Can Reparations Fix the Racial Wealth Gap?

The racial wealth gap is well-documented: the average Black household has a net worth ten times less than the average white household. Also, Black households hold only about 3% of the country’s wealth despite making up close to 16 percent of the population

Some of the proposed solutions to the racial wealth gap focus on actions that Black Americans can take to improve their own individual financial situation: save more, get more education, buy a home, or start a business. At TFG, we are huge fans of financial literacy and taking control of your personal finances, but we also understand its limitations in overcoming hundreds of years of government-backed discrimination.

How Reparations Could Help

As the authors of “What We Get Wrong About Closing the Racial Wealth Gap” point out, “wealth is cumulative” and white Americans “have more of every asset simply because they have more resources.” Those resources in turn benefit the next generation. About 30% of white Americans have received an inheritance compared to 10% of Blacks. They are also more able to rely on their networks for financial help: nearly 72% of whites could get $3,000 from family or friends compared to only 40% of Black Americans. These differences in wealth make it extremely difficult for Black Americans as a whole to “catch up” without a major intervention like reparations.

In the past few years, the idea of reparations as a way to address the racial wealth gap has been gaining momentum. Reparations—providing money or other help to acknowledge wrongdoing and make amends for it— is not a novel concept in the U.S. or abroad. The federal government has paid billions in land and other benefits to Native Americans and Japanese Americans sent to internment camps during World War II. The government has paid reparations to Black people who suffered a few specific injustices, but it has never made amends for slavery, Jim Crow laws, segregation, and housing discrimination. 

Where We Are Now

H.R. 40, a federal proposal to study the effects of slavery and discrimination and make recommendations to address them, has made little progress in the House of Representatives. Activists have pushed President Biden to create a similar federal commission through executive order, so far to no avail. 

Where the federal government has failed to act, at least one state is moving ahead: earlier this month, a California state task force released a preliminary report detailing the myriad of ways that Black Americans have been exploited and oppressed, including by federal, state, and local governments. It laid out dozens of recommendations to address political inequality, housing issues, business, prison reform, policing, healthcare, and the environment. The task force also recommended “implement[ing] a detailed program of reparations,” but specifics on what that could look like aren’t expected until the second report is released next year.

Challenges Ahead For Reparations

While reparations have become more commonplace in public discussions, the lack of support among white Americans is a major hurdle. According to a 2021 Washington Post poll, only 18 percent of white respondents support reparations for Black Americans.

Even among supporters, the scope of reparations is up for debate. Some insist that reparations must include direct monetary payments while others feel that programmatic solutions have a higher chance of success. There is also debate about who exactly should qualify: all Black Americans or only those whose direct ancestors were enslaved? And that’s all before working out the price tag attached to any of these proposals. 

Can Reparations Fix the Racial Wealth Gap? is written by Kylie Lipinski, A Certified Financial Trainer for

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