Economist William “Sandy” Darity Jr. is dedicated to answering one of America’s most persistent income inequality questions: Why do blacks struggle so much harder than whites to succeed in today’s society?
As the Samuel DuBois Cook Professor of Public Policy at Duke University, Darity has written extensively on the wealth divide between blacks and whites, and offers novel solutions to address the burden of unfair employment practices African Americans and other marginalized groups face.
Darity’s work also highlights another disturbing trend: Education alone doesn’t level the economic playing field. Despite the persistent myth that education and bootstrapping leads to the promise of the American Dream, black families headed by a college graduate have about 33 percent less wealth than white families headed by a high-school dropout. The poorest white family has slightly more wealth than the typical middle-class black family, Darity found. Among the upper middle-class, white families have three times the wealth than black ones.
“Observing an association between higher levels of educational attainment and higher levels of net wealth and concluding that education produces wealth is tantamount to observing an association between the presence of umbrellas during rainfalls and concluding that umbrellas cause the rain,” according to a 2015 study co-authored by Darity.
A longtime advocate for fair pay, Darity spoke to MLK50: Justice Through Journalism about strategies to eliminate the wealth gap and to achieve Dr. Martin Luther King Jr.’s vision of a nation where “all labor has dignity.”
MLK50: What does the racial wealth gap look like?
Darity: The 2016 Survey of Consumer Finances indicated for every $1 of net worth the median white household has, the median black household has about 10 cents. The survey is interesting because it tends to oversample individuals who are wealthier. The last set of reports, from 2014, you actually have evidence of a much wider gap with black households having about one-13th the net worth of white households. The racial wealth gap is ferocious, and it’s probably the most dramatic economic disparity that exists between blacks and whites.
MLK50: What does this mean for Memphis, which has a 63 percent black population?
Darity: There’s a strong distinction between wealth and income, and wealth disparities are far more substantial. By wealth, we mean the difference between the value of what you own and what you owe, and the difference between the value of your assets and your debt. It’s the accumulated stock of resources individuals or households might have acquired. And it is substantially different from income — associated with what people earn. We actually don’t know what the magnitude of the wealth gap is in Memphis. In six different cities where we conducted the study, including Washington, D.C., Miami and Tulsa, the largest gap we found was in Boston. I would argue we need some major national redistributive policy, like baby bonds.
MLK50: What kind of redistributive policy do you suggest?
Darity: I don’t think in the existing political climate, particularly at the federal level, there’d be any effort to close the racial wealth gap or the patterns of wealth and inequality generally. The current Congress just passed a law with respect to tax policy, which is grossly unequalizing. Hopefully, as early as 2018, conditions will be somewhat different.
Darrick Hamilton, an economics and urban policy professor at The New School, and I have talked at length about the baby bonds proposal. It’s a trust fund that would be provided for every child, a federally funded trust fund. The amount would be contingent on the wealth position of the child’s family. For kids born into America’s wealthiest families, we’d give them a $500 trust fund. The children born into families with the least wealth, we’d give those children a $50,000-$60,000 trust fund. This would be accessible when the child reaches the age of 18. We’d create the endowment at birth and guarantee a 1 percent real rate of interest per annum until the child reaches adulthood.
MLK50: Why trust funds?
Darity: The premise here is rich families give their kids trust funds; why shouldn’t every child have a trust fund? It would enable them to have an opportunity to have a major financial and monetary asset at the time they reach adulthood.
MLK50: That sounds expensive. How much would this cost?
Darity: Typically, there’s about four million infants born in the U.S. each year, and we estimate the average amount of the trust fund — this is for kids whose families are closer to the middle of the wealth distribution — would be about $20,000. If you calculated that across four million people, you’re talking about approximately $80 billion a year. But you wouldn’t have to begin any payouts until the first cohort of kids is 18 years of age. And remember, $80 billion is not a staggering amount relative to the general federal budget, [and] you wouldn’t have to start paying it immediately.
MLK50: Could such a fund be implemented at the municipal level? If so, what purpose would it serve?
Darity: We could have a program implemented in the city that could serve as a demonstration project we could learn from to do this at a national level. So it could serve two purposes: improve conditions in the city and serve as a marker, or evidence, of what it could do for everyone.
MLK50: But how would this help close the racial wealth gap?
Darity: It might affect the racial wealth gap because there are much higher proportion of black kids born at the lower end of the wealth distribution. We like to say it’s not race-specific, but it is race-conscious, in the sense that it would have a disproportionate benefit across racial lines, although everybody would be a beneficiary.
MLK50: What about the argument that more education will decrease the racial wealth gap?
Darity: Education is desirable from the standpoint of individuals improving their own outcomes in life: It’s intrinsically valuable if somebody has a quality education because it creates a more knowledgeable and engaged citizen. But it doesn’t do much about racial wealth differences. For example, we know that the unemployment rate for blacks is generally twice as high as it is for whites, and the disparity is even wider than the 2-to-1 ratio for younger workers.
We also know the 2-to-1 ratio exists at every level of education. Blacks with a college degree have twice the unemployment rate of whites with a college degree. Blacks who have finished high school have twice the unemployment rate of whites who have finished high school. What’s even more disturbing is there’s evidence the unemployment rate for whites who never finished high school is not very different from the unemployment rate for blacks who have completed some college or have a two-year degree.
MLK50: What other public policy fixes do you suggest?
Darity: Establish reparations for black Americans. One of the unfortunate dimensions for the case for reparations is people have tended to focus exclusively on the history of slavery in the U.S. and not address all the injustices that occurred after slavery ended. The case for reparations can be made just as strongly, if not more so, by taking into account the history of Jim Crow.
MLK50: Will folks accept the idea of reparations?
Darity: Obviously, there are segments of the population who will never be moved on the issue. The key is to make a case to those who are open-minded about it. There’s greater open-mindedness in younger individuals; in fact, I think I saw an estimate that about 40 percent of Americans between 18–15 think reparations for black Americans is a good idea.
MLK50: What role would municipalities play in enacting any form of reparations?
Darity: Create a lobbying group: Municipalities could participate in the political lobbying groups to encourage federal representatives to institute a program of reparations. A lot of attention has been drawn to the colleges and universities who have been identified has having a strong and intimate relationship with slavery, and many of those institutions have talked about ways in which they can, in some sense, atone for slavery.
For example, Georgetown, highly prestigious universities in the eastern part of the United States, including all of the schools we would classify as being Ivy League; the University of North Carolina, the University of South Carolina have very, very strong histories in terms of their connections with slavery, and in some cases, the slave trade. Many of these institutions, on a piecemeal basis, have talked about what they might do to do atone for their roles in the slave trade. The initial movement for this kind of drastic policy change could begin with philanthropies within a municipality or region, but the goal here is to show the general public how such a reparations program would actually be implemented with success.
MLK50: Some have called for municipal and federal job guarantees. Your thoughts?
Darity: The job guarantee wouldn’t have a significant effect on the racial wealth gap. It would not eliminate income disparities, but it would do two things: It would eliminate unemployment, and it would eliminate what we refer to as “working poverty,” since the minimum payment under a municipal of federal job guarantee would be above the poverty line. Even if we could not have the program at a federal level, we could have it at a municipal level, we could have full-employment cities. For any project like a job guarantee that is city-specific, you would have to have residency requirements.
MLK50: Which would be more powerful — a job guarantee program or a higher minimum wage?
Darity: The job guarantee is actually even more potent than various types of minimum wage standards because first, the minimum wage for folks without a job at all is zero. A living wage is not going to cover individuals who do not have jobs. Also, the living wage does not guarantee a sufficient number of hours of work to ensure everyone receives non-poverty incomes. So the job guarantee creates an effective floor for on the level of compensation for all Americans.
MLK50: Does the job guarantee concept go hand-in-hand with a living wage?
Darity: You actually accomplish creating a living wage through creating a job guarantee program, and you ensure there are sufficient wage programs and that everyone receives a work opportunity. If the average hourly wage in an hourly job program is $10-$11 per hour based on non-poverty wages, it’s an annual wage of $20,000-$24,000. Added on to that would be benefits, including health insurance. If a city had a $15-per-hour living wage, there’s nothing to stop the city from topping off the wage provided by the job guarantee.
MLK50: If you had to choose between a universal basic income program or a job guarantee program, which would you choose?
Darity: In most of the formulations of the universal basic income, I’ve seen typically a provision of about $12,000 in income, well below a poverty standard. In fact, you can think about the universal basic income as actually subsidizing low-wage work because employers in the private sector could actually pay some of their workers less because everybody would be guaranteed that amount. If you’re talking about a basic income of $23,000–25,000, that’s a different game. The $12,000 proposals are quite problematic. I’d rather have a job guarantee without a universal basic income than a universal basic income without a job guarantee.
Darity: The job guarantee does provide us with the opportunity to fulfill those tasks that are essentially valuable, and you can’t necessarily do that under the universal basic income.
MLK50: Any advice for business leaders and government officials in the political climate today?
Darity: Maybe the way we think about starting this process is having a planning commission in place charged with the development of a city-specific program at the municipal level to make sure they examine or investigate other places where a job guarantee has been implemented. The planning commission cannot be held hostage by private-sector opposition. For this to be done nationally, there would have to be a federal commission to develop the plan of action. The first phase is always the development of legislation; that requires a serious level of inquiry about how effective this proposal has been in other places, either in the city in question or nationally.
Editor’s note: This interview has been condensed for clarity.
Where do we go from here?
This report is brought to you by MLK50: Justice Through Journalism, a yearlong nonprofit reporting project leading up to the 50th anniversary of Dr. Martin Luther King Jr.’s. death. Our focus on covering economic justice issues in Memphis has been generously supported by the Surdna Foundation and the Center for Community Change. Support independent journalism by making a tax-deductible donation today.