To Her Credit offers targeted advice about personal finance based on unique challenges faced by women. It is authored by women with different financial backgrounds, dedicated to encouraging empowerment through financial literacy.
“We hold these truths to be self-evident, that all men are created equal,” states the declaration of independence. And that’s where the disparities start.
Of course, that was back in 1776 and we’ve come a long way since then. Today’s declaration would be a more gender-neutral “all people are created equal.”
Even with all the advances, however, the “Me Too” movement of recent years highlights the fact that women are still vulnerable to sexual harassment – and it’s partially a result of economic inequality.
Plus, racial tensions boiled over last year as incidences of police brutality brought issues of racism to the forefront. And, unfortunately, women of color are caught at the intersection of sexual and racial inequities.
A history of hierarchy
There exists a caste system in the United States that places white cis men at the top of the hierarchy, with women of color at the bottom. This is an implicit caste hierarchy, unlike the more explicit caste hierarchy that exists in India, but it has the same effect of awarding privilege and more opportunity to those higher up the hierarchy, while circumscribing opportunity for those lower down.
In India, the caste system developed thousands of years ago and is based on the division of labor. It placed people into four broad categories:
- Brahmins were the priests and teachers.
- Kshatriyas were deemed warriors.
- Vaishyas were counted as traders and landowners.
- Shudras were relegated to labor status.
These four broad categories were further divided into multiple castes, or jatis, at a more granular level that circumscribed their lives and work.
And beyond this caste boundary, at the bottom of the totem pole, were the so-called untouchables or pariahs whose lot was to engage in tasks deemed to be menial, such as cleaning toilets and tanning animal skin.
Although it is illegal to discriminate on the basis of caste in India, much as it is illegal to engage in race or sex-based discrimination in the United States, it still remains a social force. And while, today, every Indian has the opportunity to pursue any profession they choose, the caste divisions still cast a long shadow.
Mahatma Gandhi famously referred to untouchables as “harijans,” or the children of god (though the term Dalit, coined by the Dalit national leader Ambedkar, is preferred today). Gandhi’s non-violence movement that influenced the Indian struggle for independence from the British had ripple effects, even leaving a mark on Martin Luther King Jr., who mentioned it as an influence.
Visiting the country in 1959, King was introduced to a group of high school students from the bottom rungs of the Indian caste system as a “fellow untouchable from the United States of America.” While that initially upset King, he later realized that the lives of black people in America were as circumscribed by their race as the lives of the untouchables in India were.
Black people in America were poor, confined to ghettos and marginalized, he reflected. This led him to see the analogy comparing him to the Indian untouchables as appropriate, considering that “the Land of the Free had imposed a caste system not unlike the caste system of India and that he had lived under that system all his life.”
My encounter with the New York City police
As an Indian-American woman of color, I, too, have been impacted by this hierarchy. In one memorable incident, I had a run-in with the New York City police in the summer of 2006 on the subway. It happened as I was returning to my Brooklyn home around 8 p.m. on a Sunday night, after an evening out in the city.
When a policewoman beckoned to me to get off the train as I rested, I wanted to know why. She continued to beckon without answering me and, eager to get home and not seeing any reason for her order, I waited for a response. Then a colleague of hers came up to me and threatened to mace me unless I obeyed the order. At this point, I realized it would be better to comply with them rather than insist on an explanation that didn’t seem forthcoming.
I was then arrested and booked for “disorderly conduct.” It turned out that they had eyed me for the marginal issue of occupying two seats on the practically empty subway (since I had my feet up on the seat in front of me).
Instead of simply getting a summons to pay a $50 fine, which is the typical punishment for this “offense” (which NYC had declared to be a violation in 2005, as I later found out), I had to spend the night in prison “for being comfortable on the subway,” as one of my cell-mates joked. In the morning, I appeared before a judge who said he would dismiss the case if I didn’t run into any other issues in the next six months.
It seemed the NYC police had taken to petty arrests in order to boost their numbers, and I must have looked like an easy target. The focus on petty, even marginal, issues began after Mayor Rudy Guiliani got elected in 1993 with his promises to reduce crime in New York City.
In what is known as a “broken windows” approach, Giuliani started focusing on misdemeanors. (A cop at the station I was booked into wondered if my offense was “jumping the turnstile,” or not buying a ticket, another subway-related petty crime that attracted increased police attention.)
The idea was that policing very minor offenses kept people on their toes so that the crime situation didn’t escalate. This approach has been discredited in recent years since no clear link has been proven between it and a decline in crime.
According to the New York Times, police officers handed out more than 6,000 tickets for the subway seat violation issue in 2011, while about 1,600 people were arrested for the same offense. Some passengers were arrested on account of outstanding warrants, or for not having photo identification (I did not fall into either of these categories). “Some arrests were harder to explain, with no apparent cause other than the seat violation,” according to the Times.
Considering that the police need to give a reason when arresting someone without a warrant, unless they are caught in the act of committing a crime, it appears my “crime” was that I did not know I was committing an offense and questioned the police. The policewoman who arrested me also falsely wrote in her report that I had bitten her, as if to justify her action.
With this experience in mind, the recent outcries over police misconduct and power abuse with people of color certainly resonate with me. Multiple studies show that people of color are disproportionately arrested for misdemeanors in comparison to white people. Indeed, there needs to be more police accountability and training so that they don’t unnecessarily flex their muscles.
Economic policy can help lessen disparity
The disparities that women of color operate under not only show up in social issues, but in their wages as well. According to the National Partnership for Women and Families, a nonprofit group that advocates for women’s equality, “Women of color in the United States experience the nation’s persistent and pervasive gender wage gap most severely.”
This organization points out that the median annual pay for a non-Hispanic white man who held a full-time job in 2019 was $65,208, based on 2019 wage statistics from the U.S. Census Bureau. However, for the same work schedule, it was found:
- Asian women* earned $56,807
- White women earned $51,324
- Native-American women earned $36,577
- Black women earned $41,098
- Latinas/Hispanic women earned $36,110
See related: Dissecting the gender pay gap
It is with an eye on such disparities that the Federal Reserve has recently become more conscious of labor market outcomes. When the economy is growing and adding jobs, it seems more disadvantaged people, including women of color, have a better shot at landing suitable jobs.
During the recovery following the financial crisis, the Fed started taking action to cool down the economy earlier in the expansion, concerned that inflation would take hold. Even then, more disadvantaged people, who it was not clear would ever re-enter the labor force, found jobs even very late in the expansion, without setting off inflation.
In February 2020, just before the pandemic-influenced recession started, the unemployment rate reached 3.5%, which is the lowest level in fifty years, the Fed reports. The unemployment rate for African-Americans also hit historic lows.
As of June 2021, the unemployment rates were:
- African-Americans or Black people: 9.2%
- Hispanic people: 7.4%
- Asian people: 5.8%
- White people: 5.2%
It seems women of color might be experiencing higher unemployment rates than that indicated for women overall (white women’s outcomes also make up that 5.5% rate), having been disproportionately impacted by job losses during the pandemic.
A rising tide lifts all boats, and that’s why the Fed is now looking to foster what it calls “maximum employment,” which also makes for economic efficiency (with all workers able to find a job that makes the most of their skills), so that everyone has equitable labor market outcomes.
As women of color, we should focus on good financial management so that we can better deal with such disadvantages, which include the disparities in the employment market that the Fed is trying to slowly level.
What to do next
This sort of nuanced macroeconomic policymaking is certainly a positive for women of color, chipping away at inequality little by little as it does. At the end of the day, though, we have to make sure we’re making good financial decisions that will empower us to better deal with the disparities that women of color encounter.
With this in mind, here are some pointers on how to approach this.
Live beneath your means
While labor market disparities can certainly influence how much you make, you have more control over how much you spend. Rent, for instance, is a major expense that offers scope for savings.
In New York City, a notably expensive real estate market, I started out by renting in “outer borough” Queens and Brooklyn neighborhoods that were comfortable and convenient for my daily commute into Manhattan (their more laidback environs also offer a respite from the hustle and bustle of Manhattan, as many people realized during the pandemic), rather than focusing on cachet. That way, when I was ready to buy, I could afford a nice condo in so-called Brownstone Brooklyn.
Invest your money
Homeownership is certainly a good way to help build up equity. Another way to build up wealth is to invest your money. It seems women are much more conservative investors than men, but that doesn’t mean you should avoid investing.
For those not savvy enough about individual investments, the best course would be to invest in index funds. These funds don’t attempt to pick individual stocks or bonds, but instead mimic the performance of the overall market.
An index fund based on the S&P 500, for instance, would include all the stocks in that index. When the reference index moves up, the index fund would go up too, and vice-versa. Of course, there will be day-to-day changes in market value, but in the long-run, the market always tends to go up, so you should stay the course.
A well-rounded portfolio should also include bonds and, venturing beyond that, other investments such as utilities and real estate (there are index funds for all these different asset types too). This helps make your portfolio less susceptible to volatility in any one asset class.
Credit cards can help
Credit cards can also help you better manage your finances. When you use a credit card, you get a free line of credit as long as you pay off your balances every month. It’s a good idea to tap into your credit card, and potentially enjoy the benefits of rewards, as long as you use it wisely and don’t charge money that you can’t pay off.
At the end of the day, financial decisions are not just about money. They are about what makes you comfortable. Don’t buy something based just on dollars and cents. It’s about the value you get from it too.
Today, women of color have certainly gained more agency than used to be the case. Women such as Kamala Harris, the first woman U.S. vice-president, and Supreme Court Justice Sonia Sotomayor come to mind. It seems we are inching closer to Martin Luther King Jr.’s dream of living in a country in which people will be judged more by the content of their character, rather than by the color of their skin (or their gender).
In the meantime, you should do whatever you can to empower yourself financially considering the disadvantages women of color face in our society.
*Equal pay figures for this community vary widely by ethnicity.