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The Latino wealth gap in America is large. While Latinos have the highest workforce participation rate and are leading homeownership and new business formations, closing the wealth gap has been slow. According to the most recent Fed Survey of Consumer Finances, Latino families have one-fifth of the wealth as the typical Anglo-American family. We live in a capitalistic society, so I think it goes without saying that this is an important issue, and there are plenty of well-documented events that got us here including some that are pretty sordid. However, I’m not going to get into that here. The question is what do we do about it and how can we fix it? Without question, any solution will be difficult and complex, but I like to think of things in simple terms and I am a fan of the rule of three. So, if I had three silver bullets here is what I would do:
Increase Housing Supply by 5 Million Units to Boost Homeownership
Homeownership is the gateway to the middle class. Despite what some say, home equity remains the largest source of wealth for most Americans, and investing in real estate is almost a sure thing over time. Currently, less than 50% of Latinos own their home, but a lot of that is due to the youth of the Latino population, and most experts predict that Latinos will account for the majority of homeownership gains in America over the next twenty years. The biggest impediment to increasing Latino homeownership is a nationwide shortage of housing supply. Adding roughly 5 million additional units to the market would boost Latino homeownership substantially.
Increase the Amount of Capital Invested in Latino-led Start-ups by a Factor of 10
When Latino-owned companies succeed, not only is it good for the owners and employees of that company, it encourages more investment into Latino projects and communities. Let me explain. When Latino companies achieve scale, they sometimes get so big that they take market share from other, larger companies and corporations. The corporations respond by hiring more Latinos in key positions and investing in other projects that capitalize on the growth in the Latino market. I’ve seen this happen firsthand, and believe there is much more opportunity here than most people realize. We complain a lot about the lack of representation that Latinos have in the media and entertainment industries. We can continue to complain or we can find more ways to drive more investment into Latino-led production companies. Those companies are more likely to hire Latino writers, actors, and directors, and if they are really successful, you watch how quickly Disney, Warner, Amazon, and Netflix follow suit. I am a partner in L’ATTITUDE Ventures, which provides me with a new perspective on the issue. I can tell you that the talent is there, it is just a matter of getting more capital to the right companies. Currently, Latino-led start-ups receive less than 2% of the venture capital. Latinos are 18% of the overall population and 23% of the millennial population. If Latino-led start-ups received 20% of the venture money invested each year, it would create a multiplier effect, that would be a game-changer. It’s all about the capital. Can you imagine the cascading impact it would have if the most prolific entrepreneurs in America had names like Garcia, Hernandez, and Gonzalez instead of Zuckerberg, Gates, and Musk?
Teach Financial Education in Public Schools
It is amazing to most people that excluding college, we all spend more than a dozen years in school and are taught nothing about finances or investing. Education is the great equalizer; if Latino kids learned about these things at an early age, it would change economic mobility in ways we can’t even imagine. I’m not sure why more people aren’t talking about this. Wealth is a factor of access, but it’s also a fact of knowledge. Politicians talk a lot about the importance of education, but you rarely hear them speak about the kind of education that can have the largest impact on lifting our communities – and I never hear them speak about teaching financial education in public schools. If we are serious about closing the wealth gaps in America, it starts with educating our kids about building wealth.
I can’t wait to talk more about this in the coming months.
By definition, unintended consequences are the results of an action different from what was expected or planned. They are often referenced in relation to changes in policies. I have heard the term used for years, primarily related to government policies. Still, I didn’t realize until recently that much has been written on the subject, and most experts believe that there are three categories of unintended consequences:
I once read that sports are a universal language. Regardless of ethnicity or what language you speak, almost everyone speaks sports. No place has that been more evident than the Olympics, where every four years, we are moved by images of athletic rivals from around the world shaking hands and embracing each other in moving displays of sportsmanship.
Happy Easter! The blog will resume on April 7, 2024.