It is no secret that Black Americans fall well behind White Americans in wealth and income. This fact has, for decades, spurred a debate about if, what, and how to address it, often through policies of reparation payments for slavery.
The 2020 Democratic field has not shied away from the controversial issue. By my count, all Democratic front runners, with two notable exceptions, are publically on board with reparation payments in one form or another. Those two exceptions, South Bend, Indiana Mayor Pete Buttigieg and Vermont Senator Bernie Sanders, have both expressed support for addressing income and wealth inequality, but have not specifically endorsed reparations as the way to do so.
Often, reparations are discussed in a moral framework; they are the right thing to do because slavery was so abhorrent. Opponents of reparations—usually conservatives—are not convinced by this argument, usually because it is a moral argument. Conservatives often do not dispute that reparations for slavery are right, but correctly point out that no living White person has enslaved a living Black person in the United States, nor has any living government official protected the institution of slavery. This being the case, conservatives argue reparations are not merited.
But framing reparations as a morality policy does not fully address the complexity of the knock-on effects of slavery. In addition to discussing whether reparations are morally justified, candidates also need to be discussing whether reparations are economically justified. On this front, recent research has unearthed some interesting data points.
First, it is important to understand the difference between income and wealth. Income is more or less exactly as it sounds; the pay you take home from your employment. Wealth, on the other hand, encompasses far more. Wealth has more to do with what you own; your home, land, stocks and other investments, and retirement accounts all contribute to wealth. The famed economist Thomas Piketty made the case in his 2013 best seller “Capital in the Twenty-First Century” that, because the return on certain types of wealth grows faster than the economy, wealth gaps will play the most significant role between the haves and the have nots in the coming decades.
Heather O’Connell, at the time at The University of Wisconsin, demonstrated the effects slavery still has on racial wealth gaps between black and white americans (O'Connell 2012). In figures one and two, taken from her paper, she shows how the proportion of slaves in a county in 1860 is predictive of inequality in wealth between black and white Americans. Even after separating the effect of other factors, including the number of black residents in the county, single mother families, and homeownership rates, the legacy of slavery is still a large and significant predictor of the racial wealth gap. O’Connell is not alone in this finding.
Areas of higher slave concentration in 1860 have also been shown to increase gaps in income and in education (Bertocchi 2014). The effects of slavery have also been passed on through marriage. As children of black former slaves married children of black free people, the slavery effect was passed on to those whose parents had not been slaves (Sacerdote 2005).
The rationale is not difficult, and has been shown by those making the moral argument for reparations. Post emancipation policies were often meant to keep black Americans second class citizens. Property was stolen, people were lynched, separate wa not equal, Jim Crow thrived, neighborhoods were redlined, and a host of other post-slavery social factors continue the effect of slavery to this day. The gap is getting larger (Thomas, et al. 2019). Even among black Americans who hold wealth, the gap is large and persistent (Killewald 2013).
Education pays off less for blacks then for whites. Owning a business pays off less for black Americans. Investments pay off less for black Americans. Income grows less with age (Herring and Henderson, 2016).
The end result is simple, black people have less wealth and pass on less wealth to their children (Gittleman and Wolff, 2004), and slavery is a significant predictor of this. If Piketty is right, then wealth accumulation should be a primary concern. Black Americans doing the same things white Americans do seem to get a smaller payoff (Keister 2000). Slavery, and post slavery racial policies meant black Americans had less to pass on to their children (Conley 2001). As wealth accumulates over time, the difference between what white and black Americans can pass on to their children has exploded (Avery and Rendall, 2002); slavery seems to be where it all started.
These facts illustrate this narrative. Due to slavery and post emancipation racial discrimination proceeding from it, white Americans had a much easier time getting access to education, or getting access to steady and well paying employment; this meant it was easier for white Americans to buy property. Property grows in value over time, and can be passed on to children—whether in actual inheritance of property, or by selling property, and passing on the income. This effect grows with each generation, and means white Americans on average have access to better education, better jobs, and can therefore pass on more wealth.
Even when black Americans were able to buy houses, their value did not appreciate as White owned houses did (Flippen 2004). With a growing wealth gap in every generation, white Americans were able to make investments in many types of financial assets black Americans could not. Black Americans were also more heavily affected by the financial crisis. The wealthiest black Americans have and asset gap of over $1 million compared to white Americans. Over generations black Americans consistently start out on a lower footing than white, and because of the way capital appreciates, they are not likely to catch up anytime soon (Sullivan and Meschede, 2018).
When discussing reparations, these economic considerations need to be addressed. Simply giving money may not be the best policy. Rather, assistance in home ownership, asset investment, or education might be more effective.
In his presidential bid, Booker has proposed this type of investment fund that could be used for more education, housing, or investment—providing wealth for poorer Americans. It is a good place to start the debate.
O'Connell, Heather A. "The impact of slavery on racial inequality in poverty in the contemporary US South." Social Forces 90, no. 3 (2012): 713-734.
Bertocchi, Graziella, and Arcangelo Dimico. "Slavery, education, and inequality." European Economic Review 70 (2014): 197-209.
Sacerdote, Bruce. "Slavery and the intergenerational transmission of human capital." Review of Economics and Statistics 87, no. 2 (2005): 217-234.
Thomas, Melvin, Cedric Herring, Hayward Derrick Horton, Moshe Semyonov, Loren Henderson, and Patrick L. Mason. "Race and the Accumulation of Wealth: Racial Differences in Net Worth over the Life Course, 1989-2009." Social Problems (2019).
Killewald, Alexandra. "Return to being black, living in the red: A race gap in wealth that goes beyond social origins." Demography 50, no. 4 (2013): 1177-1195.
Herring, Cedric, and Loren Henderson. "Wealth inequality in Black and White: Cultural and structural sources of the racial wealth gap." Race and Social Problems 8, no. 1 (2016): 4-17.
Gittleman, Maury, and Edward N. Wolff. "Racial differences in patterns of wealth accumulation." Journal of Human Resources 39, no. 1 (2004): 193-227.
Keister, Lisa A. "Race and wealth inequality: The impact of racial differences in asset ownership on the distribution of household wealth." Social Science Research 29, no. 4 (2000): 477-502.
Conley, Dalton. "Decomposing the black‐white wealth gap: The role of parental resources, inheritance, and investment dynamics." Sociological Inquiry 71, no. 1 (2001): 39-66.
Avery, Robert B., and Michael S. Rendall. "Lifetime inheritances of three generations of whites and blacks." American journal of sociology 107, no. 5 (2002): 1300-1346.
Flippen, Chenoa. "Unequal returns to housing investments? A study of real housing appreciation among black, white, and Hispanic households." Social Forces 82, no. 4 (2004): 1523-1551.
Sullivan, Laura, and Tatjana Meschede. "How Measurement of Inequalities in Wealth by Race/Ethnicity Impacts Narrative and Policy: Investigating the Full Distribution." Race and Social Problems 10, no. 1 (2018): 19-29.
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