Do Your Benefits Promote Social Justice?

More and more employers are considering race, ethnicity and gender when analyzing financial health. Explore how financial wellness might help close wealth equity gaps.

We are in the midst of what might be considered a significant social justice movement centered around race since the civil rights era.

One difference between then and now, however, is the number of employers coming to realize that diversity, equity and inclusion (DEI) challenges may be addressed, at least in part, through financial wellness programs.¹ To understand why, it may help to consider some historical disparities that persist to this day—and some strategies organizations are considering in response.

Addressing the Wealth Gap

Data from the 2022 Survey of Consumer Finances (SCF)² reveals long-standing and substantial wealth disparities between families in different racial and ethnic groups. The typical White family has about six times the wealth of the typical Black family and five times the wealth of the typical Hispanic/Latino family. Although these wealth ratios have narrowed since 2019, income disparities have widened. Meanwhile, median net worth gaps remain significant. While the median net worth of White families was $285,000 in 2022, Black and Hispanic/Latino families held just $44,900 and $61,600, respectively.

To address the wealth gap, employers are increasingly offering holistic financial wellness programs designed to enhance employee education around a wide variety of topics, such as debt management, budgeting, saving, retirement planning and more.³ For more personalized guidance, employers may consider providing access to a financial planner or Financial Advisor who can meet with employees individually to discuss their unique financial needs.

To take it a step further, consider offering equity compensation benefits, such as employee stock purchase plans, incentive stock options and performance shares. More companies are trending toward offering this option to all employees rather than just to management and executive teams.⁴ This approach may be particularly helpful given that the percentage of White employees who own stock is roughly 66%, compared to 35% for Black employees and 28% for Hispanic and Latino employees.⁵

Addressing the Benefits Gap

Access to physical and mental health care coverage is less common among Black, Hispanic and Latino workers. This may be partially due to an over-representation of people of color within industries that traditionally offer lower pay and fewer benefits, such as working in the service industry or holding gig and part-time jobs.⁶

No matter the reason, employers have a critical role to play in helping to reduce health care disparities in the workplace, especially because roughly 55% of the U.S. population receives health insurance coverage and health benefits through their employer.⁷

Employers interested in retaining key talent and enhancing worker productivity also stand to benefit. Here’s why: 30% of Black, Hispanic, Latino, LGBTQ+ and younger employees have considered switching employers because of their health benefits.⁷ At the same time, enhanced health coverage for Black, Hispanic, Latino and Asian workers may help to cut absenteeism by up to 10%—potentially saving the U.S. economy as much as $20 billion.⁷

Here are some ideas to consider: ⁷

• Assess whether your health benefits may contribute to unintentional disparities, such as those potentially introduced by co-payments for emergency room visits, which may disproportionately affect marginalized workers who lack access to primary care.
• Evaluate the impact of high deductible health plans.
• Consider covering the costs of preventative medications and/or out-of-pocket expenses that may be too costly for low-income families.
• Enhance health benefits education by using inclusive language, developing a robust education curriculum and providing employees with a simple way to navigate the benefits available to them.
• Request reporting from health care carriers about disparities in care and consider community partnerships to enhance access to primary and virtual care.

Addressing the Retirement Savings Gap

Retirement accounts are an important wealth building channel that many families of color are less likely to have access to. According to the American Association of Retired Persons (AARP), roughly 58% of white families have access to an employer-sponsored retirement plan, compared to only 36% of Black families and 47% of Hispanic and Latino families.⁸

However, access is only one part of the story; participation or take-up rates also vary across racial lines. While retirement account participation rates are nearly 62% for white workers, they fall to 35% and 27% for Black and Hispanic/Latino workers, respectively.⁹

These differences in participation may be caused by a variety of factors, such as 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 overall financial literacy. For instance, when it comes to measures of financial literacy, white people correctly answered 53% of the TIAA Institute-GFLEC Personal Finance Index questions in 2023, while Black people correctly answered only 34% of the questions and Hispanic and Latino people provided correct answers to 38% of the questions.¹⁰

To understand how these factors may be playing out within your workplace, a full picture is needed. This may mean going beyond examining only 401(k) metrics.¹¹ Instead, a robust assessment may aim to measure outcomes by race, ethnicity and gender by:

• Tracking and monitoring 401(k) metrics, such as participation rates, contribution rates or hardship withdrawals, at least annually.
• Examining health-related data, such as insurance claims.
• Including financial health questions in employee surveys related to both challenges employees are facing and what benefits might help.
• Engaging in informal conversations and more formal focus groups centered on financial health.
• Tracking requests for paycheck advances.
• Tracking requests for personal loans (if applicable).

Full-Picture Assessments

While many companies have embraced diversity, equity and inclusion for some time now, only 25% of employers analyze employee financial health based on race and ethnicity.¹² Instead, most employers focus on increased employee productivity and improved worker satisfaction as the way to measure the success of their financial wellness initiatives.¹²

For organizations committed to promoting DEI, it is important to identify any gaps that may exist and include the needs of under-represented populations in the overall conversation about the selection of benefits. Assessing the financial wellness of the workforce and including key demographics such as race, ethnicity and gender may give employers data they can use to implement targeted solutions to help close these gaps.