Black Workers Face Health Care and Retirement Savings Benefits Gaps

Employers can take steps to address race-based inequities

Stephen Miller, CEBS By Stephen Miller, CEBS July 22, 2020
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Black employee and spouse coulple discusses health care and retirement benefits with HR representative.

Black workers in the U.S. have less access to physical and mental health care coverage and lower retirement savings compared to white workers, various studies show. Employers can take actions to help reduce these gaps.

Unequal benefits are, to some extent, related to income disparities between Black and white workers, since the latter are more likely to hold higher-paying, full-time positions that provide generous employee benefits.

Black and Hispanic workers "are overrepresented within service industries, and service industry jobs are likely to have lower pay and fewer benefits," explained Rachael McCann, senior director for health and benefits at HR consultancy Willis Towers Watson.

According to research by the Federal Reserve Bank of San Francisco, Black men in 2016 earned, on average, just 70 percent of the hourly wage that white men did. Black and white women also earned less than their white male peers, the data showed.

Employment itself is another factor. In 2019, the labor force participation rate for Black men was 64.8 percent, 4.4 points lower than the rate of 69.2 percent for men overall, according to U.S. Bureau of Labor Statistics (BLS) data. That translates into less access to employee benefits for Black Americans. For instance, 63 percent of Black workers had access to paid leave in 2018, compared with 66 percent of all wage and salary workers, the BLS reported.

Even among those with full-time positions, income gaps, health disparities and financial security gaps still exist for Black workers compared to white workers, McCann observed.

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Overcoming Workplace Bias

Health Care Gap

Black and Hispanic workers account for "a disproportionate number of infections and deaths from COVID-19 because societal disparities make these groups more likely to have high-risk conditions and less likely to have ready access to high-quality health care," McCann blogged recently with Jeff Levin-Scherz, Willis Towers Watson's managing director for health and benefits in North America.

Black and Hispanic workers "are less likely to have consistent sources of care or a primary care physician, and they receive less preventive care and are less adherent to prescribed medications," McCann and Levin-Scherz noted. "Employers must increase their focus on engagement strategies to address the diverse health needs of their employees."

They recommended that employers take the following actions:

  • Improve access to health care. Increase access to onsite or near-site health care when employees are back in the workplace, and help employees gain access to and navigate health care options, including access to virtual health care and telebehavioral health services.
  • Evaluate affordability of care in available insurance plans. To lower employees' out-of-pocket health care costs, consider tying the amount of the employer's premium contributions to employees' salary bands and adopting plans from a network of high-value, cost-competitive providers. A 2014 study of 5,855 patients, published in the journal Health Affairs, showed that lowering co-payments for medications after a heart attack may reduce racial and ethnic disparities for cardiovascular disease, McCann and Levin-Scherz pointed out.
  • Demand reporting from health care carriers about disparities in care. "Even when carriers do not have racial identification of members, they can provide data based on small geographic areas highly correlated with race and poverty," McCann and Levin-Scherz said. "We will know if we are decreasing disparities of care only if we are measuring them."

Retirement Savings Gap

Non-Social Security retirement savings held by white households in 2016 averaged about 7 times the amount for Black households and about 5 times the amount for Hispanic households, reported Boston College's Center for Retirement Research, using calculations from the University of Michigan's biennial Health and Retirement Study of Americans over age 50, which had more than 12,000 respondents.

Federal Reserve data compiled by the Economic Policy Institute and the Urban Institute, both Washington, D.C.-based social policy think tanks, also show the extent of the retirement savings gap.

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Even when Black and Hispanic employees have access workplace retirement plans, they typically contribute a lower percentage of their pay. Stanford University's Center for Longevity reported in 2018 that the median total contribution to an employer-sponsored defined contribution plan, such as a 401(k), was higher for white employees than for Black and Hispanic employees.


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"Black and Hispanic workers face fundamental challenges that prevent them from accumulating retirement wealth including unequal pay, disparities in financial education, lack of access to retirement savings plans, and low contribution rates when access is provided," according to a July 2020 report on the racial retirement wealth gap by San Francisco-based Human Interest, a 401(k) plan services provider for small and midsize businesses. "As a result, the gap between retirement wealth between Black and Hispanic workers and their white counterparts is staggering."

While unequal pay is a driver in the wealth gap overall—and the retirement wealth gap, specifically—"significant differences in retirement savings still exist when adjusting for income," Human Interest reported. "Disparities in financial education add to this deficit," leading to reduced savings levels that "leave Black and Hispanic households disadvantaged later in life." For example, older Black and Hispanic individuals are more likely to depend on Social Security as their sole source of retirement income. They are also more likely than their white counterparts to cash out their retirement savings.

"Real and lasting change to close this gap requires a combined effort" between retirement plan sponsors and their plan advisors, said Jeff Schneble, CEO at Human Interest.

He recommended that employers:

  • Track and report the number of Black and Hispanic employees that participate in the company's 401(k) plan and take steps to encourage participation.
  • Auto-enroll employees in the company's retirement plan so they are more likely to participate.
  • Provide financial education opportunities to all employees to help them meet today's challenges and plan for tomorrow.

Willis Towers Watson's McCann recommended that employers:

  • Add a nonelective portion to their retirement savings plan to better prepare employees for retirement. Due to societal issues, many Black and Hispanic employees "have greater immediate need for cash and cannot divert funds for retirement," she noted.
  • Periodically review participation in savings plans by race. "If there are discrepancies, employers may want to examine their delivery and education process to determine where there may be biases, or obstacles that prevent diverse employees from participating," she advised.


Closing the Mental Health Care Gap

Rates of mental illness among Black adults in the U.S. are similar to those of the general population but a gap exists with regard to mental health care services, according to the American Psychiatric Association's report Mental Health Facts for African Americans. For instance, compared to non-Hispanic white adults:

  • Black adults with a mental illness use mental health services such as prescription medications and outpatient services at lower rates but hospital inpatient services at higher rates.
  • Black adults often receive poorer quality of care and lack access to culturally competent care.

When compared with white adults, Black adults are more likely to report persistent symptoms of emotional distress, such as sadness, hopelessness and "feeling like everything is an effort," according to the National Alliance on Mental Illness, which cited research findings collected by the U.S. Health and Human Services Office of Minority Health.

Employee assistance programs (EAPs) "can help break down the barriers that are getting in the way of receiving quality mental health care—such as the stigma associated with receiving mental health support," said Cara McNulty, president of behavioral health and EAP services at health benefits provider CVS Health/Aetna.

By providing counseling sessions by phone or making referrals to local mental well-being experts, EAPs "allow individuals to confidentially and discreetly receive the help that they need," McNulty said.

EAPs don't have co-pays associated with receiving support and so remove financial constraints as a barrier to receiving care, she explained. They also can provide counseling to employees' families and other loved ones, addressing the needs of an individual's social support network.

For these programs to be effective, however, "employers need to ensure that they are effectively communicating about their EAPs," McNulty said. "Employers should also ensure that their EAP offers counselors that truly understand the different cultural norms that play into the ways people approach receiving help while addressing issues such as the social determinants of mental and physical health of employees and their families."

EAP counselors also can guide managers in how to be inclusive leaders and thereby "help navigate an employee's individual situation that may differ from their own," she noted.



Related SHRM Articles:

Black Workers Still Earn Less than Their White Counterparts, SHRM Online, June 2020

Tips for Discussing Racial Injustice in the Workplace, SHRM Online, June 2020

Managing Bias for Better Outcomes, People + Strategy journal, Winter 2020

Taking Steps to Eliminate Racism in the Workplace, SHRM Online, October 2018




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