Persistent racial inequality in the United States

8 Conclusion

The summer of 2020 saw the largest mobilization for racial justice in U.S. history.¹ Although it was most visibly driven by outrage against police violence, the movement broadly demanded that the levers of public policy be used to create a racially just and equitable society.

This demand comes from the understanding that, while racial inequality remains a stubbornly persistent problem in the U.S., it can still be changed. The first three-quarters of the twentieth century saw a large decrease in racial inequality. One study found that about 50% of the increased intergenerational mobility for individuals born between 1910 and 1950 can be attributed to increased Black access to education, health, and higher-paying jobs—all of which helped narrow the income gap. Indeed, Black women, the lowest income subgroup in the early twentieth century, have since overtaken Black men in expected earnings and even caught up with White women of the same parental income. However, overall racial convergence has largely stalled since the 1980s. What might be required to start making progress on racial equality?

Myrdal argued that given the reinforcing effects of low wealth, poor schools, and the prejudice of White people that faced the descendants of slavery in the U.S., a “big push” was needed to turn the “vicious circle” of racial inequality into a virtuous one. One such policy was to encourage migration out of the South. At the time Myrdal wrote his ideas in the 1940s, the second wave of the Great Migration was picking up, and millions of Black people did move out in the subsequent 30 years.

Myrdal, however, underestimated the racial prejudices and political power of White people in Northern cities, which re-created the conditions for persistent poverty in Northern cities as documented in Section 4.

However, an important part of his plan, which was not implemented alongside the Great Migration, was a national jobs program in the Northern and Western cities to facilitate Black employment. Together, Myrdal reasoned, a critical mass of high-wage Black employment in cities relatively free from the legacy of racial slavery would end the vicious circle of American inequality. Perhaps with such a jobs program, Black workers could have afforded houses in places with good schools, and White people in the North would not have believed so strongly that Black people would be likely to engage in crime.

The three mechanisms of racial inequality discussed in this Insight are intertwined, as modeled in Figure 18.

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https://books.core-econ.org/insights/persistent-racial-inequality-in-the-united-states/08-conclusion.html#figure-18

Figure 18 The feedback cycle between the three key mechanisms.

This model is, of course, a simplification of a more complex set of processes, but it allows us to highlight the way each of these mechanisms of inequality feedback on themselves and each other. Throughout the Insight, we explained how discrimination contributed to segregation via government policies and racism in the housing and banking industries, but a segregated society is also one where negative stereotypes are more likely to develop and flourish. This fact is particularly true when one group is economically and politically dominant, because the economically weaker group is likely to suffer multiple negative effects from their segregation, which in turn affirms the negative stereotypes of that group. Thus, segregation is not simply caused by discrimination, but also helps cause it. The connection between political inequality and discrimination similarly goes both ways, with discrimination in the political system both causing the political inequality and being caused by it, as low political power prevents policies that reduce segregation, which feeds the stereotypes and attitudes connected to discrimination.

universal policy

A policy which applies equally to all citizens, regardless of their demographic characteristics.

targeted policy

A policy aimed at some specific group or groups.

Making progress on disrupting and eliminating these vicious cycles will require political changes, cultural changes, and good policy. Policies which affect racial inequality can be loosely divided into two categories: universal and targeted. Universal policies are those which apply to all citizens regardless of race. Targeted policies, on the other hand, are policies which, in this context, are specifically aimed at reducing racial inequalities. Some examples of universal policies which would likely reduce racial inequalities are:

• Affordable universal healthcare
• More equitable educational funding
• Enhanced voting rights
• Policies aimed at reducing wealth inequality such as taxing inheritances
• Supporting poor families with income transfers
• Policies which promote full employment, such as a job guarantee

For example, consider a policy that increases overall employment rates in the U.S. economy. Since Black workers are more likely to be unemployed, such a policy would disproportionately benefit Black workers. Similarly, making it easier for everyone to vote will have the biggest effect on Black voters, since they are currently much more likely to face barriers to voting.

Exercise 11 Student debt and other universal policies

1. Black students have much higher student debt (at more unfavorable interest rates) than comparable White students. Eliminating student debt and making higher education free has also been suggested as a policy which would reduce the level of persistent racial inequality. Some critics, however, disagree, and believe it would have little to no effect on racial inequality, with some even suggesting it would make it worse. Based on what we have learned in this Insight, what effect do you believe eliminating student debt and making higher education free would have on racial inequality? Explain your reasoning.
2. Can you think of other universal policies which would help reduce or eliminate persistent racial inequalities?

Given the depth of existing inequalities, universal policies alone might not eliminate persistent racial inequality, and need to be supplemented with targeted policies. The downside of targeted policies, however, is that they may be perceived as unfair by those excluded from any resulting benefits. For example, preferential admissions for underrepresented racial groups to colleges has been the subject of lawsuits filed by White and Asian students. Although these perceptions of unfairness may be unjustified, they remain an important practical and political obstacle to implementing targeted policies.

Below are some examples of policies targeted at reducing persistent racial inequality:

• Desegregating housing and schools to improve access to education. America remains starkly segregated despite the progress of the Civil Rights Movement. Much of this segregation occurs via private markets in housing and schooling, where richer, White families move into high-priced neighborhoods with good schools.
• Anti-discrimination policies. There is an important role for cultural representation and other policies to combat racial stereotypes, including a need to transform organizational cultures and institutions that reproduce White supremacy such as in police departments and policing practices.
• Reparations. There has been a longstanding debate about reparations and race-specific redistribution. There are many other examples of countries paying some form of restitution for past injustices, including in the U.S., which paid reparations to Japanese citizens who had been interned during World War II. The rationale for reparations is that since our past and current policies and institutions created today’s racial inequality, we collectively owe it to Black people to rectify that injustice. The economists William A. Darity, A. Kirsten Mullen, and Marvin Slaughter estimate the bill to be at least 14.3 trillion dollars, though this number is disputed. A redistribution of this amount of wealth from White to Black people would almost completely erase the Black–White wealth gap. But it could be that a one-time redistribution of wealth does not alter the long-run wealth gap, particularly if other needed changes are not made. This issue highlights the case for some large and targeted redistribution of wealth if racial inequality in wealth is ever to be eliminated.

Suppose that three policies were passed at the same time: (1) expanded voting rights, (2) more funding to enforce anti-discrimination laws, and (3) extended down payment assistance for Black borrowers looking to buy a home. Expanded voting rights would make it easier for Black voters to protect any gains resulting from the other two policies. Having the resources to better enforce existing anti-discrimination laws would boost Black income and wealth by giving them better access to lucrative jobs and good credit, and would help ensure that Black mortgage borrowers could use the expanded down payment assistance to move into more-integrated neighborhoods. More-integrated neighborhoods would likely result in weaker discriminatory attitudes and more equal access to educational resources, further boosting Black economic prospects. Decreasing discriminatory sentiment and higher Black income and wealth would also likely further increase Black political power, making it easier to implement more policies that further reduce racial disparities. The reality is more complicated, but this thought exercise shows how multiple policies can be used to reverse the vicious circle of racial inequality.

Many of these proposals are not new. Following the last large mobilization against racial injustice in the 1960s, U.S. president Lyndon Johnson formed the Kerner commission to investigate the causes, which issued a report recommending many of the policies listed above. However, the report was ignored, prompting the great Black psychologist Kenneth Clark to remark:

“I read that report … of the 1919 riot in Chicago, and it is as if I were reading the report of the investigating committee on the Harlem riot of ’35, the report of the investigating committee on the Harlem riot of ’43, the report of the McCone Commission on the Watts riot.

I must again in candor say to you members of this Commission—it is a kind of Alice in Wonderland—with the same moving picture re-shown over and over again, the same analysis, the same recommendations, and the same inaction.”

This Insight shows that racial inequality has fallen over the last 150 years but still persists. Progress on these issues is possible, but requires political will, sustained attention, and activism from a large set of Americans, both Black and non-Black.