Can Baby Bonds Help Shrink the Wealth Gap?
"The Fed’s work on the issue began several years ago with its support of the National Asset Scorecard for Communities of Color, a landmark survey co-written by Hamilton and Duke economist William Darity Jr. and funded in part by the Ford Foundation. The study measured wealth across racial and ethnic groups in five metropolitan areas: Los Angeles, Miami, Tulsa, Washington, D.C., and Boston. From the NASCC results, the Boston Fed published its 2015 report, the Color of Wealth in Boston.
According to a working group convened by the Boston Fed, understanding the ways in which communities of color have been systematically excluded from wealth-building programs is the first step in reversing that trend.
With that in mind, in late May, the group of 30 public, nonprofit, and private-sector stakeholders published its analysis of the research and recommendations for closing the wealth gap in Boston. The group included priority areas we’d expect to see in a paper addressing the wealth gap, like expanding access to quality education and homeownership opportunities, and ensuring that workers earn a living wage.
But the NASCC data show that for most people of color, more education and higher incomes do not correlate with increased net worth. While improving education and wages is certainly part of building assets among communities of color, the solution will be much larger in scope and must look farther down the line. Many people of color simply have not been able to accumulate enough liquid assets to safeguard against a catastrophic event like a job loss or illness—let alone pass anything along to the next generation. In fact, in the five cities studied, Hamilton, Darity, and their colleagues found that where whites typically have thousands of dollars socked away in case of a financial crisis, black residents only have an average of $200 in liquid assets."
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