This week, the podcast revisits a topic I wrote about for The New York Times last month – race and retirement. I’ve written before about how the inequities people of color experience during their working lives spill over into retirement. But during this time of racial reckoning, I wanted to take a deeper dive into the topic.
For the Times story, I took special care to seek out the voices of Black Americans who also are expert on this topic. That’s how I found my way to economist Darrick Hamilton. Professor Hamilton is one of the nation’s leading voices on the causes and consequences of racial and ethnic economic disparities. He recently left Ohio State University to rejoin The New School in New York City, where he is teaching and starting up a new Institute for the Study of Race, Stratification and Political Economy.
Darrick is a leading proponent of one of the most creative ideas for addressing the racial wealth gap – “baby bonds.” The idea is to provide every American child with a government-funded trust account at birth, starting with a $1,000 contribution. Kids born into lower-wealth families would receive more contributions over time, and the accounts would benefit from compound interest growth.
The premise is that much of the wealth in the U.S. is transferred from generation to generation, and there’s a powerful compound effect that starts with our legacy of racist laws and policies and ends with today’s white households able to access far more capital for wealth-building activities – attending college, buying a home or starting a business. Baby bonds could serve as a proactive remedy for that injustice, and in many cases could impact the wealth available at retirement for people of color.
In the Times story, I outline the basic numbers on race and retirement. They may not be surprising, but they certainly are appalling.
In 2016, the typical Black household approaching retirement had 46 percent of the retirement wealth of the typical white household. For a Latino family, it was 49 percent. Two-thirds of single black retirees have incomes too low to meet basic living expenses.
And that was before the pandemic. Since COVID19 struck, unemployment rates for older Black and Latino workers have been much higher than for their white counterparts. And mounting evidence suggestions that millions are being forced into premature retirement. That’s going to translate into sharp cuts in Social Security income and savings, and expensive disruptions in health insurance.
The baby bonds concept has caught on in the Democratic party – Senator Cory Booker advocated for it during his presidential campaign and he has sponsored baby bond legislation in the Senate. The idea also has found its way into the Biden presidential campaign.