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Biden’s big challenge: A growing racial wealth gap

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When he takes office on Jan. 20, Joe Biden will face a gap between Black and white wealth that has grown into a yawning chasm during the past 10 months.

The pandemic has shuttered tens of thousands of businesses and left millions out of work. And communities of color have borne the brunt of the economic devastation, particularly Black-owned businesses that have failed at a far greater rate during the pandemic than white-owned businesses. Many that remain may not survive the current pandemic wave without significant help from the federal government before effective vaccines finally arrive.

Biden’s presidency may rise or fall on his ability to execute policies — possibly with a GOP majority in the Senate — that address systemic economic inequality, which often leaves Black families and businesses far more vulnerable to economic shocks. Black families have faced a well-documented pattern of financial discrimination that has stymied their ability to accumulate wealth at the same rate as white families, forcing them to live in neighborhoods with fewer resources. For example, they are denied loans at much higher rates than white families with similar credit profiles — and face higher interest rates when they do qualify.

Biden won the White House with enormous help from African American voters, which he acknowledged in his victory speech: “The African American community stood up again for me. They always have my back, and I’ll have yours.”

Now, his supporters say, he must deliver.

“Had it not been for Black people it would have been difficult for [Biden] to win,” said Ron Busby, president, CEO and founder of the U.S. Black Chambers. Busby said the pandemic exposed inequalities that have long existed: Black people were more likely to get the virus and die from it, more likely to be forced to go into work and less likely to be eligible for federal stimulus programs designed to prop up the economy.

“We’ve got to fix that and hold this administration accountable so we can provide opportunities for our own,” he said.

People close to the Biden transition team say targeting the higher rate of Black-owned business failures — and the racial wealth gap more broadly — will be a central focus of the new administration. Early measures to target the problem will likely include language in any new stimulus package aimed at making sure money from the Paycheck Protection Program, which is focused on aiding small businesses, goes to firms that may not have gotten access to previous funds, especially minority-owned businesses.

“The administration really needs to think creatively to make sure aid gets to some of these small businesses that have been hit so hard,” one person close to the transition said on condition they not be identified because they were not authorized to speak publicly. “We can’t leave them behind. It’s got to be better than what happened before.”

Despite Biden’s intentions, he’ll face significant roadblocks, including a divided Congress, a range of pressing priorities and a problem that has deep historical roots. New census data out this week showed white households with median wealth of $171,000 compared with $25,000 for Hispanic households and $9,567 for Black households in 2017. That gap has only widened among people with college education: Families headed by a college-educated Black person saw their wealth decline by nearly half compared with families headed by a college-educated white person between 1989 and 2016, according to the Federal Reserve Bank of St. Louis.

“The Biden administration can certainly begin to do this work and begin to support policies that will eliminate racism and discrimination in our economy,” said Rep. Maxine Waters, (D-Calif.) who chairs the House Financial Services Committee. Waters said that more banks and other financial institutions have been receptive to addressing the wealth gap and ending lending discrimination since George Floyd’s death in May. “But it certainly is not something that in a few months or a few years, all of a sudden, he’s going to be able to wipe away all the instances and ways by which inequality has grown and developed.”

Many federal government programs created in the stimulus package are set to expire at the end of the year including an eviction moratorium, enhanced unemployment benefits and the Paycheck Protection Program. Black business owners and worker groups say they were largely shut out of the $2 trillion CARES Act.

From April to June of this year, 13 percent of jobless Black workers received unemployment benefits, compared with 22 percent for Hispanic workers and 24 percent for white workers, according to analysis from Nyanya Browne and William Spriggs at Howard University. (Their analysis was based on survey data from the National Opinion Research Center at the University of Chicago.)

Spriggs, also chief economist at the AFL-CIO, said Black people are more likely to work in service industry jobs not covered by unemployment assistance programs and live in Southern states that were slow to roll out benefits. He said that to address the imbalance Congress and the new administration would have to redesign unemployment insurance programs instead of just renewing the current program when it lapses at the end of this year.

“We are going to have a long period of a very disrupted labor market,” Spriggs said. “They have to think, ‘Am I just going to patch this up? Or do I conceive of something different.’” If all they do is put it back together, Spriggs said, they’ll just end up replicating existing inequities.

In addition PPP funds haven’t reached Black businesses owners, which have been especially hard hit because of pandemic related shutdowns and a drop in demand. Between February and April of this year, 41 percent of Black-owned businesses closed, compared with 17 percent of white businesses, according to the New York Federal Reserve.

That’s likely because Black-owned businesses often have thinner financial cushions. According to Goldman Sachs, 43 percent of Black-owned businesses expect cash reserves to be gone by the end of this year without more stimulus from Washington. Overall, that number is 30 percent.

But the problem with using PPP is that the program relies on banks as intermediaries to distribute capital. And Black-owned businesses often don’t have relationships with banks participating in the program.

“There are things implicit in PPP that are detrimental to Black businesses,” said Darrick Hamilton, founding director of the Institute for the Study of Race, Stratification, and Political Economy at The New School. “Using banks as an intermediary won’t help if you don’t have a strong relationship with a commercial bank. It’s a justice issue. Black people should have the same access to capital as white people.”

Hamilton suggested the administration focus on direct grants to heavily impacted minority-owned businesses, either through new legislation or through the Small Business Administration.

Breaking up big companies is another area progressive economists want the Biden administration to pursue. Outside of going after big tech giants the president didn’t like, the Trump administration did not prioritize legally targeting some of the nation’s largest and most dominant companies such as Amazon and Facebook. But those who study the racial wealth gap suggest that the concentration of growth in a smaller number of very large companies is a critical factor in driving inequality.

“For small businesses to thrive you need to have a robust antitrust agenda,” said Heather Boushey, president and CEO of the Washington Center for Equitable Growth. “It’s a super important and under-recognized factor. There is lots of empirical evidence that these things are connected.”

The Biden administration can also take steps to address the wealth gap even if Congress doesn’t cooperate. One way to tackle it is through federal contracting. Federal officials could reverse a Trump administration policy of not sharing which firms get federal funds and reinstate an Obama administration policy of paying suppliers upfront for contracts.

John Rogers, co-CEO of Ariel Investments, said there should be more transparency around how federal funds are spent. The federal government should track contracts by race and category to ensure that Black-owned businesses are getting deals for professional services — and not just contracts forjanitorial or other low-margin industries. What’s more, Rogers said, the administration should use their bully pulpit to ensure private companies are doing the same.

When the state of Illinois mandated diversity in company boards, more Black executives benefited from new opportunities, Rogers said.

“A lot of companies had a Jackie Robinson moment,” he said. But even forcing companies to be transparent about who gets contracts and sits on boards can create more diversity.

“Then pressure builds to move into the 21st century,” Rogers said. “And do the right thing.”

This blog originally appeared at Politico on November 18, 2020. Reprinted with permission.

About the Author: Renuka Rayasam covers Texas politics, policy and health care for POLITICO. Rayasam grew up outside of Atlanta, Ga. She studied political economy and German at the University of California, Berkeley and has a Master of International Affairs from Columbia University.


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Katie Porter called for an investigation into PPP layoffs. Under Biden, that could actually happen

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Back in October, a group of Democratic House members wrote to the Small Business Administration asking for an investigation how an owner of dozens of hotels had spent Paycheck Protection Program funding while laying off many of the workers whose paychecks the program was supposed to protect. Now, the signs are good that President-elect Joe Biden is going to take exactly that kind of oversight seriously.  (Disclosure:Kos Media received a Paycheck Protection Program loan.)

recent report from Bloomberg Law notes that, back in April, as the Trump Consumer Financial Protection Bureau was saying it would do basically nothing to enforce the provisions of the CARES Act, former CFPB head Richard Cordray called for tougher enforcement—and Cordray is reportedly under consideration to lead the CFPB again. Cordray’s former deputy director, who should have succeeded him as acting director, is heading up the Biden transition efforts on the CFPB.

That all means that hotel owners—and others—who took money intended to protect jobs only to lay off tons of workers, could face more consequences than they had anticipated.

“Congress passed the Paycheck Protection Program to help small businesses keep workers on payroll,” Rep. Katie Porter said in a statement at the time she joined with UNITE HERE Local 11, the hotel workers’ union, to call for an investigation into the hotel layoffs in her area. “Columbia Sussex received millions of taxpayer dollars, yet they continued to lay off workers in the middle of the COVID-19 crisis. We need a full audit to see whether this taxpayer-funded program is actually helping the American people—not big corporations.”

In the letter to the SBA, Porter and her colleagues noted that ”Columbia Sussex affiliates borrowed enough money under the PPP to retain more than half its total workforce, but there are reports of Columbia Sussex hotels in California and Alaska operating at 10 percent of normal staffing.” What’s more, “we are concerned that Columbia Sussex may have double counted’ employees as working at multiple affiliates tied to the same hotels, potentially inflating the total value of PPP loans.”

This wouldn’t be the first case of shady dealings around PPP loans, whether it’s predatory lenders getting the funds while some of the businesses that needed help the most getting left out, or applicants lying about why they needed the money and how they qualified for loans. The Biden administration can’t go back in time and make things better last summer, but it should make it a priority to ensure that the PPP gets tough oversight and enforcement.

This blog was originally published at DailyKos on November 18, 2020. Reprinted with permission.

About the Author: Laura Clawson is labor editor at Daily Kos.


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Businesses brace for mandatory workplace safety rules under Biden

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President-elect Joe Biden has vowed to issue mandatory workplace safety rules that employers must follow to protect workers from coronavirus exposure. It’s likely to be one of his first big fights with American business and a test of how far he can go to create a national strategy to slow a pandemic that is still raging out of control.

Employers, which until now have been treated to a flurry of optional guidelines by the Trump administration that have been revised and rewritten throughout the coronavirus crisis, are bracing for the new Biden rules.

Biden and his allies believe that a national set of rules for employers could help workers return more quickly to offices and other workplaces since everyone would be following the same emergency standard, rather than a patchwork of state-by-state, county-by-county regulations.

“We cannot successfully restart our economy until workers are safe — and the first step is to require that businesses implement very basic measures to prevent the virus from spreading in the workplace,” said Debbie Berkowitz, a senior policy adviser for the Occupational Safety and Health Administration under President Barack Obama who’s now with the National Employment Law Project. “To stem the growing number of cases, hospitalizations and death from COVID 19, it is critical that OSHA, or the Biden administration, promulgate an emergency temporary standard immediately to mitigate the spread of this disease at work and then back out into the community.”

But Republicans and the business community are likely to come out strong against any such broad mandates.

“If done the wrong way, if it’s implemented as a strict regulatory requirement with little flexibility, I think it will be difficult for many businesses to implement,” Neil Bradley, the U.S. Chamber of Commerce’s chief policy officer, said during a press call this week. Ultimately, he said, it “will hold back both fighting the coronavirus and restoring the economy.”

The issue threatens to set up a contentious battle in the lame duck session of Congress, when lawmakers debate a new coronavirus relief package.

Senate Majority Leader Mitch McConnell and other Republicans are demanding a robust liability shield for businesses and schools as a condition for a new aid package — a provision that former OSHA officials say would strip Biden of the ability to enforce Covid-19 workplace protections.

As part of his plan to combat the coronavirus, Biden says he will direct his administration to issue the so-called emergency temporary standard, which would lay out specific precautions that employers must take to protect their workers from exposure to the virus.

The standard isn’t likely to fully take shape until the new administration assumes control of the government, but a former OSHA official predicted it would at least mandate the Centers for Disease Control’s guidelines, which broadly suggest allowing for social distancing, frequently disinfecting the workplace and providing protective equipment like gloves, goggles or face masks.

Implementing such a rule is something the new president could do quickly, even without Senate-confirmed leadership at the Labor Department or OSHA, according to two former senior OSHA officials.

Unions and labor advocates have slammed OSHA over its response to the pandemic. While the worker safety watchdog has cited companies for coronavirus-related risks over the past several months, large corporations have received meager fines in cases where their workers fell ill or have even died from the coronavirus. OSHA has also used its special enforcement powers far more leniently than previous administrations.

Unions say that much of the problem lies with the flexibility the watchdog has given to employers and the influence businesses have had over its enforcement efforts.

But flexibility is what businesses want to maintain.

The Chamber’s Bradley said that while he’s confident the Biden administration will listen to businesses’ position, any emergency standard would need to “be flexible enough to recognize” employers’ ability to implement public health safety measures and to “accommodate the differences in how businesses operate.”

“There is a big concern,” said Robyn Boerstling, who oversees human resources policy issues at the National Association of Manufacturers. “Every manufacturing facility is generally different. They make different things, they have different procedures, they have different assembly lines, production processes. So, manufacturers need flexibility in different ways to implement their controls.”

Boerstling says Biden’s plan will leave businesses with little room to weigh in on how the rules affect their specific industry once the emergency standard is in place.

When OSHA determines workers are in “grave danger,” the agency is able to issue emergency temporary standards that take effect immediately. The emergency standard stays in place until a permanent final rule is issued, but the agency will accept public comments on the standard during that period.

“An ETS is very immediate,” Boerstling said. “It’s permanent until it’s not permanent.”

The American Hospital Association, which represents more than 5,000 hospitals and health care providers that would be heavily regulated under any such infectious disease rule, suggested that an emergency infectious disease standard could hinder the health response to the virus.

The organization issued a fact sheet warning its members that an emergency standard would create “a new layer of conflicting and unnecessary regulatory burden at precisely the wrong time,” putting a strain on supplies of protective equipment and limiting hospital capacity.

“Unions have reported filing numerous OSHA complaints against hospitals; such actions could force hospitals to dramatically reduce their inpatient capacity rather than potentially expose themselves to very large fines,” the fact sheet said.

The maximum fine OSHA can issue against an employer is $134,937 per violation, when an employer’s breach of safety rules is considered “willful” or is a repeated violation. For other violations, including “serious” and “other than serious” offenses, the safety agency’s fines max out at $13,494 per infraction.

Such concerns were what prompted McConnell to push for Covid-19 liability protections — including shielding employers from being fined under federal safety laws — warning that “one-size-fits-all” rules would prompt “an epidemic of lawsuits” against employers who can’t comply.

But with both of Georgia’s U.S. Senate seats facing runoff elections that will determine which party controls the upper chamber, the GOP’s negotiating posture over another aid bill is weaker than when McConnell first made those calls.

While there’s little chance Democrats would be willing to limit their incoming president’s ability to police workplace safety in exchange for an aid bill in the lame duck, McConnell seems in no mood to drop his demand for liability protections.

“It should be highly targeted, very similar to what I put on the floor in October and September,” he said of the next aid bill during a press conference on Capitol Hill Tuesday.

This blog originally appeared at Politico on November 13, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.


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