A young girl stands behind a grated door
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After decades of inequality, the average black family in Boston has assets totaling $8. A controversial proposal could give younger generations a leg up.

Economics are the most common barometer for measuring inequality in America. A 2016 Brookings Institution report handed Boston the dubious distinction of having the highest income inequality in the country, with the top 5 percent of earners making an average of $266,224, compared to just $14,942 for the bottom 20 percent.

That inequality is even more pronounced along racial lines and net worth. Staggeringly so. A white family in Greater Boston has a net worth of $247,500, according to a recent report. The wealth of a black, U.S.-born household in Boston? $8.

The Federal Reserve Bank of Boston has been trying to understand the origins of this wealth gap, and how to close it. “Every time, there’s this sense that the numbers can’t be right,” says Anmol Chaddha, a policy analyst with the Boston Fed who has worked closely with the bank’s efforts to study the disparity. “Is there a mistake? A calculation error? And every time, it’s actually really true.”

Such staggering disparity didn’t happen overnight. Richer families have often built up monetary, real estate, and retirement assets over many years. Wealth is frequently transferred from generation to generation, and experts say racial wealth disparities reveal decades-old systemic racism that aided the expansion of a white middle class while excluding people of color.

As the white middle class grew throughout the 20th century, government-sanctioned segregation and financial redlining, as well as a lack of access to home loan subsidies and voting rights, held back communities of color in Boston and elsewhere. Now, most black families in Boston are essentially “penniless” in terms of accumulated wealth, according to Darrick Hamilton, associate professor of economics and urban policy at The New School. “They’re subsistence populations,” he says. “If you use an indicator like wealth,” Hamilton says, “there’s been virtually no progress [for blacks] since we ended slavery.”

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.

One possible solution proposed by Hamilton and Darity, and boosted in the Boston Fed’s paper, is “baby bonds,” which work something like this: The federal government gives every American baby a savings bond at birth, with children born into the poorest families getting as much as $50,000. (The average amount, according to Hamilton and Darity, would be around $20,000.) The beneficiary would only be able to access those funds when he or she is an adult, and only for “asset-enhancing endeavors” like purchasing a home or starting a business.

“What’s clear with wealth is that … wealth begets more wealth,” Darity says. “Receiving an inheritance at some point in one’s life, having access to some key capital at a key juncture, gives somebody an asset will passively increase over the course of their lifetime irrespective of their individual actions or attitudes.”

As a serious policy proposal, baby bonds have not seen much success on the national level. In 2007, then-presidential candidate Hillary Clinton floated the idea of giving every child $5,000 to put toward college or a home, but dropped it after Republicans called it a “budget-busting baby fund” and accused her of pandering to black voters. Though the $90 billion required to pay for the program could be rustled up by reforming the mortgage interest reduction and capital gains taxes—programs that cost more than $500 billion annually—the passage of a national baby bond program seems unlikely in our political climate.

Regardless of movement or stasis at the national level, Darity would like to see cities take up baby bonds and “use it as a proof of success.”

This is where an institution like the Federal Reserve Bank of Boston may play a part. The nonpartisan Fed and its regional branches have a megaphone on economic issues, and could use that voice to promote municipal baby bond programs. Through its own research on the racial wealth gap and continued push for long-term solutions, the Boston branch, for its part, has led out on this front. According to Jeffrey Fuhrer, executive vice president and senior policy analyst with the Federal Reserve Bank of Boston, that’s because the data-driven, politically independent public bank has the power to convene a diverse array of stakeholders. “We’re a serious institution, and when we start to shine a light on an issue and convene partners, those partners are willing to work with us,” he says.

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