July 6, 2020

UNIVERSAL ACCOUNTS:

How to build Black wealth (William G. Gale, July 6, 2020, Brookings)

Without cultural change, it is hard to see how public policies alone will be able to close the entire Black-white wealth gap. Nevertheless, reforms could reduce the net worth differential significantly. Policy reform should aim to both redress injustices committed in the past and to provide equal opportunity for all today.

First, we need to consider the ways to address a national history (and disgrace) of structural racism that has denied Black households access to resources. Reparations to Black Americans have been proposed since the Reconstruction Era--and very recently by William "Sandy" Darity and Kirsten Mullen. Reparations are not novel; notably, Japanese Americans who were forced into internment camps during World War II received compensation in response to a clear societal wrong. Reparations can help Black households build wealth through direct payments and access to mechanisms of wealth accumulation. Since even achieving equality of opportunity going forward will not address the intergenerational disadvantages that Black households already face, reparations are a source of racial justice and an equitable policy.

Policies that reduce the cost of college attendance and student loans could also increase opportunities for wealth accumulation for Black households. Likewise, policy makers should correct existing homeownership policies that have disproportionately benefited white households and have implicitly and explicitly restricted Black homeownership and create new policies to support Black homebuyers. Creating automatic IRAs and making the Saver's Credit refundable would provide workers without employer-sponsored retirement benefits (who are disproportionately Black) access to tax-advantaged retirement savings and offset the cost of saving for low-income workers, reducing the wealth gap between elderly white and Black Americans.

All these policies, however, would affect people after they enter adulthood. By that point many of the inequalities related to human capital and financial wealth have already taken effect. To affect wealth accumulation more durably, earlier life interventions are needed. These include a strong social safety net, including the availability of high-quality, affordable child care, employment and training programs, and baby bonds.

Posted by at July 6, 2020 12:42 PM

  

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