The average white family holds about six times as much wealth as the average Black family. Wealth disparities for young Americans are even more stark, with young white Americans holding 16 times the wealth of young Black Americans before they turn age 25.

The wealth gap is arguably more consequential than the income gap since wealth enables people to invest in a secure future for themselves and the next generation. It allows them to start a business or attend college without crushing debt and to handle financial emergencies and economic downturns.

Below are four key findings and resources from Urban Institute researchers that demonstrate how targeted policy interventions could help Black Americans establish, maintain, and grow their wealth.

1. Worker-Centered Policies Can Build Black Wealth and Support Black Workers Who Earn Less

Black workers’ labor market outcomes reflect the historical consequences of US policy which were, in some cases, explicitly designed to limit Black workers’ opportunities for economic security and upward mobility.

Raising the minimum wage: Today, the median wage for Black workers is roughly 75 percent of white workers. Raising the federal minimum wage to $15 an hour would close gaps in effective minimum wages across states and regions and would benefit millions of workers, including nearly 1/3 of all Black workers.

Strengthening Unemployment Insurance: Black workers who lose a job are 24 percent less likely than white workers to receive unemployment insurance benefits, primarily because Black workers have average lower pre-unemployment earnings and are more likely to live in Southern states where benefits are less generous and less accessible. State variance in the implementation of unemployment insurance suggests that federal reform may best mitigate the racial disparities. Temporary programs enacted during the COVID-19 pandemic demonstrated how reforms to federal unemployment insurance focused on benefit levels, duration, and eligibility could have a significant impact if made permanent. Congress is exploring such reforms with proposals like the Unemployment Insurance Modernization and Recession Readiness Act of 2023.

Paid leave: Less than half of Black workers report having access to paid leave. Legislation such as the 2021 FAMILY Act would increase the share of Black workers receiving paid leave by 22-percentage points, according to Urban’s modeling.

For more information, please see Labor Market Policies for Racial Equity by William J. Congdon, Elisabeth Jacobs, Marokey Sawo and Black Women and Vulnerable Work by Ofronama Biu and Afia Adu-Gyamfi.

2. Reducing Inequitable Tax Penalties for Black Married Couples Could Increase Wealth

While the individual income tax code generally does not refer to race, the tax code’s structure creates and reinforces racial disparities because income, homeownership, marital status, dependents, and relative spousal earnings—which impacts the taxes someone owes—vary by race. Marriage penalties and bonuses are one way these disparities have persisted. They are a side-effect of the system’s progressive, family-based income tax where couples with more equal incomes are more likely to face penalties than those with less equal incomes. Black couples are more likely to have more equal incomes since Black women are more likely to work and more likely to earn more, relative to Black men, than white women to white men. 

Black couples with an Adjusted Gross Income (AGI) between $50,000 and $100,000 were more likely to face marriage penalties and less likely to receive marriage bonuses than white couples. The size of the penalties was higher ($1,394 versus $1,241) and the bonuses were smaller ($1,402 versus $1,576) for Black couples than white ones. Allowing couples to file as head of household would eliminate marriage penalties, reducing taxes for 46 percent of Black couples.

For more information, please see Racial Disparities in the Income Tax Treatment of Marriage by Janet Holtzblatt, Swati Joshi, Nora Cahill, and William G. Gale.

3. Scaling Baby Bonds Could Reduce Black-White Racial Wealth Gaps

Black Americans are less than half as likely to receive inheritances or gifts from family members; this disparity accounts for roughly 26 percent of the Black-white racial wealth gap. Baby bonds, which are publicly funded trust accounts some cities are using to invest in the future of low-wealth or low-income children, could help reduce this gap. When children become adults, funds can be used to pay for college, purchase a home, or start a small business—things that people who inherit wealth already do. 

Versions of baby bond programs are in early implementation stages in Connecticut, Washington, DC, and California. A 2020 simulation showed a national baby bond program could reduce Black/white wealth gap to a factor of 1.4 to 1 ($79,000 to $58,000), compared to the status quo of 16 to 1 ($46,000 to $2,900).

For more information, please see Baby Bonds Would Reduce Racial Wealth Inequities. Here’s What Policymakers Need to Know by Madeline Brown, Marokey Sawo, and Ofronama Biu.

4. Reparations Can Address Accumulated Losses and Historical Barriers to Building Wealth

Even after the official policy of enslavement ended, federal and state policies prevented Black Americans from amassing wealth—from Social Security payments denied to domestic workers, to school segregation, to redlining. Barriers embedded in policy continue today, including the disproportionate sentencing of Black men in the criminal justice system, racial disparities in home valuations, discrimination in assessing creditworthiness, and racial discrimination in hiring. These policies have meant that wealth gaps compounded over time.

The compensatory model of reparations (which primarily focuses on economic compensation, restitution, and targeted investments) could help close the gap. Federal investment could strengthen the research and policy-development infrastructure around reparations to help support the development of an evidence-based national reparations program.

In places such as Evanston, Illinois; Detroit, Michigan; Providence, Rhode Island; Asheville, North Carolina; and the State of California, local and state governments have established reparations commissions to evaluate and address the impact of racist municipal and state policies on wealth building for Black Americans and their descendants. Most of these efforts have focused on a single domain―for example, housing discrimination or persistent racial inequity in homeownership. As of September 2024, the City of Evanston has given 203 residents $25,000 to make a down payment on a home, pay toward an existing mortgage, or make home repairs.

For more information, please see How Social Science Research Can Inform a National Reparations Research Agenda by LesLeigh D. Ford and Rekha Balu.

For more on Urban’s research on Black wealth building and economic opportunity, visit our page on The Black Paper Series curated by the Black Economic Alliance Foundation, which also includes related content on research into policies that can advance the work, wages, and wealth of Black people.