The Value Gap is a MarketWatch interview series with business leaders, academics, policymakers and activists on reducing racial and social inequalities.
Low-income people, despite often being seen as one of the groups that would benefit the most from financial-literacy programs, are typically aware of their money problems.
Yet every April — once designated National Financial Literacy Month, and now called National Financial Capability Month — they’re met with well-meaning lessons and resources for improving their circumstances by paying down debts, building saving habits, creating a budget and boosting credit scores.
That’s all well and good, said Anna Gifty Opoku-Agyeman, a Harvard Kennedy School doctoral student studying public policy and economics and the editor of “The Black Agenda: Bold Solutions for a Broken System.” But what about the systemic issues that keep poor people poor, despite their best efforts to save money?
In the past, financial-literacy and health programs have been criticized over a perception that they too narrowly focus on individuals’ choices, rather than circumstances that shaped those decisions, particularly when such programs are highlighted as a means of addressing the country’s racial wealth gap. The idea of pulling yourself up by your bootstraps — going from a little to a lot by virtue of smart choices and hard work — may not make as much sense for low-income people and people of color starting from a place of less wealth, fewer resources and more institutional roadblocks.
“What happens when you don’t got boots? Or when you don’t got straps? Or when your feet are quite literally submerged under concrete?” said Opoku-Agyeman, an award-winning speaker, writer and researcher on economic justice and workplace equity and a co-founder of the Sadie Collective, a nonprofit focused on Black women in economics and related fields. “What happens then?”
While financial-literacy programs often have demonstrably positive effects, such as improving participants’ knowledge and behavior with respect to budgeting and saving, scholars have noted they’re unlikely to make a dent in the racial wealth gap, which was built on a history of exploitation and oppression rather than on poor individual decision-making. At least one study has also shown that the benefits of participating in financial-literacy programs are more pronounced for white people than for people of color.
Opoku-Agyeman is currently writing a book called “The Double Tax,” which will examine “extra costs and hidden penalties between Black and white women” and how they contribute to inequality. She talked with MarketWatch about the problem with assuming low-income people aren’t financially literate, the racial wealth gap, and what financial planning looks like if you’re poor. The interview has been edited for length and clarity:
MarketWatch: In a tweet last April, you wrote: “Low-income people are actually very financially literate. Folks just use ‘financial literacy’ as an excuse to not address systems that perpetuate socioeconomic inequality.” What did you mean by that?
Opoku-Agyeman: I’m somebody who grew up in a low-income neighborhood, and I think a lot of times people assume that folks who are poor are incompetent. That is the underlying belief: that if you’re poor, it’s because you didn’t manage your money well or you aren’t working hard enough, and therefore you don’t know how to spend money.
But in my lived experience, what I’ve found is that people who are low-income and even middle-income really know how to pinch a penny; they really know how to stretch a dollar. In terms of budgeting, in terms of prioritizing costs, folks who are from those communities really know how to do that — probably better, in my opinion, anecdotally, than folks who have never had to think about budgeting.
“‘When wealthy folks consider financial decisions, it’s about investing in the future. When low-income and middle-income people think about financial decisions, it’s about surviving.’”
To some degree, you would say folks who kind of rag on poorer folks for not being financially literate have people they can just hire to budget for them. The folks from those communities don’t really have to grapple with the day-to-day costs of living versus those who are from poorer, more middle-income communities that have to think about the price of eggs as it relates to their rent; they have to think about their student-debt payment as it relates to their health bill. And because they have to think of those costs, the budgeting mechanism is fundamentally different than if you were from a wealthier neighborhood.
I grew up in this low-income, [sliding-scale rent] neighborhood, but I actually ended up going to school with a lot of the students that fall into that second group I was mentioning: the wealthy group. They didn’t have to think about whether their phone broke, because another phone would just pop out of nowhere. But I had to be very economical in how I thought about what I was buying and why I was buying it, and that’s just because of the way I was raised in the community I was raised in.
MarketWatch: There was a point where one unhoused person — this was years ago — told me that being poor was a full-time job: Money buys you time, and money buys you convenience. If you don’t have money to buy you time and convenience, you’re spending a lot of time in welfare offices trying to negotiate with people for benefits, and trying to figure out how to make your money stretch. What examples, if any, have you seen in either the neighborhood you grew up in or in your professional life of the time people spend on thinking about money if they are low-income?
Opoku-Agyeman: A really salient example that applies to a lot of [low- and middle-income] folks is going to the MVA, or DMV. Maybe you have to get your license renewed; maybe you have to take a license test. I think someone said once, “The DMV has no respect for your time.” It’s true. They don’t care. But the question becomes: Whose time is more expensive? Who can afford to lose an hour or two hours of their day, and have it not affect whether or not they make rent that month?
I remember when my parents and I would go to the DMV, they would usually be renewing something, and my dad would have to take off that day, or he’d have to make sure he told them, “I’m calling in late.” Then he’d be like, “I have to make it up later in the week.” There’s a trade-off, but not really — because even though you’re trading off whatever you need to do for the wages that you’re missing, oftentimes you’ll find low-income people will then either pick up a job (they’ll either have multiple jobs going on, so it cancels each other out) or they’ll end up picking up more shifts during time when you expect people to have leisure.
I would even say — very, very specific to my family — my mom would travel all the way to D.C. for cheaper fish, because the fish in the area [Howard County, Md.] was too expensive. Her and my dad would make a trip to D.C. once a month to go get all of their produce, because it’s not affordable in the area that we are living in, or not as affordable. That’s crazy. You’re losing time. They would have to do it on the days that my dad was off, my mom was off. The timing would have to line up.
I’ve lived a lot of these experiences. I haven’t been at the poverty line, but I’ve been hovering right above it. A lot of what we talk about when we talk about penny-pinching, it’s applying to folks who are low-income and who have to think about how their financial decisions affect the trajectory of their lives in a way that wealthy folks don’t have to really consider.
When wealthy folks consider financial decisions, it’s about investing in the future. When low-income and middle-income people think about financial decisions, it’s about surviving.
MarketWatch: A number of surveys have shown women often manage household finances. When we’re talking about financial literacy, do you think that looks different for women versus men, and white women versus women of color?
Opoku-Agyeman: I’ll say anecdotally: Yes, that seems right, and it seems like there’s a benefit from that. I think there’s some work in the developing world from economists that shows when women are managing finances, the kids benefit, for example. I would imagine it’s true here, and I would imagine, quite frankly, by the numbers it makes sense. If we’re talking about who tends to be the [primary] source of income in their household, it’s Black women, Black mothers, disproportionately, as compared to any other group — that’s according to the Center for American Progress.
In my opinion that’s also been my experience — but not because my parents are single parents, but my mom has just been really good with money. She knows how to manage finances really well. She usually manages — or helped manage — the finances in my house growing up.
Of course it’s going to be different between Black and white women, because our realities are different. One thing I really hate is when people say, like, “All women! Women empowerment!” Which women? Which women are being empowered?
The average net worth for white families is in the hundreds of thousands, and Black families haven’t even crossed the $100,000 mark. We are starting at fundamentally different places. We can’t say that if we close the [wealth] gap for women that that’s going to somehow account for women who exist at other marginalized identities.
White families tend to live in neighborhoods that have investment in them — the houses are sturdier, your amenities are more taken care of, the schools are better, you’re not in a food desert and have grocery stores near you — versus a lot of Black and brown families, especially those that are low-income, are in food deserts, meaning there’s no grocery stores. Perhaps you might have a convenience store or a bodega that’s near you depending on where you live, or it might be a lot of fast food in the area.
I’m going to parse this out even more: I’m Ghanaian American, but if you think about African-American communities that are underserved, think about the rate of incarceration — how that adds another undue pressure. Think about health risks; that adds another undue pressure. Environmental factors, another undue pressure. You have to think about all these other costs related to your survival that affect the way you administer your finances.
That’s why, again, when we talk about financial literacy, I’m thinking to myself, “Who are y’all talking to? Because the people who you claim are not financially literate are very much aware of how to manage their finances under the most undue circumstances.” I don’t know why y’all assume that financial literacy is going to solve all the problems. I know there’s a little bit of evidence that it helps, but it doesn’t help groups in the same way.
The question then becomes: What are these more systemic factors that are adding financial pressure that we really need to be addressing? This sort of pull-yourself-up-by-your-bootstraps [mentality] — what happens when you don’t got boots? Or when you don’t got straps? Or when your feet are quite literally submerged under concrete? What happens then? How are you going to pull your boots up?
“‘[Y]’all have been calibrating policies to the people who are the best off, and you’re wondering why it’s not working for people who are worse off. What if we changed the lens to people who are worse off?’”
MarketWatch: I was just looking at a speech Martin Luther King Jr. gave in Michigan 55 years ago. In it, he mentions that there’s an “over-reliance on the bootstrap philosophy,” or this idea that if some racial and economic groups have found greater economic success, why can’t everyone? He said, “Nobody, no ethnic group, has completely lifted itself by its own bootstraps.” In what ways have we created wealth through policy for white people, and in what ways could we create that wealth for others?
Opoku-Agyeman: One of my favorite people in economics, Dr. Ellora Derenoncourt, is really amazing in some of the work that she does. Recently her and her co-authors documented the evolution of the racial wealth gap. At the time of slavery, the wealth gap — the white wealth to black wealth ratio — was [nearly] 60 to 1. For every dollar a white person had, Black people had [less than] 2 cents. That is a head start.
Even if you don’t come from money as a white person, the fact that someone who looked like you had that opportunity to build that kind of wealth put you at a head start, because the perception of you being a wealth-builder — you’re much more believable, and that affects everything. If people think you can build wealth, they’ll invest in you. They’ll invest in the communities you live in; they’ll invest in your success; they’ll invest in your career.
It goes back to the idea of: Who is believed to have inherent productivity? We’re going with this bootstraps idea — who is believed to actually have boots to strap up and really kind of bring themselves up? White folks. All policies through slavery, all the way through Jim Crow … have all been focused through the lens of: White folks are wealth builders. They build wealth, and because they build wealth, they need to be making decisions on behalf of everyone if we want everyone to build wealth. We’re going to make sure that the policies that exist will ensure that white people — specifically, white men from a certain class that you come to find out benefited from that 150-year head start — have ample opportunities to build wealth.
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That’s essentially it: White men from a certain class who have had this benefit of a 150-year head start are associated with this term “wealth builders.” Which is why, for example, when Silicon Valley was screaming and crying, “What’s the government going to do about Silicon Valley Bank?” the government said, “Hey, we got y’all. Why? You’re wealth builders.” You actually had some people in the VC space and the tech space talking about: “Tech is the biggest wealth generation that we’ve ever seen; it’s generated so much wealth.” I ask the question: “For who?” For y’all, for sure.
I think we have to divorce ourselves from this idea that only white people can build wealth, because if you think only white people can build wealth, they’re only going to get investments toward everything that they do. This goes all the way down from when someone gets accepted into a daycare of very, very outstanding quality all the way into who gets into Harvard, all the way into who gets into a consulting job, all the way into who gets to retire early, have a vacation home — this is what “The Double Tax” will be about, but focused on women and non-binary folks. It’s from start to finish, this idea, this perception.
The policies I think make sense to reframe who gets to be a wealth builder — it comes from the work of Dr. Sandy Darity, Dr. Darrick Hamilton, Dr. Lisa Cook, Ellora, etc., [and] it’s something that Janelle Jones, who was the first Black woman to be the chief economist at the Department of Labor, says in “Black Women Best,” and if you read anything I’ve done, this is my guiding philosophy: this idea that y’all have been calibrating policies to the people who are the best off, and you’re wondering why it’s not working for people who are worse off. What if we changed the lens to people who are worse off? If the policies work for the people who are worse off, then the people who are better off will be the best off.
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The best outcome for Black women is a better outcome for everyone else, especially those who are at the top, especially those who have been defaulted as wealth-builders. What opportunities to build wealth, and to build sustainable and generational wealth, are there for Black women? As I mentioned before, Black women are the primary breadwinners in their households. Black communities are among the most underserved in the country. Even if there are groups that are worse off than Black women, they’re not that far worse off. So lifting up Black women is the rising tide that lifts all boats.
This is a calibration that I and many others — Jones, Kendra Bozarth — we want people to really understand. It’s not about, “Oh, we only want Black women to win.” How do we all ensure that we have a fighting chance at building wealth? How do we ensure the poor white guy who lives in a trailer park has an opportunity to build wealth? Actually, it turns out that the answer to that question is to ensure that Black women can build wealth, because there’s an element of his identity that’s associated with Black women typically, and that is what is being discriminated against. That’s the framing that I think is really, really important for equity in this space.
“‘You need Black and brown folks in the economics and broader policy space, because we’re holding folks accountable to telling the real story.’”
MarketWatch: If we’re talking about framing, pretty much everybody that you’re citing as an influence or somebody who you look to is Black, and many of them are Black women. If we’re also looking to the idea of “Who is a wealth builder in this country?” and it’s a white man, that’s perhaps more reflective of the current field of economics. How do you think having more Black economists, more women economists, more Latino economists, and so on, impacts our understanding of financial circumstances of non-white households?
Opoku-Agyeman: In “The Black Agenda,” which is this book that I edited last year — the paperback comes out in June — I invited several economists to weigh in on … pretty much, the question was: What’s an issue in this area, and how do we solve it? And so there’s a part of the book that was dedicated to the economy, and in this chapter, one economist [Kyle Moore] mentioned that the Black unemployment rate is nearly double the white unemployment rate. This is what we call “structural unemployment,” this idea of when you dig into structural inequities, you find out that it’s been a persistent gap.
And so the idea of stratification economics, which is something that Darrick Hamilton, Sandy Darity, Dania Francis — these are all doctors, by the way, Dr. Darity, Dr. Francis, Dr. Hamilton — is this idea that pointing to the educational and skills gap as reasons for persistent disparities is not giving you the full picture because it’s not talking about how those educational opportunities and skills are acquired, and what’s fundamentally unequal about that.
Black and brown economists really help us understand the real story behind the numbers. You go on CNBC, you get the numbers. You go to the Bureau of Labor Statistics, you get the numbers. People are going to interpret it a million different ways. Most people are going to give you a surface-level answer of: “This is what’s going on in the economy; unemployment is falling; this is great.” The reason why Black and brown economists are really, really important is because they can parse out the numbers and say, “OK, yes, these are the numbers. However, the numbers are not telling the full story. When we break out these numbers, here’s really what’s going on in your community; here’s what’s really going on with people who look like you.”
You might not get that analysis all the time of white folks — I will say with the exception of a couple few who I think really go out of their way to disaggregate the data, shoutout to Aaron Sojourner. You really won’t see people parse it out like that. Paul Goldsmith-Pinkham is another example of what I’m talking about. But that’s kind of what I mean: You need Black and brown folks in the economics and broader policy space, because we’re holding folks accountable to telling the real story.
You’re saying unemployment is falling, but for who? This was the story [being told] during the 2009 to 2011 recovery period: It was true, unemployment was falling at the aggregate, but when you actually parse it out Black women’s unemployment was rising, and as I just mentioned, Black women, in my opinion, are a better proxy for progress than any other group, because we’re vulnerable on a number of different dimensions. It’s like, “OK, you built this fortress, but you have a weak spot here. If I tap it the wrong way, this whole thing falls down.”
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I think that also goes back to kind of your question: Why do we care about what Black and brown economists have to say about anything? Because Black and brown people are part of the population, and the population is becoming more diverse. You cannot ignore Black and brown people for the foreseeable future. We’re here, folks are having babies, people are immigrating into the country. And you’re seeing a lot of that panic among certain factions of the country around that — the reality is, it’s inevitable. What does Thanos say? “I am inevitable!” It is!
You can be scared of it or you can recognize it for what it is, and also recognize that as a white guy from a certain class, you might not have all the answers to all of the economic problems that exist. Because, quite frankly, you have not experienced all the economic situations that exist. There are other people who — I’m using economics now — have a comparative advantage, and instead of trying to compete against them, you could work alongside them to come up with the best solution that works both for you and for those communities.
“‘I think people knowing about their finances is great. I think personal-finance podcasts are awesome. I think workshops are good. But they’re not enough.’”
MarketWatch: Do you think there’s a place for financial-literacy and financial-wellness programs — and I’m talking about classes that teach you how to build credit or get a down payment for your first home — alongside serious policy change? And what role do you think that those sorts of classes play in a way that is not patronizing to the people they are saying they’re going to help?
Opoku-Agyeman: It seems like there’s slightly conflicting evidence on the literal effects of financial-wellness and financial-literacy programs. I’m reading one paper here that says, basically, if you’re able to increase financial literacy in Black and brown populations, it improves socioeconomic differences, etc., and then you have other folks who say this is more structural.
I recently told somebody this — I said, “A lot of times I feel like people talk a lot about: This what you’ve got to do to make money.” But I think what people don’t understand is [that] even the access to things that help you make money is unequal. The average person does not know how a credit card works — I’m not saying they don’t know how to charge a credit card; I’m saying they don’t know how the credit-card fees work. They don’t know the nature of a credit card. I’ll be very honest and say I didn’t really know, either. That’s not my strong suit, either. That’s not what I study. A lot of what I had to learn around my own personal finances happened over the last, like, six or seven months.
I think there seems to be a strong link between financial literacy and financial wellness within the Black community, but even access to those resources that are promoted in these classes, and these courses, and these workshops, [is] fundamentally unequal. It’s important to have a 401(k), but you have to be in a job with benefits. If your job doesn’t have benefits, you might not be able to have a 401(k). Who’s typically in jobs that don’t have benefits? There we go.
Or they’ll say something like, “Invest in stocks!” Investing in stocks is like gambling — who has enough money to gamble, usually? If you’re trying to put food on the table and pay your student-debt payment, you don’t got money to gamble. [This] is why something like cryptocurrency was so attractive — it was like, “OK, this seems like I can get into this, it’s not that much money,” and then it turns out the whole thing was a farce. And it was also advertised as a way to equalize the playing field. We can’t equalize the starting position if you had a 150-year head start.
It’s fundamentally impossible to do that with, I would say, bandages on a gaping wound. There’s something wrong with the actual wound itself. The wound is the problem, not the fact that it’s bleeding, which is what people will say. This is what a lot of folks will say, especially when they “make it”: “Y’all just don’t know how to make money; y’all just don’t know how to invest.” But the reality is, the function in which you make money and the function in which you invest is unequal because of where people start; because of where people are from.
It’s true across the board — it’s true if you’re white, it’s true if you’re Black, if you’re Latina, Native — but it’s especially true if the history of your people had a 150-year head start. Even if you are not rich, the perception that you could be — it’s precisely why it’s hard for you to really say these financial-wellness and literacy workshops have a causal impact on who gets to build wealth. I don’t know if I can say that — I don’t know the literature that well on that — but at least from where I’m standing, I don’t know if the evidence is that clear that there should be so much investment only in this and nothing else.
I think people knowing about their finances is great. I think personal-finance podcasts are awesome. I think workshops are good. But they’re not enough. You’re putting a bandage on a gaping wound. You’re saying, “Oh, you’re in the hospital? Let me give you a juice box to hold you over.”
That’s what people are doing. And it’s not enough, because ultimately the structure of our economy, arguably, is fundamentally unequal because of who our economy is built upon, who our economic system believes to be a wealth builder, and the history of wealth building in this country.
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