Bold Policies for Economic Justice
William Darity Jr. &Darrick Hamilton
Published online: 7 January 2012
#Springer Science+Business Media, LLC 2012
Abstract The U.S. is characterized by a longstanding pattern of large structural racial
inequality that deepens further as a result of economic downturn. Although there have
been some improvements in the income gap up until around the mid 1970s, the
employment gap, and the racial wealth gap - two dramatic indicators of economic
security - remains exorbitant and stubbornly persistent. We offer two race-neutral
programs that could go a long way towards eliminating racial inequality, while at the
same time providing economic security, mobility and sustainability for all Americans.
The first program, a federal job guarantee, would provide the economic security of a job
and the removal of the threat of unemployment for all Americans. The second program,
a substantial child development account that rises progressively based on the familial
asset positioning of the child’s parents, would provide a pathways towards asset security
for all Americans regardless of their economic position at birth.
Keywords Recession .Post-racial .Child development accounts .Full-employment .
Federal job guarantee .Racial wealth gap .Racial unemployment disparities
The U.S. is characterized by a longstanding pattern of large structural racial inequal-
ity that deepens further as a result of economic downturn.
Rev Black Polit Econ (2012) 39:79–85
Much of the text in this paper are reprinted from FOCUS Magazine: November/December 2011, published
by the Joint Center for Political and Economic Studies, and related to views expressed by the authors in
testimony before the Congressional Black Caucus (January, 2011), a webinar for the Joint Center for
Economic and Political Studies (August, 2011), and in Darity (2010) and Hamilton and Darity (2010).
W. Darity Jr.
African and African-American Studies and Economics, Sanford School of Public Policy,
Duke University, Box 90239, Durham, NC 27708-0239, USA
D. Hamilton (*)
The Milano Graduate School, Urban Policy, Department of Economics, Schwartz Center for Economic
Policy Analysis, The New School, 72 Fifth Avenue, New York, NY 10011, USA
For example, in 2008, the median hourly wage for black male full-time workers
was $14.90, while the median for white male counterparts was nearly $6 higher at
$20.84. This wage disparity is not primarily due to differences in educational
attainment. Even when one looks at workers within the same educational categories,
disparities persist. Among workers with a high school degree or a bachelor’s degree,
black males earned only 74% of what white males earned, and, among high school
dropouts, black males earned only 61% of their white male counterparts. Also, nearly
90% of U.S. occupations can be classified as racially segregated even after account-
ing for educational differences. Occupations are distributed such that black males are
more likely to be crowded into occupations with wages 74% lower than the higher
earning occupations from which they are largely excluded (Hamilton et al. 2011).
Although there had been some improvements in the income gap up until around
the mid 1970s, the employment gap and the racial wealth gap—two dramatic
indicators of economic security—have remained exorbitant and stubbornly persistent.
The September 2011 white unemployment rate was 8%, while the black rate was twice
as high at 16%. The 8% unemployment rate for whites is indicative of a crisis in
employment at the national level. Yet, over the past 40 years; there has been only 1 year
in which the black rate has been below 8%, in contrast, there has been fewer than 5 years
in which the white rate has been at or superseded 8%. Thus, if we view black unem-
ployment with thesame lens as the rest of the population, blacks are in a perpetual state of
employment crisis that deepens astronomically during national economic downturns.
Another indicator of economic security is wealth, and, like the unemployment rate,
it is an indicator of stark racial disparity. Before the Great Recession, the typical black
family had a little less than $0.10 for every dollar in wealth of the typical white
family. After the recession, that gap nearly doubled with the typical black family now
having about a nickel for every dollar in wealth held by the typical white family
(Taylor et al. 2011).
The absolute racial wealth gap exceeds $100,000. Regardless of age, household
structure, education, occupation or income, black households typically have less than
a quarter of the wealth of otherwise comparable white households. Perhaps even more
disturbing, the median wealth of black families whose head graduated from college is
less than the median wealth of white families whose head dropped out of high school
(Gittleman and Wolff 2004). The disparity is so pronounced that the median Latino
and black household would have to save 100% of their income for close to three
consecutive years to close the gap. Furthermore, 85% of black and Latino households
have a net worth below the median white household (Kocchar 2004).
Despite these glaring and persistent racial disparities, the growing “post racial”
rhetoric has led to a political environment that makes it increasingly difficult to use
race-specific polices to address these inequities. The post-racial rhetoric is a narrative
that our society has transcended the racial divide and that the remaining racial
disparities are due primarily to self-sabotaging attitudes and behaviors on the part
of blacks themselves. In sum, the post-racial ideology represents a shift from a public
acknowledgement of a social responsibility for the condition of black America to a
position where individual blacks need to “get over it”and “take personal responsi-
bility”—and discrimination and other social barriers are deemed largely things of the
past. Moreover, blacks are enjoined to stop making particularistic claims of injustice
(Hamilton and Darity 2009).
80 Rev Black Polit Econ (2012) 39:79–85
We offer two race-neutral programs that could go a long way towards eliminating
racial inequality while at the same time providing economic security, mobility and
sustainability for all Americans. The first program, a federal job guarantee, would
provide the economic security of a job and the removal of the threat of unemployment
for all Americans (Darity 2010).
The second program, a substantial child develop-
ment account that rises progressively based on the familial asset positioning of the
child’s parents, would provide a pathways towards asset security for all Americans
regardless of their economic position at birth (Hamilton and Darity 2010; Darity and
The Bureau of Labor Statistics reports that about 14 million Americans remained
in the ranks of the unemployed in September 2011. January 2011 represented 21
consecutive months in which the unemployment rate was at least 9%. February and
March offered very mild and temporary rays of hope when the unemployment rate
dipped slightly to 8.9 and 8.8%, respectively. After that time, the rate has crept back
up to at least 9%, and in September 2011 stood at 9.1%. The United States has not
seen a span of unemployment this high since the Great Depression. Furthermore,
these numbers do not fully capture the relationship between joblessness and “dis-
couraged workers,”who drop out of the labor force altogether. The employment-
population ratio in September 2011 was only at 58.3%.
A federal government job guarantee program for all adult citizens would address
this crisis. The government should insure that the opportunity to work for decent pay
is a citizenship right for all Americans. Having Americans out of work does immense
damage to the human spirit while imposing extensive costs to individuals and society
as a whole.
The federal government should establish a National Investment Employment
Corps offering all citizens 18 years of age and above an employment guarantee at a
minimum salary of $20,000 with $10,000 in benefits, including medical coverage and
retirement support. An upper bound estimate of the expense of the program can be
established by putting all 15 million persons unemployed at the peak of this crisis at a
mean salary of $40,000, inclusive of materials and equipment per worker, with
$10,000 in benefits. The total compensation package would amount to $750 billion,
which is less than the first $787 billion stimulus package and considerably less than
the bailout of the investment banks estimated at $7.7 trillion.
This initiative would be
far superior to the indirect incentive effects of stimulus measures because it would
constitute a direct mechanism for job creation and it would trigger a multiplier
stimulus effect across wide panoply of activities that take place in the economy.
Correspondingly, the net expenses of the job guarantee program would be reduced
because of wide array of cost savings from other social programs that either could be
reduced or eliminated. With the federal government acting as employer of last resort,
unemployment compensation funding could be slashed and antipoverty program
funding—including free and reduced lunch subsidies and food stamps—could be
reduced greatly (indeed, a job guarantee could eliminate both working and jobless
Please see Harvey (1989,2000), Wray and Forstater (2004), and Wray (2008) for examples of previous
discussions of federal job guarantee programs.
Please see the following link for reference: http://bottomline.msnbc.msn.com/_news/2011/11/28/
Rev Black Polit Econ (2012) 39:79–85 8181
poverty simultaneously). Furthermore, the income paid to the employees of the
National Investment Employment Corps would restore tax bases at the state and
municipal levels, alleviating their current budget crises. The federal job guarantee
also would moderate significantly the home foreclosure crisis and the medical
coverage provided as a job benefit of the federal job guarantee would provide an
implicit “public option”leading to the coverage of millions of uninsured Americans.
Market interventions like minimum wage laws, financial regulation, and associat-
ed enforcement expenses could be eliminated. Minimum wage laws no longer would
be needed since the floor on the wage standard would be set by the minimum salary
offered by the National Investment Employment Corps. Financial regulation no
longer will be needed because the presence of the job guarantee would mitigate the
adverse effects of fluctuations in speculative investment markets on personal em-
ployment and income.
States and municipalities can conduct an inventory of their needs and develop a
job bank of tasks. The program could give priority to the most urgent projects to aid
the most distressed communities. The work to be done by employees of the National
Investment Employment Corps would address the nation’s human and physical
infrastructure requirements. This could include the construction, staffing and provi-
sion of high quality preschools, computer repair, upgrade and maintenance, sanitation
workers, flood and other disaster service workers in hospitals and schools, and the
extension, repair and maintenance of the public transportation infrastructure, e.g.
roads, bridges, and dams. In 2009 the American Society of Civil Engineers (ASCE)
gave the country a grade of D on its physical infrastructure; one in four rural bridges
were characterized as structurally deficient. ASCE reported that in Texas alone there
were only seven engineers and a budget of $435,000 to oversee more than 7,400
The proposal advanced here is not meant to act as a temporary program contingent
upon emergency conditions; rather, it is to function as an automatic stabilizer in good
and bad times insofar as the numbers of persons put to work in the National
Investment Employment Corps will rise during downturns and fall during upswings.
Thus, the program will expand and contract counter cyclically. Moreover, the pro-
gram would structurally change the U.S. economy away from low wage jobs—a
sector in which an increasing global economy is making the U.S. increasingly less
competitive—towards more moderate and high wage jobs.
The program also would provide assurance of employment for members of
stigmatized populations who are subjected to discriminatory exclusion. Princeton
sociologist Devah Pager’s audit study in Milwaukee, Wisconsin demonstrates that
among males of comparable ages and education, whites with criminal records were
more likely to get callbacks for jobs than black males with no criminal record (Pager
2003). Indeed, even among white males only, having a criminal record reduced the
odds of receiving an employment callback by half. This is particularly alarming since
the analysis took place in Wisconsin, a state that outlaws employer use of a criminal
record as a criterion of employment for most jobs. Furthermore, Bureau of Labor
Statistics data indicates that among 18–25 year olds, white high school dropouts have
The 2009 ASCE report card on the nation’s infrastructure can be found at http://www.infrastructurereportcard.
82 Rev Black Polit Econ (2012) 39:79–85
an unemployment rate 10 to 12 points lower than blacks who have completed some
college. The program envisioned here would provide employment for all—black or
white, male or female, with or without a criminal record.
In addition, a guaranteed federal jobs program would mitigate the personal and
familial costs of damaged mental health and other stressors faced by the unemployed.
The unemployed themselves often say that they would rather be paid to work than
receive unemployment compensation. Glenn Blackburn, a 45 year old unemployed
casino worker, sums up these sentiments, “Put me to work digging ditches or helping
build roads. Anything is preferable to sitting on my butt. This would give those of us
on unemployment back our pride and actually accomplish something with the money
being spent. There is a work force of a million people just sitting idle waiting for
something to do. That is a massive amount of lost labor that could be fixing
America’s infrastructure. Instead of unemployment hire me to do that (Delaney and
Nasiripour. February 24, 2010.Huffington Post).”
The second program that we propose is a substantial child development account
(or “baby bond”program, a phrase coined by the recently deceased, Manning
Marable) is designed to provide an opportunity for asset development for all
newborns regardless of the financial position in which they are born. The advantages
of wealth in our society are clear. Wealthier families are far better positioned to
finance elite independent school and college education, access capital to start a
business, finance expensive medical procedures, reside in higher amenity neighbor-
hoods, exert political influence through campaign financing, purchase better counsel
if confronted with the legal system, leave a bequest, and/or withstand financial
hardship resulting from any number of emergencies. Yet, even among only white
families, less than 10% of families hold more than 50% of total white wealth. Since
about 85% of black families have a net worth below the median household, it is clear
that the vast majority of the nation’s wealth, along with the associated opportunities
stemming from this wealth are skewed heavily towards a relative few, who are
Given this strikingly uneven distribution of wealth and the importance of wealth in
providing economic security and enhanced life-chances, a baby bonds program
would represent a needed shift in public policy that could provide asset-building
opportunities for all Americans. Indeed, with wealth so unevenly distributed along
racial lines, the baby bonds proposal could go a long way towards eliminating the
racial wealth gap.
The baby bonds would set up trusts for 50–75% of all newborns with an average
account of $20,000 that progressively rise to $60,000 for babies born into the most
wealth poor families. The accounts would grow at a federally guaranteed annual
interest rate of 1.5–2%. The accounts could be accessed when the child becomes an
adult and used for some asset-enhancing endeavor such as purchasing a home, or
starting a new business.
Program concerns around measuring financial assets can be alleviated by modern
electronic recording of financial data, which facilitates our ability to identify financial
assets. Financial monitoring advances made by IRS and law enforcement agencies
serve as examples of the public sector’s ability to measure financial assets, and, many
localities are already engaged in home value assessments. To avoid crowding out
savings the transfer program could be structured in a manner similar to the Earned
Rev Black Polit Econ (2012) 39:79–85 8383
Income Tax Credit (EITC) program, which uses a phase out schedule to avoid work
disincentives. Finally, there may be concerns that the program may influence the
timing in which parents, grandparents or other relatives (or friends) might make
transfers to their off-spring, so that the children of these off-spring can increase the
federal bond support in which they qualify. To address this moral hazard concern, the
federal government could reserve the right to tax future transfers to baby bond
If three-quarters of the roughly 4 million babies born per year were eligible for the
program, a crude estimate of the cost of the program would amount to about $60
billion a year. This cost could be fully funded based on a fraction of what the federal
government already spends on asset enhancing activities. A 2004 report by the
Corporation for Enterprise Development (CFED 2004) estimates that the federal
government allocated $335 billion of its 2003 budget in the form of tax subsidies
and savings to promote asset development policies. The bulk of this allocation comes
from items like mortgage interest deductions, exclusion of investment income on life
insurance and annuity contracts, reduced rates of tax on dividends and long-term
capital gains, and exclusion of capital gains at death. The total allocation, which is
about 15 times higher than what is spent by department of education, does not include
subsidies or tax breaks given to corporations nor funds from state and local level
policies. An updated version of this report estimates the asset-building allocation at
close to $400 billion with more than half of the benefits going to the top 5% of
earners (Woo et al. 2010).
At issue is not the amount that was allocated, but to whom the allocation is
distributed. The top 1% of earners, those typically earning over $1 million dollars a
year, received about one-third of the entire allocation, while the bottom 60% of
earners received only 5%. If the federal asset promotion budget where allocated in
a more progressive manner, federal policies could be transformative for low income
Americans (see Sherraden, 1991). The baby bonds proposal provides a far more
progressive, opportunity-enhancing that is a lot less expensive program than many of
the asset tax policies already in existence.
Ultimately, public provision of a substantial trust fund for newborns from families
that are wealth-poor and the passage of a federal job guarantee would go a long way
toward achieving what the American ideal should be—a race-fair America that
provides economic security and asset building opportunities for all of its citizens.
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