While the racial wealth gap is the result of multiple factors, a disparity in income is likely the clearest indicator of how wide it truly is.
In 2020, the median non-Hispanic white household made nearly $75,000, compared to just over $45,000 and $55,000 for Black and Hispanic households, respectively. To paint this picture more clearly, Black and Hispanic households respectively earned 61% and 74% of the income of every median non-Hispanic white household in 2020, according to the U.S. Census Bureau.
Income gaps between races in America make it much more difficult for people of color, particularly across generations, to build more wealth.
One policy solution that could potentially help close this gap is an idea called “baby bonds,” originally proposed by two academics: Darrick Hamilton and William Darity.
In simplest terms, the government would contribute to savings accounts for children under 18, with the contributions determined by family income or wealth. When a recipient turns 18, the money can go toward certain uses, such as paying for college or buying a house.
At Morningstar, we believe it is important to use our expertise to analyze the effect such programs could have on reducing the racial wealth gap and the trade-offs in how such programs are designed.