Financial empowerment indicators
The eight indicators in this topic quantify racial disparities in financial empowerment, and suggest ways we can make progress toward equitable outcomes. The indicator reports that follow will allow the City of St. Louis and all stakeholders to evaluate policies from a fact-based, verifiable perspective. We’ll be able to learn from the data, see what’s working and what’s falling short, and use these insights to double down on good investments and experiment with new policies.
The Financial Empowerment topic compares opportunities to build wealth and the cost of living in St. Louis.
Today, racial disparities in wealth persist throughout all life stages in St. Louis. Racial disparities in poverty rates start in childhood (see Child Poverty in the Child Well-being Topic), continue into adulthood, and extend into old age.
Black residents are more likely to struggle to afford basic living expenses. It is common for black households to pay more than 50% of their income on rent, which is a function of both low incomes and a lack of affordable housing. When basic living expenses consume so much of what people earn, it makes it difficult to save, invest, or time purchases to take advantage of lower prices.
Lastly, black residents do not have equal access to wealth-building opportunities. Black households earn significantly less income than white households, and black residents have much higher rates of unemployment than white residents. Black talent is underrepresented in high-growth, high-wage sectors like management and STEM. Traditional tools that aid in wealth-building, such as access to credit, are not equally available to black residents. These disadvantages contribute to lower homeownership and business ownership rates among black residents.
For the Equity Indicators Project, the measures chosen focus on racial disparities. For this topic, the indicators are reflective of the Ferguson Commission’s calls to action around financial empowerment, but not all related calls to action are addressed within the scope of this project.
What is our equity score for this topic?
The higher the score on a scale from 1 to 100, the closer we are towards achieving equity.
Which Calls to Action from the Ferguson Commission report are reflected in this topic?
The Ferguson Commission priorities to address economic inequality include financial empowerment. Specific calls to action addressed in this report include:
- Building Equity Through Enhanced Access to Banking by strengthening the Community Reinvestment Act, concentrating financial services through empowerment sites, and embedding public banking models into Community Development Financial Institutions.
- Ending Poverty by raising the minimum wage, ending predatory lending, and implementing earned income and child tax credits.
- Ensure Robust Minority Participation in the Job Market by implementing a statewide M/WBE program and developing/implementing an economic inclusion infrastructure.
- Optimizing the Existing Housing Supports by building more affordable housing, stabilizing middle market neighborhoods, enacting inclusionary zoning, and instituting fair housing protections.
- Prioritizing Youth Focused Job Creation and Training through tax incentives, performance-based funding, and building a poverty-to-professional model for youth serving organizations.
- Promoting Asset Building through the creation of development accounts, encouraging savings with tax-refund matching, and teaching financial literacy to Section 8 housing beneficiaries.
- Realigning Incentives and Funding to Improve Job Training and Creation by implementing state hiring programs, launching best practice-driven job training programs, expanding funding for job training and wage support programs, and modifying procurement systems to encourage hiring of targeted employees.
- Create the Spirit of Missouri Fund to invest in a range of innovations that have a strong potential to impact at a large scale our state’s most vexing challenges
What institutions and organizations were assessed?
Banks and financial institutions were assessed for home loan denials.
Where did the data come from?
The data used in this topic comes from the American Community Survey and the Home Mortgage Disclosure Act (HMDA).
What stakeholders were consulted?
Stakeholders consulted include the Treasurer’s Office, Equal Housing Opportunity Council, Prosperity Connection, and the Unbanked Task Force.
What metrics do we know are missing?
Metrics that are missing from this report but are important to measuring racial disparities in Financial Empowerment include financial stability, rate of unbanked and underbanked, reliance on predatory lending providers, home foreclosure rates, and credit scores. Financial stability is defined by the consistency and reliability of income that empowers people to practice financial planning. While there has been progress on quantifying this measure by regional experts, no standard has been adopted. The Federal Deposit Insurance Corporation (FDIC) conducts biannual surveys of unbanked and underbanked households, however they do not collect enough observations to share data disaggregated by race for our region.
Estimating foreclosures is possible, however, this measure was not included primarily because it was not within the budget for this project to acquire the data. Nationally, we know the foreclosure crisis disproportionately impacted minority homeowners, and that foreclosed homes are less likely to be maintained by the lender in black neighborhoods. In a 2017 report, Zillow researchers studied negative equity rates, studied negative equity rates, or the share of homeowners with a mortgage balance greater than their home’s worth — also known as being “underwater” on a mortgage — and found that, “in St. Louis, majority white communities had a negative equity rate of 10.8 percent; in St. Louis’ black neighborhoods, it was 28.2 percent.”
Regarding credit scores, the City is pursuing data partnerships with credit bureaus; however, none had been finalized by the time of publication. In future years, we hope anonymized data will be made available to researchers and service providers to better understand and respond to the financial needs of consumers.
Financial Empowerment Equity Indicators
Black residents are nearly five times as likely as white residents to experience unemployment.
|FE2: Median Household Income
White households’ median income is nearly twice that of black households.
|FE3: Adult Poverty
Black adults are more than twice as likely as white adults to live in poverty.
|FE4: High-Wage Occupations
White workers are nearly three times as likely as black workers to be employed in high-wage occupations.
|FE5: Severe Rent Burden
Black renters are more than twice as likely as white renters to spend more than 50% of their household income on rent.
White residents are nearly twice as likely as black residents to be homeowners.
|FE7: Home Loan Denial Rate
Black loan applicants are nearly four times as likely as white applicants to be denied a home loan.
|FE8: Business Ownership
White employed residents are 36% more likely than black employed residents to own their own business.
|2018 Equity Score