or Financial Advisor who will meet with employees individually to discuss their specific financial questions.
To take a step further, consider offering equity compensation benefits (employee stock purchase plans, incentive stock options and performance shares). More companies are trending toward offering this option to all employees rather than just management and executive teams.3
Access to physical and mental health care coverage is less common among Black and Latinx workers. This may be partially caused by an over representation of people of color within industries that traditionally offer lower pay and fewer benefits such as the service industry or holding gig and part-time jobs.4
No matter the reason, now is an ideal time to address health care disparities in the workforce. Below is a simple list of recommendations:5
Retirement accounts are an important wealth building channel many families of color have less access to. According to the Federal Reserve, white families have broader access and participate more in employer-sponsored retirement plans. Nearly seven out of 10 white families have access to a retirement plan as opposed to only 56% of Black families and 44% of Latinx families.6 However, access is only one part of the story; participation or take-up rate also varies across racial lines.
These differences in participation may be caused by a variety of factors, including whether or not a family has sufficient income to enable retirement savings, level of debt, the types of funds offered by employer-sponsored plans, plan default options and financial literacy.
As more organizations commit to change, a logical place to start is understanding where gaps may exist in your own workplace.
To understand the various needs of a diverse workforce, a full picture is needed; this means going beyond just examining 401(k) metrics.7 A robust assessment should lay out the following by race, ethnicity and gender:
While many companies have embraced equality, diversity and inclusion for some time now, less than three out of 10 employers (29%) analyze employee financial health based on race and ethnicity. Instead, most employers focus on job classification, age and income level as the way to measure financial wellness.8
For organizations committed to promoting Diversity and Inclusion, it is important to identify any gaps that may exist and include the needs of these populations in the overall benefits conversation and selection. Assessing the financial wellness of your workforce and including key demographics such as race, ethnicity and gender can give employers the data they need to implement targeted solutions to help close those gaps.
We’d love to talk. Fill out the form and a team member will reach out shortly.
3 Morgan Stanley & Financial Health Network. “Financial Health Benefits in the Workplace.” Sept. 2020
6 US Bureau of Labor Statistics. “National Compensation Survey: Employee Benefits.” Sept. 2020.
7 Morgan Stanley & Financial Health Network. “Financial Health Benefits in the Workplace.” Sept. 2020.
8 Morgan Stanley & Financial Health Network. “Financial Health Benefits in the Workplace.” Sept. 2020.
© 2021 Morgan Stanley Smith Barney LLC. Member SIPC.
CRC#3539502 (04/2021)
