Economists at Minneapolis Fed meeting explore persistent racial gaps in hiring, wealth
Economists Darrick Hamilton of the New School and William Darity Jr. of Duke University discussed their research into the wealth gap between white and black Americans, which they said is rooted in slavery and unkept economic promises after the Civil War.
In 2010, they proposed an asset creation tool nicknamed “Baby Bonds” to reduce inequality.
A newborn baby would be given a trust fund inverse to the net worth of his or her family: $500 for the child of affluent parents and $50,000 for the child of poor parents. The child would not be able to access the fund until age 21 and could only use it for a prescribed asset-enhancing activity, such as funding a debt-free education or buying a house.
Initially, the program would disproportionately aid black Americans because they are disproportionately concentrated at the lower end of wealth distribution. “It would not propel us toward a race-blind or colorblind society,” Darity said of the Baby Bonds idea. “But it would propel us to a race-fair, or color-fair, society.”
While they would provide a financial start for young adults, the bonds would not be enough to dissuade someone from working, and they would help shrink the gap between the races, he said.
“Since wealth provides insurance against declines in income, particularly unexpected declines, the labor market is not the site that we should emphasize to understand economic inequality,” Darity said. “The site that we should emphasize is the processes of stratification that led to sharp wealth differentials.”
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