Understanding Racial Disparities in Lifetime Earnings and Life Expectancy

KIRSTEN BROADY: Good morning. I'm Kristen Broady, Director of the Economic Mobility Project, here, at the Chicago Fed. Thank you for joining us for "Understanding Racial Disparities in Lifetime Earnings and Life Expectancy."

Data from the Federal Reserve's survey of consumer finances and research from economists, including myself and those you will hear from during today's program, have documented a historical and significant disparity in wealth between Black and white Americans.

And we know that one of the major components of wealth is income As is the case with wealth racial income inequality has persisted for decades and has been impacted by changes in life expectancy, advances in medicine and access to education, among other factors.

During today's event, you will hear from Chicago Fed economist Dr. Ezra Karger, who will present his research on the Black-white Lifetime Earnings Gap for Black and white Males Born Between 1900 and 1970.

Ezra's presentation will be followed by a panel discussion during which experts on topics, including wealth, social equity, labor, household finance, and the economics of aging, will discuss factors associated with changes in life expectancy and how life expectancy and economic well-being have changed since 1900.

They'll share their ideas for policies that might decrease the gap in the Black-white lifetime earnings ratio. We're pleased that you have joined us this morning. And now I'm going to turn it over to Ezra Karger. Ezra.

EZRA KARGER: Thank you so much, Kristen. So today, I'm going to be presenting, briefly, some academic research that I conducted with my co-author, Anthony Ray. And the goal of this project was to document, descriptively, the Black-white Lifetime Earnings Gap.

And I want to talk a little bit about how this is different from prior work on this topic. So there is a significant literature, a significant amount of work looking at income inequality, Black-white gaps in income. So this research takes a typical person in America, a typical white person in America, and it asks how much money are they making in the labor force and how do these numbers compare.

The goal of this project was to extend those measures of inequality, to combine income and life expectancy into an overall picture of Black-white inequality over the past century. Throughout this presentation, I'm going to focus on men. And this is because, for this project, there were large changes in female labor force participation between 1900 and 1950 and the present. And so we wanted to take a group of people, for this project, who were in the labor force at reasonably high rates, in the traditional labor force at reasonably high rates, over that entire time period.

So the problem that we're going to discuss is that standard measures of Black-white income gaps provide a partial and incomplete measure of inequality and understate the amount of Black-white inequality in the United States, especially historically.

What we're going to show is that, in a typical year, the average white male earns about 1.6 times as much in the labor market as the average Black male. But this understates Black-white inequality, especially in the early time period that we study, because Black-white gaps in life expectancy are very large. And so to think about this with, maybe, an example, if you're measuring inequality between two groups, if half of one of those groups doesn't appear in your data because they are not alive, that's going to make it look like inequality is lower than it actually would be if you included that group in your calculation.

So we are going to propose a focus on lifetime earnings-- a calculation of how much money people, on average, made over the course of their careers. And we're going to argue that this measure of lifetime earnings provides a more comprehensive summary of Black-white inequality.

And using this measure, we show that white males earned more than 2 and 1/2 times as much as Black males, especially at the beginning of this time period. And that number has declined over time, but it remains elevated and significantly higher than the typically measured measures of Black-white income inequality of 1.6.

So I want to start with this descriptive fact based on data from the CDC and vitality statistics. And this is the probability that a Black and white male would live through age 30 as a function of when they were born.

You can see here, which I found pretty shocking as someone who doesn't work as much with mortality data from the early 1900s, is that in the 1900 birth cohort, Black males had around a 50% chance of dying before they reached age 30, and white males had about a 25% chance of dying before they reached age 30. So these were incredibly large gaps that drive measures of inequality during this time period.

Those gaps did shrink. They became much smaller through the 1920 cohort. And there's academic research about how Jim Crow laws and access to medical institutions, hospitals might have affected this gap-- caused both the large gap and then the convergence in this gap.

But you can see that this gap in the probability that Black and white males survive until age 30 remained relatively significant, for the 1920 birth cohort, and has converged, only slightly, from that period to today. And so this is going to affect our measures of lifetime earnings, because, if you are a person who dies at the age of 30, you haven't earned a lot of money, over your life, relative to someone who lives until the age of 80.

So let's take a step back and talk about the typically discussed measures of Black-white income inequality. And this uses data from the decennial censuses. It uses various imputation procedures and averaging procedures. And the goal of this figure is to show you that the ratio between the average amount of money that a Black male and a white male earned is relatively constant over this very long time period.

So the average white male was earning about 1.6 times as much as the average Black male, for the 1900 birth cohort when they were aged 30 in 1930, and that has continued roughly to the present.

If you look at people born in 1970, in their 30s, 40s, and 50s-- so those are people measured closer to today in the 2010s and 2020-- those people are still seeing these gaps where you have the average white male earning about 1.6, 1.7 times as much as the average Black male. So this makes it seem like inequality levels are at about this 1.6 gap. But also note the trend hasn't really changed at all. We argue that this is very misleading.

If you look at measures of lifetime earnings-- this is a figure taken from our paper. I'm not going to go into what all of these lines mean. But each of these lines is plotting a measure of lifetime inequality that combines mortality and life expectancy information with income information.

And what you can see, from all of these lines, is that you have very high levels of inequality for the 1900 birth cohort. You see convergence. You see some convergence through the 1920 birth cohort. And then you see relative stagnation, at pretty high levels, from the 1920 birth cohort through the 1970 birth cohort.

So we need to focus on one of these lines. If we look at the red diamonds, so this is the bottom line on the graph. This is a measure that takes into account labor earnings, Social Security income. It accounts for things like state and federal taxes. And what it says is that that post-tax measure of earnings, if we sum it up over people's lifetime, in the 1900 birth cohort, you would expect that the average white male would earn around 2 and 1/2 times as much as the average Black male. And by the 1920 birth cohort, that number was maybe closer to 1.8 or 1.9. And it's remained at that level, and maybe even increased a little bit, through the present, through the 1970 birth cohort, which we're projecting out, measuring today.

These gaps and trends are even larger if you use any of the other measures that we proposed in the paper, including measures that rely on models and measures that rely on calculations of the value of statistical life. But in all of these cases, you see this pattern where there's a reduction in inequality, between the 1900 and 1920 cohort, and the relative stagnation from then until the present. And so this is a fact that we wanted to document in this paper.

So what are the key takeaways? Its historical context, which I think is very important for people to understand. Black males, born in 1900, face much higher rates of early mortality, and nearly half of Black males died before the age of 30 compared to only about a quarter of white males. Much of these mortality gaps were driven by childhood mortality, when access to hospitals may have been different, access to neonatal care may have been different. This matters a lot for measuring Black-white inequality, which is often just using income, at age 30, for the people who happen to end up in survey data at age 30.

And so white males born in 1900, who happen to be alive at age 30, earned about 1.6 times as much as the average Black male born in 1900. But white males born in 1900 earn about 2 and 1/2 times more than Black males over their lifetime. And this large gap is something that I think previous research hasn't dug into much.

So to summarize, cross-sectional income inequality masks large gaps in welfare because of Black-white gaps in life expectancy. And a measure of inequality that combines mortality rates, life expectancy, and income shows much larger gaps, in the early 1900s, which converged a bit through the early to mid-1900s, and then have largely stagnated since. So there's more work in the academic paper, which is online. And I'm excited to hear from the panel. Back to you, Kristen.

KIRSTEN BROADY: Thank you so much, Ezra. I now have the pleasure of introducing our esteemed panelists. Dr. William Darity is the Samuel DuBois Cook Professor of Public Policy, African and African-American studies, and economics, and director of the Samuel DuBois Cook Center at Duke University.

Dr. Nicholas Hill is the Dean of the School of Business and professor of economics at Claflin University.

Dr. Damon Jones is an associate professor and associate director of the Stone Center For Research on Wealth Inequality and Mobility at the University of Chicago's Harris School of Public Policy.

Dr. Sita Slavov is a professor of public policy in the Schar School of Policy and Government at George Mason University.

And now I am very pleased to introduce Jonnelle Marte, Federal Reserve and economics reporter for Bloomberg News. Jonnelle, I'll turn it over to you.

JONNELLE MARTE: --that wonderful introduction. It is a true honor to be on this panel with such esteemed and important experts in this field. So I want to thank Ezra for giving us the presentation. The numbers are very stark. And as you said, it actually doesn't state-- it understates the true measure of inequality that we're seeing in lifetime earnings and in life expectancy. So it's important that you walked us through that progress that was seen but, at the same time, pointed out that there's been some stagnation.

So let's dive right into the conversation here. Why don't we start by looking at what Ezra pointed out. We had, in the beginning, white males that were born in 1900 had an average life expectancy of 47 years. But Black males born in that same year had an average life expectancy of 33 years.

So for the panelists, if we could talk a little bit about why you think it is that Black males had that much shorter life expectancy than white males. Sandy, if you want to start.

WILLIAM DARITY: Sure. I think that, in general, when we observe very low rates of life expectancy, it's typically-- not always but it's typically driven by high rates of infant and child mortality. And we know that there were exceptionally high rates of infant and child mortality.

So, for example, if we were to look at the year 1920, the cohort that was born in 1920, if we were to compare Black and white infant mortality rates, the Black rate was in excess of 185 per 1,000 live births. So virtually 1 in 5 Black infants did not make it to the first year of age. In contrast, the white infant mortality rate, while still high, was approximately half of that, 99 per 1,000 live births. And so that would be about 1/10 of the infants that were born to white mothers.

And so then, if we extend the analysis to look at child mortality, that is children who die before the age of five, the Black mortality rate was also significantly higher than the white mortality rate. So we have to investigate, I think, in a very, very substantive way why there was much higher infant mortality in the Black community.

And I would attribute that to the evidence that we have about the higher levels of maternal malnutrition among Black women attributable to their lower incomes and poverty. I would also attribute it to the poor infrastructure for public health and sanitation in many Black communities under the orbit of the Jim Crow regime.

And in addition, we had a situation in which Black families were also confronted with a situation in which they had inadequate access to medical care. And so one of the prime indicators is the fact that, in 1928, there was only one hospital bed for every 1,941 Black Americans while there was one hospital bed for every 139 white Americans.

And so I think that we have to look very closely at infant and child mortality as the explanation for the difference in life expectancy. Men are not generally dropping dead at 49 or 33. But what is happening is newborns are not surviving to adolescence.

JONNELLE MARTE: That's a really important point, the disparities, of course, starting at birth. So did Nicholas want to have anything to add or Sita?

NICHOLAS HILL: Yeah. So along with that, one of the things that I'm considering may be impactful is the type of labor opportunities that were available at that time. A lot of Black males, in particular, had to earn wages doing hard manual work, which includes sharecropping and farming, and some of which were in areas where it led to a lot of spread of diseases that were talked about. And when you don't have adequate health care, that leads to that.

And then along that line is when those who start migrations to the North, to seek different opportunities, they were housed in these different areas that had, as was previously mentioned, low health, environmental health concerns that led them to catch diseases at a higher rate and things like that. So that's the only thing I would like to contribute at this time.

JONNELLE MARTE: Thank you. Sita, did you want to say anything more?

SITA NATARAJ SLAVOV: So I would add, I do think infant and child mortality, that's a big part of this. Even if you look at people in their early 60s, though-- and that's something that I've studied a little bit-- is conditional on living to your early 60s. You still do see a racial gap in life expectancy. It's not as big. But it is there for this cohort. And it probably reflects differences in health or access to health care, maybe the experiences or access to health care you've had over your entire life.

JONNELLE MARTE: And Damon, please.

DAMON JONES: I think people have covered, I think, what would come to mind as some of the main factors for that initial stark gap that we saw.

JONNELLE MARTE: So let's talk a little bit about the progress that was seen. So the life expectancy-- let me pull up the numbers here. So we did see that life expectancy increased between the 1900 and the 1940 birth cohorts. And that Black-white gap, for male life expectancy, did shrink a little bit from 14 years to 10.6 years.

So what are the factors that contributed to that decrease in the life expectancy gap? And then why did it stop after that point? We saw some progress and then it stalled.

DAMON JONES: Yeah. I can start by saying that, if you look at when those later cohorts were born, they're going to be growing up living and working through that kind of post-war period. And I just think, when you look at a number of different economic indicators, earnings, wages and wealth, there's this period where there's a little bit of closing of some of those economic gaps, during the same period, that people refer to as a great compression, where, in general, there was growth in the economy. And it was more evenly spread through the economy.

And in a lot of studies that followed this over time, they find that that compression seems to stall in the late '70s. And so then you see wealth gaps, earnings gaps, and things like that remain in place, especially if you focus on certain parts of the earnings distribution, thereafter. So it's not surprising that, with life expectancy, you also see some of that gap closing but then slowing down. That seems to be in line with other economic factors that people look at. And those can be related.

JONNELLE MARTE: Does anyone else have any thoughts on what could have contributed to at least some of the gap closing a little bit during that time frame? OK. Well, let's continue the conversation on earnings, which Damon already brought up.

So the white to Black ratio for average earnings, for the 1900 birth cohort, was about two. And this was for people, for men, specifically, in their 30s, 40s, and 50s. Now, that earnings gap dropped to around 1.7 for the 1945 birth cohort. And yeah, but then it increased a little bit. So again, the similar trend of there was some improvement, in terms of closing the gap, and then a little bit of stagnation.

So what do we think is contributing to or what do we think contributed to the changes in that ratio? First, do you want to jump in at this point?

WILLIAM DARITY: So I'm not so sure how much of a well-being dimension we should assign to these types of gap measures. The measure that we're typically using in this context is the white to Black ratio in earnings. And that ratio actually could narrow at the same time that the dollar value of the gap actually could widen. And so I'm not sure what the data would show us about the dollar values of the gaps. But I think that that's something that we would also need to pay attention to, to make some stronger assessment, as to whether or not there was something that we're calling progress that was actually taking place.

And the reason why I'm concerned about the distinction between looking at the ratio versus looking at the monetary gap comes into clear focus when we think about changes that have occurred in the white to Black ratio of wealth in the United States. So for example, between 2019 and 2022, using the Fed's own data from the Survey of Consumer Finances, we actually observed that the white to Black ratio in net worth actually gets smaller.

It actually declines between those three years. But at the same time, there is a significant increase in the dollar value of the differential, so much so that, even if you take into account inflation, you're talking about a 16% difference or increase in the difference in the money value of wealth between Black and white households.

JONNELLE MARTE: There's a lot of different ways to look at the numbers. Very important point that you're making there. So what are some of the other things that might have contributed to the change that we saw, either way, between those cohorts?

NICHOLAS HILL: Things that I think we need to consider also is what was going on during that period of time. There was a lot of not only violence but discriminatory practices that was legalized throughout not only the South but throughout the country. This led also to earnings being-- the gap is widening early on, as I mentioned earlier, with regards to sharecropping and land renting and things like that associated with type of production.

And then, as you start to move up into the North, you start to see, also, that you had discriminatory practices with wages and earnings associated with that. I will say that you start to see, toward the 1945-era, with the different World War, there was increased production. So while those people were going off to war, there may have been opportunities associated with employment for people to earn, quote unquote, "more" money during that.

But I do not take-- without understanding that Jim Crow was alive and well during that era. And so that kind of ramps up right before the civil rights movement and things like that, that caused a lot of discriminatory and segmentary practices.

DAMON JONES: Yeah. I would add, during that period where we see this ratio declining, there were some changes in the labor market, as well. There were many minimum wage increases and expansion of industries that were covered by the minimum wage. That could have contributed to that ratio going down. This was a period of, in general, the lower earnings part of the labor market having relatively strong growth in wages and earnings during that period. And so some of that could have affected some of those cohorts where you see that ratio decreasing.

JONNELLE MARTE: So that's a conversation around wages, earnings in the moment. Now, when we look at the lifetime of a person, so white males that were born in 1900 earned roughly 2.6 times, over their lifetime, as much as Black males born in 1900. So that's lifetime earnings ratio. This fell a little bit to 2 for the 1920 birth cohort. But it remained virtually the same for the 1970 birth cohort. So now we're talking about the ratio for lifetime earnings coming down a little bit, again, between 1900 and 1920, and then staying the same until 1970, the data that we have.

So why do we think that that ratio hasn't changed, didn't change during that time frame? Well, what might have been going on in the economy and, again, with this country that could help us to understand a little bit about why it did come down and then stopped?

WILLIAM DARITY: So to the extent that we can take seriously these ratio measures as an indicator of improvement, the key thing that's relevant is that the cohort born in 1920 would have been in their prime working years, at the point at which the Civil Rights Act of 1964 was passed and the Voting Rights Act of 1965, where we had the introduction of substantial anti-discriminatory measures in the United States. And there is some evidence to suggest that there was a convergence in earnings that took place, in the aftermath of that legislation, through the 1970s.

It stalls out in the 1980s. And that's perhaps something that we need to really investigate, very closely. But I don't think it's mere coincidence that was the period of the Reagan administration.

DAMON JONES: Yeah, I think another thing that's happening is some of those forces, those civil rights laws that were passed, would be pushing you towards a lower ratio. And then once you get towards those later cohorts, there, as Sandy mentioned, their earnings, their peak years are during the '80s and the '90s, where we know the highest earning people took off and started to receive much greater growth in earnings and wages during that period. And that was--

Black people are underrepresented in that group. So that's going to push back against those other factors. And that could be something to counterbalance or keep that ratio from continuing to converge during that period.

NICHOLAS HILL: And one of the other things that I think has been mentioned, if we look at the end, first, before we go back to the '20s, is that you also have, with that civil rights legislation, the passage of Brown versus the Board of Education as well. So you're thinking about after the civil rights movement, toward that time, you had a larger proportion of Blacks able to increase educational attainment.

So with that, there is some relative correlation between higher educational attainment, as well as income, as we start to come up. So you start to see that be one of the possible factors associated with that. Whereas, early on, in the 1920s, in an era with all the discriminatory practices and, as has previously been said, with the Jim Crow laws, it was hard for Blacks, in particular, to attain higher levels of education in the space to get earnings.

JONNELLE MARTE: Thank you. And Sita, was there anything else that you might want to add about the improvement in the ratio and then the lack of--

SITA NATARAJ SLAVOV: Yeah, sure. So this is not a direct answer to the question. But one thing that I thought was interesting is this paper focuses on lifetime earnings both before and after taxes. A similar type of analysis could be done for government benefits, as well. So something that I've looked at is the Social Security program, which, if you look at the Social Security benefit formula, it looks pretty progressive in that people with higher earnings do get a higher monthly benefit. But that monthly benefit is a smaller share of their pre-retirement earnings.

But that's only looking at the monthly benefit. When you add up expected benefits, over a person's whole lifetime, then differential mortality can actually undermine some of that progressivity. So I think that's just a point that I wanted to make that earnings, that's kind of one dimension. But there are these other dimensions of people's income that this might apply to, as well.

JONNELLE MARTE: So speaking of other dimensions, let's come back to a topic that came up at the start of our conversation, and that would be health care as well as educational attainment. So how has better access to health care and have increased levels of education impacted the Black-white disparity in life expectancy and in earnings? I'm thinking a little bit about, as well, the historical role of racism that has been in place for medicine.

WILLIAM DARITY: Well, I don't think there's a consistent story here. We have certain paradoxes about educational attainment and its relationship to certain types of health outcomes. Certainly, I don't think that there's substantial evidence that greater educational attainment reduces the incidence of hypertension among Black Americans.

More educational attainment doesn't actually reduce the infant mortality rate for Black mothers. In fact, the women with the highest infant mortality rates in the United States are the most highly educated Black women-- Black women with professional degrees and Black women with advanced degrees. And so I think we have to explore huge aspects of how racism operates in the system of medical care. These things are not merely resolved by having higher incomes or higher levels of education.

DAMON JONES: And Sandy, was that infant mortality or maternal mortality?

WILLIAM DARITY: It's infant mortality. And maternal mortality does not necessarily decrease with greater educational attainment either.

DAMON JONES: Yeah. I guess I just would add there's two things that happen with education. There's a long history of evidence that there's a return, there's a premium to college graduation or higher education for people's earnings. But I think people with higher levels of education tend to have higher earnings. And then there may be a gap in that return, which means that it doesn't necessarily mean that the inequality closes at higher levels of education. It depends on who can cash in the most on that educational attainment. And so both of those things-- I think we see evidence for both of those, that people with higher education improve their earnings. But it may improve even more so and could increase gaps if you're comparing, for example, white and Black earnings.

NICHOLAS HILL: Things I can add-- I think the relationship between educational attainment and health care, I guess attainment or the increase of your viability to live is also linked to your environment.

And so a lot of times, if we're still living in places that have a lot of segregation, and segregation in the areas where Blacks are kind of huddled together in urban cities and areas with lower environmental protections and things like that, you will start to see, regardless of how much you earn, you're still in the same living conditions that lead to some of the health problems that we kind of see. So to that end, there may not be a direct correlation between the two associated with that.

JONNELLE MARTE: What would you say the impact is, if any, in the trustworthiness of medical providers? No, no takers on that? OK.

WILLIAM DARITY: I'll take it. No, I mean, trustworthiness is critical. People are less inclined to actually utilize medical services that might be available to them if they are not confident that they will get good care.

And so given the history of the medical system in the United States, the use of Black bodies, for experimental purposes and experimentation that was not conducted with the consent of the individuals who were impelled to participate in these experiments, the fact that many medical professionals, to this day, believe that Black people feel less pain than white people given a similar kind of injury, the expectation that Black people's bodies are more durable, in some sense, and that there are certain diseases that are specific to Black Americans or to other Black people, internationally. All of these kinds of factors play into having poor medical care. And this diminishes the degree of trust that Black patients might have in the health care system. And so, yeah, I think that's an important factor.

DAMON JONES: Yeah. And I would want to add to that that there's some recent evidence, from Marcella Alsan and coauthors that the medical trials aren't representative, the samples of people that are participating in medical trials for different types of drugs or interventions or cures.

And there's evidence that shows that this also causes people to be differentially trusting of the potential treatments that are presented. If you know that the sample only included a certain race and it wasn't representative or it's unclear how much that extends to you or applies to you, that could also contribute to create a barrier to people feeling confident that the care that they're getting is appropriate and adequate or that the evidence backing up the care that they're giving applies to them.

JONNELLE MARTE: Really, really important points that are being made here that are relevant to the past but also to the current moment, clearly, having just come out of this or still coming out of the pandemic that we all experienced. So does anybody else have anything else that they want to add? Or I was going to talk a little bit about what we have seen in recent years.

So there was a movement, which we saw, which we covered and witnessed after the murder of George Floyd, a lot of companies moving toward saying we're going to improve diversity, we want to do more to address inequality, and a lot of investment in diversity, equity, and inclusion programs at different workplaces and just different initiatives all around the country.

Of course, in recent months what we've seen is a little bit of pulling back on those efforts. We also had the Supreme Court ruling last year that abolished or effectively abolished race-conscious college admissions. And as well, we've had more than 30 states introducing laws that either ban or limit these sorts of DEI initiatives. And many companies, as well, are cutting back on their efforts or on their teams that are focused on that. So what impacts do we think these changes could have on racial disparities and on economic well-being? I don't know if Nicholas wants to start us off.

NICHOLAS HILL: Yeah. Yeah. Thanks. Thanks for this. I think this conversation is a good one to start to look at with regards to not only industry but also educational access. One of the things that I think is important is to also highlight the commitment that HBCUs, in particular, have done, throughout history, of educating people regardless of race, gender, or religion. That's the original mission associated with it.

So you have universities like Claflin University, the Jackson State University, Tougaloo College, Howard University. You have all of these universities that are committed to this process of educating people. So happens to be that we have a large proportion of the student population that are Black and Brown persons.

So that work has always been going on. And it's all about getting access to educational opportunities so that they can further their career and what they're doing but also increase the earning and income throughout their lifetime. One of the things that I think, with these programs and the attack on it, is it's limiting the access that larger universities, who typically don't have that population, to talent.

So one of the things that is there is not from the standpoint of how they misconstrue the conversation around DEI. I think it's just based on the fact that you have a racial condition that you can check a box on. But it's more so, how do I get talent from areas that I typically don't recruit from or typically don't get? So that's one of the issues.

Now, for the workforce, the same thing goes. There are a lot of things that happen, from a promotion standpoint, discriminatory standpoint, that we are aware of. What are some ways that we can change that so we can have the most talented person in positions to do the work, not necessarily have people, who are placed there, who are not necessarily qualified.

So I think some of the rhetoric and some of the conversation around DEI has been kind of co-opted. It has been changed from what the original purpose of it is. And I'm just proud that I get an opportunity to work at institutions that believe in educating people regardless of what their race, gender, or religion is.

WILLIAM DARITY: I think that the rapid retreat that we're experiencing, from the changes that occurred in response to the "year of reckoning," if you will, is restoring the conditions that existed, say, in 2019 and may actually be on track to restore conditions that existed in 1959. And that will mean that the types of income disparities, that we are observing between Blacks and whites in the United States, probably will become worse.

And I would urge people to start measuring those differentials at the money value and not look exclusively at the ratios as I suggested earlier. But there's another point I want to make, which is I think we have to be careful to separate the factors that lead to income disparities from the factors that lead to wealth disparities. And I think it's misleading to suggest that there is a strong connection between income gaps or earnings gaps and wealth gaps by race.

So this is contrary. I'm making a statement that's contrary to what I would describe as the Fed view, which links earnings and income directly to wealth. That perspective is predicated on the view that intergenerational transfers of resources are not all that important in dictating the racial wealth gap. I think that they are vital. They're central to the determination of the racial wealth gap. And that's something that's not going to be affected in a significant way by the trajectory of income differences.

So I just want to say that if our policy concern is income disparities, that leads us to one set of programs or initiatives. If our concern is wealth disparities, then we have to think about it in a very different way.

JONNELLE MARTE: Thank you for bringing us to the point of what can be done. What are some-- so this is my next question. What are some of the policy approaches that could be considered or should be considered to help to narrow some of these gaps, at least, in earnings? I guess it depends on what you're saying. If we're talking about earnings, if we're talking about life expectancy, and if we're talking about wealth, it will vary. But what are some of the things that you think should be in the conversation, in the mix? Maybe, Sandy, did you have any solutions or policies that you think we should be [AUDIO OUT]

WILLIAM DARITY: Nowadays, in my old age, I have a ton of solutions. But I'm never particularly confident that any of them will ever be adopted, at least not while I'm still around. Nevertheless, I do have some suggestions.

If we're concerned about income disparities, there actually are some programs that could be designed, for all Americans, that might have a disproportionate benefit for Black Americans in terms of improving their income position. And one of these would be a federal job guarantee for all Americans, which would eliminate joblessness.

I like to put it in this way, that the Phillips curve would become vertical at a 0% rate of unemployment. And so that's one policy that I would want to introduce that's focused on income disparities. A second that I would mention, that's vital, is a restoration of anti-discrimination measures, which have been weakened, progressively, over the recent months. And so I think that those are two steps that are really critical if we're concerned about earnings and income differentials.

So we need some way in which we can protect all Americans from exposure to poverty. A job guarantee might be the way to do it. Guaranteed national income might be the way to do it. But that's the first thing. And then the second is we have to address the presence of discrimination in labor markets.

If we're talking about wealth disparities, though, on the other hand, there is one universal program, that I've been an advocate of, and then there's a program that I think must be designed specifically for Black Americans. The universal program is a baby bonds program, which would provide a trust account for every newborn infant in the United States. And this is a way in which we could moderate the degree of wealth inequality in the United States.

On the other hand, if we want to eliminate the Black-white disparity in wealth, then I think we have to make direct payments to Black Americans, whose ancestors were enslaved in the United States, and that could constitute a reparations program. You might want to call it something else. But the idea is that you make direct transfer payments to alter the wealth distribution in the United States by race.

JONNELLE MARTE: Thank you. Yes, hopefully, we'll see if they get to be considered down the line. Do we want to hear anything else, maybe from Nick or from Damon or Sita, other policies that you think should be considered or should be in the mix when we're looking at these disparities?

NICHOLAS HILL: Well, Sandy, real quick, I wanted to ask you about, also, home ownership programs or anything. Would that be a policy recommendation to help? I know one of the disparities that we start to see-- I know ratios, the problem with it is with the number of Blacks who own homes versus whites. Would any type of program like that lend itself to increasing the wealth attainment for Blacks and decreasing the wealth gap?

WILLIAM DARITY: So of course, increasing any type of asset would have some effect on reducing the gap in wealth. The question is how much of an effect. So if you were to equalize home ownership rates, you still would have the issue of there being substantial equity differences between Blacks and whites in terms of the value of their homes.

Now, if you were to correct for that also, then you could make some more significant headway towards trying to reduce the magnitude of the racial wealth gap. But I think, in this society, we have a tendency to romanticize home ownership and undercut the value and significance of other types of assets, which I think reinforce the gap between Blacks and whites.

And here, I would include the sharp difference in values associated with business ownership, the sharp difference in ownership of financial assets, like stocks and bonds, the sharp difference in the value of retirement accounts that are held by Black and white Americans. And so I think we have to also look at these other categories of assets.

And so my feeling is the way you close the gap is you give people direct monetary payments, in a sufficient amount, to eliminate the gap and then let them arrange their portfolios as they please.

JONNELLE MARTE: This is bringing us to the topic of how important it is to look across generations. So I wanted to ask, as well, about any more intergenerational interventions that you think could be effective for Black people with low and moderate incomes. And Sita, maybe we can bring you in here. You've done a lot of work on these programs and on aging and the economics of that. So what are some of the things that you think could be looked at?

SITA NATARAJ SLAVOV: Yeah. So I would say one of the biggest sources of retirement income for most people is Social Security. So shoring up that program's finances would be a huge thing. We expect to see the trust fund run out. And this is for all Americans. So the trust fund is going to run out of money in 2034, at which point there will only be enough money coming in to pay a fraction of the benefits. And so shoring that up would be a huge thing.

Another thing I've been thinking about recently is long-term care is a huge issue. And it's often done, informally, by women in their 40s or 50s, in their middle age, which leads to career interruptions, could lead to major impacts on earnings. And I don't know what the right solution is. But in an aging society, addressing that issue, the long-term care needs of the aging population would be a huge, huge thing.

WILLIAM DARITY: Yeah, for those of us who've been thinking about the federal job guarantee, we've been concerned about there being a variety of jobs that people actually could perform under this system of public sector employment. And one of the categories that has come increasingly to the fore is care work. And this would be inclusive of child care and also elder care. And so we could, potentially, under the aegis of a federal job guarantee, professionalize the provision of the type of care that you're talking about, Sita. And the women who might want to continue to provide that type of service could actually be reasonably paid for it in a way that they currently are not.

JONNELLE MARTE: Did anyone, anybody else on the panel want to talk about other programs that we haven't already addressed? If not, I want to say this has been a really fascinating conversation. We've heard about how these disparities start from the moment that you're born, from looking at the care that a mother receives.

We've talked about how the numbers aren't ever that straightforward. There could be-- certainly there are, and there should be lots of different ways to look at all of this. The importance of protecting some of the programs that are already in place and how even certain things, like income and improvements in income, will not necessarily close the gap-- close some of these other gaps that are also equally important.

I also want to give a shout out to the chat. I've seen a lot of smart comments coming in there looking at how we should also take into account the kind of jobs that people have, disparities in racial-- maybe racial disparities in who are the people providing medical care. All really important things that are playing, potentially, a role in some of the figures and some of these disparities that we're looking at.

So this has been a really invigorating conversation. Thank you so much to all of our esteemed panelists for taking part. And Kristen, I'll turn it right back over to you.

KIRSTEN BROADY: Thank you, Jonnelle. And thank you to our panelists, Dr. William Darity, Dr. Nicholas Hill, Dr. Damon Jones, and Dr. Sita Slavov, for such an enriching and enlightening discussion. I know I learned a lot. And I hope you did as well. I'd like to, again, thank Chicago Fed economist Ezra Karger for his research, which provides a more complete way to measure racial inequality in lifetime earnings. We'll be sending a post-event survey, so please be on the lookout for it. We value your feedback. And the findings will help us to shape future programs. A recording of today's event and a summary will be available at ChicagoFed.org/Mobility in the next few days. We'll email you when it's ready. Thank you, again, and enjoy the rest of your day.