The U.S. economy has been dancing along the edge of a recession for more than a year. But despite dodging an official designation, the pain points of a recession are still being felt by some workers — particularly workers of color.
As job growth continues to slow, the unemployment rate for the BIPOC community continues to climb, and currently sits at nearly twice that of white people — almost 6% compared to 3.5% — according to the Bureau of Labor Statistics. In 2022, the racial wealth gap grew to 30%, with only 45% of Black families owning a home, compared to 75% of white families, according to the American Civil Liberties Union.
"A lot of indicators are flashing red right now," says Yemi Rose, founder and CEO of OfColor, a minority-owned financial wellness platform focused on supporting workers of color. "But not a lot of people are paying attention to it, because there is still relative strength in the stock market and in the job numbers."
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The financial challenges workers of color are facing have additional troubling symptoms: Regardless of age and income, Black and Hispanic workers are less likely to participate in their company 401(k) plans, according to research non-profit the Rand Corporation, and when they do contribute, they save at much lower rates than white workers. Black employees are also more likely to take a loan, according to a report by the Advisory Council on Employee Welfare and Pension Benefit Plans, and more than twice as likely to take a hardship withdrawal from their retirement savings.
"We've been a month away from a recession for about a year and a half now," Rose says. "Eventually we're going to get to a point where we can't keep up with the current level of spending without corresponding savings, and folks of color are like the canary in the coal mine."
Rose warns that an economic contraction could lead to widespread financial instability among workforces, and urges employers to pay closer attention to the struggles workers of color are currently facing, and prioritize helping them shore up their finances and be more prepared to weather a potentially worsening storm.
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"The racial wealth gap impacting folks of color is not about having a certain amount of money in their wallet," he says. "It's referring to their ability to withstand financial shock and whether there's a lack of resilience. What we're saying right now is that the usual buffer, which was already thin, has become even thinner, and it won't take much to tip us over into a crisis."
For employers who want to heed his warning, start by making sure basics are in check: For retirement savings, embrace auto enrollment and auto escalation, and be sure to track and report the number of BIPOC employees participating in a 401(k) plan. If the numbers are low, take the steps to ensure that there's opportunity for everyone to participate equally.
"Whether it's in the economy as a whole or in individual businesses, we don't plan necessarily for the least prepared," Rose says. "The more you know about the struggles of the employees that are struggling the most, the more we learn how to get to the source."
