Executive Summary

The Black-White wealth gap refers to the income gap between Black Americans and White Americans as a result of historical and contemporary racist policies and practices. This gap is the result of two major back-to-back United States ears: the antebellum period and the Jim Crow era. Because of the ever-growing public awareness of the ramifications of the slave-trade legacy, the events thereafter and how they interplay with the economic position of Black Americans, many have been calling for reparations to be made, whether in the form of monetary compensation or land ownership. The discourse surrounding reparations and how to bridge the income gap between Black Americans and White Americans has become a controversial, polarizing topic. The brief reviews the extent to which reparations bridge said gap or if alternative solutions are necessary. 

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Overview

The racial wealth gap is a highly nuanced, complex problem that has been documented through extensive research. Although slavery happened over four hundred years ago, Black Americans still suffer from the tangible and intangible effects of it. Compounding this, the era of Jim Crow where Black citizens were denied the right to vote—through the grandfather clause and literacy tests—as well as the “separate but equal” doctrine hindered the social and economic mobility of Black Americans. Research has shown that these events have not only affected the economic class of Black Americans but also the generational emotional baggage that they endure.

Though the federal government has not made reparations towards Black Americans, local governments have been enacting plans to do so. In response to this, citizens and few politicians have been calling for reparations to be made so Black Americans can have access to what was stolen from them for centuries. However, there has been major push backs from these plans, as many are concerned about the moral obligation of white citizens as well as the economic practicality of these reparations. Rather than reparations, many nonpartisan supporters believe it would be best to invest in better access to higher-quality education, as education is an integral part of determining one’s socioeconomic status. In response, the federal government has enacted plans so Black Americans—and lower-income citizens in general—can have increased access to affordable childhood and higher education.

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Pointed Summary

• The Black-White wealth gap—also referred to as the racial wealth gap—refers to the racial differences in yearly income between Black and white Americans.

• The Black-White wealth gap has been the effect of two major back-to-back eras of the United States’ history: the antebellum and the era of Jim Crow.
• In order to bridge this gap, citizens and some politicians have been calling for reparations to be made to Black Americans, whether in the form of monetary compensation or land ownership.
• Because of the United States’ ever-growing awareness of racial disparities, the discourse surrounding the wealth gap and how to fix it, in regards to reparations, has been a polarized, controversial topic.
• Reparations have limitations, so in order to bridge this gap, it would be in the best interest to invest in educational programs that allow access to socioeconomic mobility for Black Americans.

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Relevance

At present, it is clear that the discussion of the racial wealth gap and reparations has become very prominent in American politics. With cities such as San Francisco and Chicago announcing to allocate funds towards reparations, the discourse around the practicality and morality of reparations has become more polarized than before.

The racial wealth gap has become a very staggering figure throughout the United States. The median net worth of a white household in 2019 was $188,200 versus the median net worth of a Black household being $24,100. There have been prominent events to blame for the racial wealth gap, however, there have been two major back-to-back eras that have exacerbated such inequality. Such includes the antebellum period and the era of Jim Crow. The antebellum period began at the beginning of the 1800s and ran through until the start of the American Civil War in 1861. Though slavery did not begin in the 1800s, it became a prominent practice among Southern states by 1830. Therefore, the antebellum South was characterized by the mass use of slavery and the culture that was fostered because of it. Throughout the South, slavery was governed by a body of laws: the Slave Codes. Though every state had its own slave code and court decision process, all slave codes made slavery a permanent decision, through which enslavement was inherited and defined slaves as property. Enslaved people, therefore, were prohibited from becoming property owners, marrying, reading, writing, and even practicing their own faith. Additionally, these codes had sections that required free Black residents to register their freedom by paying a fee and securing the testimony of a white person to vouch for their credibility. In 1850, Congress passed the Fugitive Slave Act, which required all slaves to return back to their owners despite their state residency and mandated the federal government to find, return, and try escaped slaves. The abolition of slavery occurred after the ratification of the Thirteenth Amendment in 1865. The income ratio of whites to Black during this time was 60 to one. Despite the ratification of this amendment, governments still found ways to exacerbate the racial inequality.

When federal troops were removed from the South at the end of the Reconstruction and the state legislatures of the former Confederacy were no longer being controlled by carpetbaggers and freed Black men, states began passing Jim Crow laws that reestablished white supremacy and codified the segregation of whites and Blacks. Examples of these practices were the grandfather clause, literacy tests, and the Plessy v. Ferguson court decision, all of which hindered the social and economic mobility of Black families. It was only until 1964 when Congress prohibited discrimination on the basis of race and color with the Civil Rights Act. The income ratio by this time was seven to one. 

Despite its 400-year occurrence, slavery and the events thereafter have been a catalyst in producing the wealth gap among Black Americans and white Americans. Today, there are debates about reparations—an act or process of making amends for slavery—among citizens and politicians, which concern the practicality of them as well as the morality. 

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Current Stances

In modern times, it has become evident that the idea of reparations has become a very controversial, polarized subject for many Americans. This, in turn, has made solutions to the Black-White wealth gap increasingly difficult.

In order to have a holistic view of the political landscape that surrounds reparations, the misconceptions about the racial wealth gap must be recognized. A collaborative analysis by The Associated Press-NORC Center for Public Affairs Research and the General Social Survey demonstrates that 36 percent of Americans attribute racial inequalities to a lack of will or motivation. Although this statistic decreased from the original survey in 2014, it must be noted that only 23 percent support preferential hiring and promotion, and 57 percent agree that Black Americans should work their way up the social ladder without special favors, such as reparations. These “work-their-way-up” attitudes can be attributed to events—such as the Emancipation Proclamation in 1863, the ruling of Brown v. Board of Education of Topeka in 1954, and the election of Barack Obama in 2008—which have caused Americans to skew towards a more optimistic view regarding racial progress: that society has come a long way and is moving very rapidly towards racial equality. 

This optimistic lens about racial progress has been fueled by misconceptions about racial economic equality. In three studies, participants—both black and white—were asked the following question: “If the typical White family has 100 units of each of the five economic categories, how much would the typical Black family have?” Participants of the studies responded using a zero to 200 scale in which 100 meant racial equality. Their responses were compared to the United States government’s estimates of those inequality disparities. The results of the study, shown in Figure 1, proves that participants’ perceptions of racial progress is substantially overestimated, suggesting that Americans are largely unaware of the striking persistence of the Black-White wealth gap in the United States.

Additionally, a 2021 survey done by the Pew Research Center found that only three-in-ten U.S. adults say that descendants of enslaved people should be repaid in some way, whether that be through land or money. This statistic can be broken down by race—77% of Black adults say that descendants of enslaved people should receive reparations while only 18% of white Americans and political parties. Furthermore, four-in-ten U.S. adults say that the slave-trade legacy and its political aftermath has not affected the societal position of Black Americans.

It is clear that the Black-White wealth gap and its solutions has become a very polarized, controversial topic. This can be attributed to the misconceptions of how much racial progress has actually been made and whether or not slavery and the events thereafter have had any affect on Black citizens today. Through the data provided, it is notable that racial progress today will seldom go past the admission of the legacy of slavery.

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Tried Policy

Historically, there have been few federal reparation plans for Black Americans. An example of such has been the Southern Homestead Act of 1866, which stated that ex-slaves were given six months to purchase land at a reasonable rate without competition from white southerners or northern investors. However, very few ex-slaves were able to take advantage of this opportunity because of the extreme poverty they were left in, the land was not suitable for farming, and many Southern white people prevented Black Americans from obtaining access to the program. The act ultimately failed. 

Contemporarily, the United States House Resolution 194 and Senate Concurrent Resolution 26 made a formal apology to the African American community “...for centuries of brutal dehumanization and injustices…” and how “...African-Americans continue to suffer from the consequences of Slavery and Jim Crow laws… through enormous damage and loss, both tangible and intangible, including the loss of human dignity and liberty.” There was no talk of reparations after this apology. 

Although there have been minimal strides made towards reparations on a federal level, there have been policies put into place that promote economic mobility of Black Americans, in hopes of closing the Black-White wealth gap. Executive Order 11246 — Equal Employment Opportunity is an example of such. This order ensures that an employer will not discriminate against an employee or an employee applicant on the basis of race or color, and that the employer will take affirmative action to ensure that employees are not being treated unfairly in regards to their race or color. Additionally, the Fourteenth Amendment of the Constitutions addresses aspects of citizenship, most importantly the equal protection clause, which states that no state shall make or enforce any laws that infringe upon the rights and liberties of any citizen. This clause has been used in cases such as Fisher v. University of Texas at Austin to approve of race-conscious admissions into college programs, which allows universities to consider a student’s race as a factor in the admissions process to create a diverse student body. This, in turn, has addressed racial discrimination and structural barriers that have denied Black American students access to higher education and economic mobility.

On a federal level, there have not been many successful tried policies that pertain to passing reparations for Black Americans, but there have been some reparations plans made on local levels. A very recent example of such has been San Francisco’s recommendations that have been made by the city-appointed reparations committee. These recommendations include payments of five million dollars to every eligible Black adult, the elimination of personal debt and tax burdens, homes in the city for just one dollar a family, and a guaranteed annual income of at least $97,000 for 250 years. 

Even though these plans are only being announced, there has been major pushbacks from politically liberal San Francisco residents as well as conservative critics. Many are concerned with the cost of such a plan, with Stanford University’s Hoover Institution senior fellow Victor Davis Hason pointing out other factors—such as homelessness and the current tech industry layoffs—that do not make reparations economically feasible. 

Although many of the tried policies towards reparations usually do not come into fruition, the city of Evanston, Illinois was able to pass the first reparations program in 2019 called the Restorative Housing Reparations Program. In order to qualify for the program, Black residents of the city needed to fit one of three categories: they are residents who lived in the city between 1919 and 1969, they are the direct descendants of Black residents from 1919 to 1969, or they must have sufficient evidence to prove they suffered from housing discrimination due to the city’s politics or practices after 1969. Through partnerships with nongovernmental organizations such as the National African American Reparations Commission and First Repair, the city was able to grant 16 out of 122 residents who qualified $25,000. The residents who were not recipients will receive their grants as more marijuana tax revenue accumulates. 

Though it does have its limitations, Evanston, Illinois could potentially become a model for future reparations across the country. 

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Policy Problem

Stakeholders

The aims of both political parties tend to differ on the matter of addressing the Black-White wealth gap. A study conducted by the Pew Research Center shows that only eight percent of Republicans and GOP learners believe that descendants of enslaved people should receive reparations while 48% Democrats and Democratic-leaning independents believe they should. These statistics can be further broken down by race—77% of Black Americans believe reparations should be paid while only 18% of White Americans support reparations for descendants of enslaved people. Despite this, more than half (58%) of the overall public believes that the legacy of slavery has affected Black citizens' position in the American class system. Additionally, 57% of reparation supporters believe that cash payments should be made and a majority of them believe that the U.S. government should pay. However, reparation opponents are worried about the economic practicality of such a plan. 

A non-partisan approach would aim to tackle both parties’ goals and ensure that the racial wealth gap is being bridged in an economically feasible, long-lasting way. Implementing policies that beget Black Americans to have better access to higher-quality childhood and college education and affirming the right of affirmative action takes both sides of the claim. These alternative policies have been proven to increase academic performance for lower-income Black students and ensure greater economic mobility. Due to the emphasis on long-term practice rather than a quick fix, Black citizens will have the ability to receive the education, skills, and tools they need to build generational wealth, thus closing the racial wealth gap. 

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Risks of Indifference

As our country begins to recognize systemic racism, especially among younger generations, the idea of reparations for Black Americans becomes more prevalent than ever. Though the framework for mass reparations is uncertain, they may provide Black Americans more access to economic mobility, and they can be an effective strategy in reducing racial inequalities in longevity. However, it is up to the government to decide on how reparations will be paid and who qualifies for them. Aside from wondering how the government will fund reparations, considering the estimated cost is around 13 trillion dollars, many lawmakers are hesitant about them. Their hesitance is rooted in perception of relative deprivation and zero-sum competition, such that many are prone to status anxiety and downward mobility. According to the study, this is applicable to the majority of white Americans, specifically middle-class white Americans and white women.

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Nonpartisan Reasoning

One of the most distinctive benefits of reparations is that it would allow Black Americans to earn back what they lost out on during slavery, which would allow them to pursue economic mobility, thus increasing the likelihood of social mobility and generational wealth. Although the federal government has not moved past the admission of slavery and the effects of Jim Crow and policies and practices thereafter, they have set aside reparations for other demographics that have had their justice breached by the government. An example of such is H.R. 422 - Civil Liberties Act of 1988. This bill declares that “a grave injustice was done to citizens and permanent residents of Japanese ancestry,” and that “[the unjust] actions were without security reasons… and were motivated by racial prejudice.” It further offers pardons to those convicted of violating laws or executive orders during the internment period and the government will pay $20,000 to the affected individual. 

Although the Japanese population during this time was 716,331, it shows that reparations have been attainable in the past and are beneficial. However, there are stark differences between the case of reparations for Black Americans and the case for Japanese Americans, such as no ex-slaves nor slave-owners being alive today to be sued. Additionally, the limitations of reparations must be addressed.

Aside from wondering how the government will funnel $13 trillion into these payouts, reparations will not cure the ills that Blacks face today as individuals and as a community. Beyond the income inequality that slavery has produced, it has also fostered lack of self-worth in Black Americans. Colonialism and racial thinking have historically allowed the Black Americans to be objectified and dehumanized—slaves being viewed as mere property—which has caused many to feel ashamed of their blackness. Additionally, slavery has reinforced path dependence, which is conceived as a set of historical sequences in which some prior event triggers subsequent deterministic behavioral and institutional patterns. During slavery and the wake of its abolition, children were indoctrinated into racial etiquettes that reinforced White superiority through aspects of community life, such as the constant anti-Black violence like policing. This has created intergenerational socialization, which does not exist in a vacuum. Rather, it consistently interacts with the legal sphere—including law enforcement and local, state, and federal governments—to perpetuate social customs, behaviors, and worldviews that serve a dual purpose of preserving White interests while suppressing Black populations. Hence, why Black crime rate is disproportionate to their population. This mindset and system has become so entrenched in our system that monetary reparations cannot and will not solve this issue. 

Even though reparations have been implemented in the past to other racial minority groups, there are limitations for using them as a model. Furthermore, mass reparations will not solve the ingrained values of White supremacy in the United States. Rather than moving towards reparations, we should begin to advocate for solutions that impact the Black community in positive ways.

Policy Options

Education is one of the biggest factors in determining the economic mobility of low-income families, and the effects of slavery are not isolated from this institution. Redlining, the act of refusing a loan or insurance to an applicant who lives in an area a town that is deemed to be financially stigmatized despite their creditworthiness, within the United States remained in practice among lenders up until the 1960’s. This often meant that those who were being denied access to lenders were often descendants of enslaved peoples. Therefore, rather than it being a battle of creditworthiness, it was more a battle of skin color and racial ideas surrounding such. This was so much so that it was printed in Article 34 of the National Association of Real Estate Brokers Code of Ethics, which stated “A realtor should never be instrumental in introducing into a neighborhood a character of property or occupancy, members of any race or nationality, or any individuals whose presence will clearly be detrimental to property values in that neighborhood.” This rhetoric assumes the idea that a Black individual’s life is less valuable than their white counterparts, and it holds the racial superiority that white people had during the time of slavery and colonial America. Although this was the federal policy until the late 1960s, the damage had already been done, and it has deeply affected Black student’s education.

During the time of redlining, districts were ranked from A through D, with ranking A being minimal risk of loan defaulting and ranking D being high risk of defaulting on a loan. Therefore, this ranking system influenced how banks gave out loans and to what districts, and 95% of Black-owned houses were in regions with “D” ranking. This crisis has shown its way in education today, as schools and districts located today in historically redlined D neighborhoods have less district per-pupil total revenues, larger shares of Black and non-White student bodies, less diverse student populations, and worse average test scores relative to those located in A, B, and C neighborhoods. Redlining has effects in today’s education, and although the official act has not been implemented in policy since the 1960s, another form of redlining has been observed throughout United States’ schools.

Public school funding is contingent upon zip codes and local and state fundings. Since the impoverished, Black-heavy areas were underfunded, the public schools within that district received less funding from property taxes and state and local aid while more affluent, white-centered suburban schools received more funding. Therefore, this disparity in funding makes it difficult to provide optimal levels of simple resources to schools and districts with large disadvantaged or minority populations. This lack of resources directly translates into Black student achievement on standardized tests, which negatively affects the Black student enrollment rate into academically beneficial programs. This high-stakes testing serves to further racial inequality in education, and it does so under the guise of forms of anti-racism that have been reconstituted as part of a larger neoliberal project for education reform. 

that a Black individual’s life is less valuable than their white counterparts, and it holds the racial superiority that white people had during

The criteria that is used for entrance into academic programs that can foster social mobility often contains some form of threshold of standardized test scores. Student’s scores on standardized tests, like the SAT, mirrors that of the housing redlining crisis. While it does not include the lending of money, the vocabulary, contexts, examples, and situations presented in text-based questions ... used in most schools all derive from middle-class life experiences. Because of the redlining crisis, 74% of neighborhoods that were ranked D are now low-to-moderate income and 64% of them are minority neighborhoods. Therefore, Black student experiences are less likely to be synonymous with middle-class life experiences on standardized tests. And the fact that standardized tests and state-mandated exams design questions that exclude common experiences of students from poverty means that Black students frequently answer questions incorrectly while White students answer them correctly. Therefore, the dialogue within these problems inhibits Black students’ ability to not only comprehend but also rationalize through the question matter. This lowers Black students’ standardized test scores, which hinders their ability to gain access to certain academic programs, which undermines their potential for upward mobility. 

Taking this into account, reparations do not solve this education inequality that Black Americans face; thus, devoting time to policies that allow greater access to quality education is a more feasible solution. Novel policies such as The American Families Plan is an example of this. This plan will invest in education as a downpayment on the future of America by funneling revenue into early childhood through postsecondary education so that children and young people will be able to grow, learn, and gain the skills necessary for economic mobility. With a $309 billion budget, it will provide universal, high quality preschool to all three- and four-year-old children as well as provide two years of free community college for all Americans. It will make access to college more affordable to lower-income and middle-income students, including students from Historically Black Colleges and Universities (HBCUs) and improve teacher training and support. Historically, in order to address affirmative action in colleges’ and universities’ admissions process, the Supreme Court has sided with the approval of race-conscious admission. The most recent case, Fisher v. University of Texas at Austin, involved a white woman who was rejected on what she claimed to be racial prejudice because of the school’s consideration of race into admission. However, in 2016, the Supreme Court ruled that the university’s policy met the standard of strict scrutiny, which affirmed the right of race-conscious admission. 

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Conclusions and Recommendations

Though argued to combat the racial wealth gap between Black and White Americans, reparations are not the most economically feasible nor do they solve all of the hardships that Black Americans face as a result of slavery. Rather, reparations have come to symbolize a bandaid over a large wound—a quick fix to an issue that will need a long-term investment.

Rather, I recommend that a long-term investment in educational access, both childhood and higher education, must be implemented to effectively promote Black citizens’ economic mobility and their potential to produce generational wealth. Such strategies include providing free access to childhood education and two-year community college for lower-income Black citizens as well as reaffirming the right to affirmative action and race-conscious decisions in the college admissions process. Educating and equipping Black citizens with a powerful range of tools that can be applicable to their past, present, and future lives promotes an increased chance at economic success thus fostering a culture of social mobility.

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Acknowledgement

The Institute for Youth in Policy wishes to acknowledge Gwen Singer, Sarah Zhang, Paul Kramer, Carlos Bindert and other contributors for developing and maintaining the Effective Discourse Department and associated Fellowship programming.

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