Reparations: Closing Income and Poverty Gaps

The median White family in America has 10 times the wealth of the median Black family. When you look at averages, the gap is even more startling, the average White family has a net worth $791,700 higher than the average Black family.

Education statistics are also sharply divided, America spends more money per capita on White students than Black students. Consequently, young White Americans are twice as likely to receive a college degree than young Black Americans.

And even so, the average White American with no college degree is richer than the average Black American with a college degree.

Black Americans are five times more likely to be incarcerated than White Americans, twice as likely to be victims of police brutality, and 25% more likely to be a victim of a violent crime.

Further, Black Americans are less likely to have a job, less likely to have health insurance and more likely to die at a young age.

The trend is clear, across the board there are huge opportunity gaps between Black and White Americans.

*Opportunity Gaps represents all gaps described at the beginning of this paper among others. Including wealth, income, educational, incarceration rates, victimization, life expectancy, etc.

Logically, there are only two possible reasons that these opportunity gaps exist.

1. White people are inherently superior to Black people.
2. A history of systematic racism and racist institutions are completely responsible for all opportunity gaps between White and Black Americans.

If you believe the answer is the former, you have some major soul-searching, unlearning, and straight-up fact checking to do. You can start your reading here and move onto here and here and come back to this paper when you are ready.

The rest of us accept that racism is the sole reason for all opportunity gaps today. Emphasis on “sole”, if you believe that genetics have even a fraction of responsibility for opportunity gaps then you are a White supremacist and I advise you to check out the recommended reading above.

The natural next-step after accepting that all opportunity gaps are due to systematic racism and institutions is to begin to undo the damage done by these systems. This undoing, or “repairing,” process should restore all opportunity gaps back to their natural level, zero.

Completely eliminating these gaps, is reparations in its truest form. Thus, reparations are not a single check or policy plan, but an ongoing effort to undo the damage of the past and the present. Reparations are not complete until all opportunity gaps are closed.

This paper will focus on policy solutions to closing the poverty and income gaps between Black/Native and White Americans. Because Native and Black people have different gaps, closing them takes different amounts, thus, we will evaluate each separately.

Because our focus is to close all gaps (not just poverty and income), the policy proposals in this paper should be thought of as compliments to other universal and targeted initiatives to close other opportunity gaps.

Methodology

All research in this paper is conducted using the Census Bureau’s 2019 Annual Social and Economic Supplement (ASEC), which uses data collected in 2018. The ASEC survey contains over 180,000 Americans from more than 75,000 households. Each respondent is assigned a sample weight by the Census Bureau so that models can provide consistent national-level estimates.

The Supplemental Poverty Measure classifies respondents’ poverty status by comparing their total family income (post tax and transfers) to their family poverty threshold. The Census Bureau defines poverty thresholds based on family size and costs of necessities.

You can see the entire workbook for this research here.

Poverty Gaps

One of the most glaring consequences of our racist institutions are the varying poverty rates across racial demographics. Black and Native Americans are roughly twice as likely to be in poverty as White Americans. Poverty is simply a lack of money (or more technically resources) and thus I propose closing these poverty gaps by providing direct cash transfers to all Native and Black people, regardless of age (parents would receive money on behalf of their children).

You can see exactly how much money is needed in new spending to eliminate the poverty gaps in the charts below.

The first chart shows that at roughly $90 billion in spending on Black reparations, Black poverty would reach the White poverty rate. For context, that is about $2,100 per Black American. Native reparations would need to total about $7 billion ($1,900 per person) to cross below the White poverty threshold.

Thus, for slightly under $100 billion, the U.S. could eliminate the poverty gap between White Americans and Black/Native Americans.

While these figures matter and reparations would reduce poverty, that is not their sole goal, reparations should eliminate all opportunity gaps. I would argue that universal programs, such as UBI, public child care, government health insurance, etc, should be focused on eliminating poverty until the poverty rate is near 0% for all racial demographics in America.

Median Household Income Gaps

The median household income for a White household in the U.S. is $59,686, that same number for Black and Native households is $40,505 and $44,217 respectively. The next charts examine what new spending levels are necessary to completely close the gaps. The gaps are closed when Black/Native median household income reaches 100% of White median household income.

With new government spending of approximately $250 billion ($5,835 per Black American) Black median household income would equal White median household income. For Native Americans, new spending would need to total roughly $16 billion ($4,342 per Native American) to match White median household income.

Mean Household Income Gaps

While closing median household gaps is a step in the right direction, closing the average household income gaps is arguably more important to begin to equalize access to power in our country. Average income gaps are larger than median gaps due to the immense amount of income made by the richest Americans. The average household incomes are as follows: White: $76,725, Black: $52,687, Native: $55,386.

Again, on the charts below, average income is equalized when Black/Native average household income is 100% of White average household income.

Average Black household income is equivalent to average White household income at $350 billion ($8,170 per Black American) in new spending. For Native household income, new spending would have to be $25 billion ($6,876 per Native American).

Thus, to close the unnatural average income gap between Black/Native Americans and White Americans the government should make monthly payments of $681 to every Black American and $573 to every Native American.

These income supplements would cost a total of $375 billion in the first year. I recommend these increases in spending are offset with a wealth tax that would be another tool to close opportunity gaps.

This number should be adjusted each year based on new data. In the long-run payments will fade out as meritocracy and power sharing increase.

Conclusion

Even some that accept that racist institutions are solely responsible for racial opportunity gaps may believe that the government should not target individuals by race under any circumstances. One might ask, why should a rich Black American get a payment while a poor White American does not?

While this question matters, it misses the point. Reparations are not anti-poverty programs. You can and should argue for other universal programs that eliminate both global and domestic poverty.

On the other side, some pro-reparations may view them as “apology payments” that make amends for the past, this logic is shaky on moral grounds and risks reparations being seen as a one-and-done cash transfer.

Real reparations acknowledge that racist institutions created unnatural gaps in America, and that these unnatural gaps have created immense human suffering and social division. It is time that America begin the “repairing” process and eliminate all opportunity gaps. Thus, true reparations will be an ongoing endeavor that should be re-evaluated each year, a simple place to start would be with monthly payments of $681 per Black American and $573 per Native American.

*Note: For this paper I only used people who selected “Black only” and “American Indian, Alaskan Native only” on their survey. Because race is a social construct and not a biological fact there will certainly be some debate over who is eligible for these payments. As a White person, I did not feel that I should weigh in on this debate, but please be aware that some numbers would change as reparations are made more inclusive or exclusive.