Overcoming Economic Barriers to Racial Healing and Equity

Back to Fall 2021: Volume 110, Number 3

For centuries, people of color in the United States have been denied equal access to resources and opportunities. From the forcible displacement of Indigenous people, to the enslavement and exploitation of Black Americans, to the historic and present-day exclusion of immigrant groups and exploitation of people of color in the workforce, inequity is created and sustained in U.S. economic policies and practices.

By imposing systemic barriers to economic opportunities, these policies and practices sustain the false belief in a hierarchy of human value. These barriers perpetuate and validate the biased valuations of people based on their race and ethnicity, with devastating impacts. In 2019, the median wealth for Black and Latinx families was between $24,000 and $36,000, compared to $188,000 for white families.1

Wealth is a means of accessing services, goods, and resources. It provides families with the means to purchase and own a home, invest in their children’s education, start a business, support social and community institutions of importance, and ensure the financial security of generations to come. Wealth is also a tool for power and influence through access to the political process. Households with wealth can donate time and money, thereby influencing the political process and the policies that are important to their communities.

Reducing gaps in income and wealth requires acknowledging and honoring the equal value of all people, investing in communities that have been historically disenfranchised, and rectifying past wrongdoings to ensure such disparities in economic opportunity and access are not passed along to future generations.

Equitable policies aim to create an “economic democracy, where every person, family, and community of all racial, ethnic, and cultural backgrounds can individually and collectively participate and thrive in the U.S. economy.”2 Strategies should be informed by the needs and priorities of the community, through intentional inclusion in decision making of those who live in the communities where the investments will take place.

Healing Through Policy proposes the following policy actions to advance a more equitable local economy:

  • Income and asset strategies to promote economic mobility of individuals and families of color.
  • Equitable investment and development that prioritizes community voice and assets.
  • Compensatory redress to rectify historical injustices that economically disadvantage communities of color.

Income and Asset Strategies to Promote Economic Mobility of Individuals and Families of Color

Present-day racial income and wealth gaps reflect a lengthy history of racist and discriminatory policies and practices that reduce economic opportunity for communities of color. Ninety percent of the wealthiest 1% of households are white, well above their 65% share of households overall. Inequities in economic policy have created a situation that results in white families receiving much larger intergenerational transfers (e.g., inheritances), which “account for more of the racial wealth gap than any other demographic and socioeconomic indicators.”3

The impact of unequal distribution of income is undeniable. Income inequality is higher in the United States than in other industrialized economies. For decades, wage and income inequality has been increasing in the United States. In 2018, pre-pandemic, the gap between the highest- and lowest- income households was the largest it had been in 50 years. While the impact of the COVID-19 pandemic on wealth disparities remains to be seen, historically, families of color are hardest hit by economic downturns. As the Urban Institute notes, during the Great Recession, “White families’ wealth fell 26.2%, while the wealth of Black families fell by 47.6% and Latinx families’ wealth fell by 44.3%.”4

Common-sense wage policy solutions and strategic investments for individuals and families with the greatest need are necessary for creating a solid pathway for individual and family wealth building.

Policy Examples

  • Raising the minimum wage and/or requiring a living wage: While the Biden administration is pushing to raise the minimum wage, the federal minimum wage ($7.25) has not increased since 2009. In the absence of federal action, states and localities have considered or adopted policies to either increase the minimum wage or require a living wage. A living wage is a locally mandated wage that is higher than state or federal minimum wage levels. Living wages may be set at the level needed for a family of four to meet the federal poverty guidelines threshold, which was $26,200 for a family of four in 2020. Living wages may also be calculated based on factors such as location or family composition and include additional expenses such as childcare, taxes, and savings. As women of color are disproportionately affected by wage inequalities, Black female workers earning 65.1% and Hispanic female workers earning 58.9% of what a white male earns, pursuing policies to raise wages must also pay attention to the gap in wages based on gender and race.

Seattle, with strong advocacy from the “Fight for $15” organizing campaign, passed a law to gradually increase its minimum wage (from $9 in 2014) to $15 over seven years. At the beginning of 2021, the city’s minimum wage increased to $16.69 per hour for large businesses (more than 500 employees).

Some living wage laws also mandate or encourage employers to provide health coverage and other benefits to workers. For example, Los Angeles’ living wage ordinance requires employers to offer a wage that includes health insurance at no cost to employees. Living wage initiatives may overlap with efforts to increase the local minimum wage. The San Francisco Living Wage Coalition worked to increase wages for municipal workers at the San Francisco International Airport and now supports the city’s minimum wage law.

Currently, 29 states and the District of Columbia have a minimum wage higher than the federal minimum wage, and 42 localities have adopted a minimum wage above their state minimum wage. San Diego’s living wage law has been in effect for 10 years. Covered employees have reported higher standards of living and reduced economic pressure. Dallas requires all proposals for use of city funds to include the $10.37-per-hour wage. Hartford, Connecticut set a living wage rate that exceeds federal poverty guidelines and the state minimum wage.

Some local governments cannot enact such measures due to state preemption legislation. As of 2020, 25 states had preemption laws in place that prohibit mandatory living wage ordinances and local minimum wage laws. Colorado repealed its preemption law in 2019. Those in support of state preemption of minimum wages frequently cite concerns about varying wage levels across the state and that higher local minimum wages put the city or county at a competitive disadvantage relative to surrounding localities. Much of the evidence indicates minor or no job losses for moderate increases (8-10%) of the minimum wage, despite potential job loss being used as a key counterargument. It’s also important to note that much of the research on minimum wage increases has focused on these moderate increases and less is known about the impact of larger increases (to $13 or $15) being considered or implemented.

  • Universal basic income or guaranteed income: An emerging policy strategy is to provide a universal basic income (UBI), also known as guaranteed income. Guaranteed income programs give direct, recurring, and unconditional cash payments to residents. At least 11 cities are piloting UBI programs, including Pittsburgh and Compton, California. In addition, over 40 mayors are participating in Mayors for a Guaranteed Income, which advocates for guaranteed income at the local, state, and federal levels; investing in “narrative change efforts to highlight the lived experiences of economic security;” and supporting pilot programs.
  • College savings and investments for low-income families: Children and youth from families with low incomes do not have the benefit of college savings. Their parents are often struggling to ensure basic needs are met, which means that there are usually little to no ancillary funds to put toward saving for post- secondary education. In addition, lower family wealth means that college students of color are more likely to rely on debt loans to finance higher education. The resulting debt often prevents them from building wealth that can then be passed on through generations, exacerbating and continuing the racial wealth gap. Cities are attempting to address this inequity through various strategies, including city-led children’s savings accounts. Several cities, including Boston and Chelsea, Massachusetts; Caldwell, Idaho; and Durham, North Carolina, provide city-led children’s savings accounts. These are long-term savings or investment accounts that provide incentives to help children, especially low-income children, build dedicated savings for post-secondary education.

Research shows that when a low- to moderate-income child has a savings account — even if that account holds less than $500 — they are three times more likely to enroll in college and four times more likely to graduate.5 Another example in Michigan is the Kalamazoo Promise, which has guaranteed 100% post-secondary education support for K-12 public school graduates since 2005. In 2015, Tennessee became the first state to offer free community college tuition to all high school graduates; California, New York, and Oregon (including four- year state universities) have followed suit.

  • Down payment and mortgage assistance to support homeownership as a path to building wealth: Many cities and counties have grant or loan programs that provide down payment and/or closing cost assistance to provide a pathway to homeownership for households that lack sufficient savings to cover the upfront expenses associated with purchasing a home. This assistance is usually done through grants (often for $5,000 or less). Forgivable, no- or low-interest loans are the usual mechanisms for providing this support.

Metro Mortgage Assistance Plus provides a grant to cover down payment and closing costs of up to 4 percent of the loan through the Denver Office of Economic Development. The city has a $30 million revolving pool that provides funding for the program. In Ohio, the Cuyahoga County Down Payment Assistance Program run through Neighborhood Housing Services of Greater Cleveland provides down payment assistance up to 17 percent of the total transaction cost.

However, home buyer initiatives that encourage individuals to be able to own their homes are often set at levels that are still unaffordable due to the rising cost of living in cities. Rising costs of housing markets and property taxes present a challenge in achieving and maintaining homeownership.

Evidence for Improving Health and Racial Equity

Income is the most critical determinant of health. As described in the Healthy People 2020 report from the U.S. Department of Health and Human Services, financial capacity shapes individual and population health by influencing the degree to which an individual’s basic needs are met. Other social determinants of health, such as safe housing, educational achievement, and job opportunities, are closely linked to financial resources. People earning lower wages face significant barriers to safe and healthy environments and resources. A living wage allows people to meet an array of basic needs such as food, shelter, clothing, transportation, childcare, and medical needs.

Living wage laws appear to be most helpful for workers just below and just above the poverty line. Specifically, moderate living wage requirements for local government workers, contractors, and grantees are the most likely to reduce poverty rates. Life expectancy for individuals with earnings above the federal poverty line is five years longer than that of people with earnings below the poverty line. The Economic Policy Institute has demonstrated how raising the $7.25 federal minimum wage would increase the purchasing power of low- wage earners, boost the economy, and increase people’s capacity to spend new earnings on previously unaffordable basic needs or services to protect their health.

Lifting individuals out of poverty is only one of many mechanisms through which raising the minimum wage can improve public health. Increasing wages can improve psychological well-being and job satisfaction, improve delay-of-gratification ability, and increase the opportunity costs of engaging in unhealthy habits.

Living wage or minimum wage increases have significant promise for advancing racial equity. Several studies have indicated that the positive effects of these increases would be most realized among historically underserved communities, especially women and people of color.

Equitable Investment and Development that Prioritizes Community Voice and Assets

The conditions of a community and the health of the individuals living in it are inextricably linked. Due to decades of disinvestment, many people of color live in places where housing is of poorer quality and also unaffordable, public transportation is limited or non-existent, healthy food options are scarce, and schools are under-resourced and under- performing. Equitable investments that encourage and support entrepreneurship and small businesses, especially those owned by Black, Indigenous, and immigrant people, can create vibrant communities that can be fertile ground for economic growth.

Policy Examples

  • Housing trust funds: These trusts are a flexible source of funding that can be used to support a range of affordable and innovative housing options. These trusts are administered at the state, city, or county level and can be responsive in addressing local priorities and needs. Housing trust funds systemically shift affordable housing funding from annual budget allocations to the commitment of dedicated public revenue. Housing trust funds are inherently extremely flexible and have been widely adopted in small towns and big cities alike.

There are now 47 states with housing trust funds, as well as Washington, D.C., and more than 750 city and county housing trust funds in operation. They dedicate more than $2.5 billion annually to help address critical housing needs throughout the country.

In Massachusetts, the Somerville Affordable Housing Trust Fund is focused on preserving and creating affordable rental and homeownership units as well as providing direct assistance to renters and homeowners. Funds may be used for a variety of activities that support these goals, including site development for new construction, rehabilitation subsidies and arson prevention for existing developments, and assistance with security deposits or down payments and closing costs for renters and home buyers. At least 20% of funds must be used to serve households with incomes below 50% of the area median income. The trust also promotes the use of funds to serve people experiencing homelessness.

Austin, Texas funds its housing trust with property tax revenue from projects built on land that was previously owned by the city. Funds support rehabilitation and creation of new affordable housing, including in higher-income neighborhoods and Homestead Preservation Districts that have been targeted for reinvestment, among other activities.

  • Participatory budgeting (PB): This is a democratic process in which residents are directly involved in deciding how public funds are spent. PB is different from other forms of citizen participation in budget decisions (e.g., public forums, surveys, public comment periods) because residents have decision- making authority in addition to input. Through direct involvement of residents and their knowledge of local conditions and needs, PB allows for budget decisions to be better aligned with community priorities, with the potential for more equitable distribution of resources when the voices of disadvantaged communities are elevated. As PB typically requires residency, not citizenship, for participation, the PB process provides an opportunity to engage people who cannot participate in traditional voting. For example, in Louisville, Kentucky, people under the age of 18, those who are undocumented, and those who have a felony on their record can participate in PB.

The PB process originated in Brazil in 1989, with an aim to redirect resources to where residents found the greatest need. It was first piloted in the United States in Chicago in 2009 and is currently in its 11th cycle. In 2012, the first multi- ward PB cycle was implemented in an initiative known as “PB Chicago,” which culminated with 2,574 Chicago residents participating in the decision to fund 21 projects totaling $4 million.

In 2012, the Vallejo City Council in California established the first citywide PB process in the United States, which includes an additional step beyond the voting phase, to evaluate the process and monitor the implementation of the winning projects. During the first five cycles, Vallejo allocated over $8.3 million to fund a total of 47 projects and engaged over 20,000 residents. After four years of community advocacy, Greensboro, North Carolina, was the first city to implement a PB process in the South, working with the Participatory Budgeting Project. The process in Greensboro is distinct in that the funds allocated for the process come directly from the city’s general fund, rather than, for example, discretionary funds.

In 2017, Wickenburg, Arizona, a small town with a population of 6,400, allocated $50,000 to select a project decided through a PB process, and ultimately funded an additional project. In their third cycle, Wickenburg increased the funds for PB to $223,000.45 In San Antonio, District 9 allocated $1million to a PB process, with voters as young as 13 years of age, that funded 10 projects in their 2019 fiscal year budget. In December 2020, Philadelphia announced the launch of a PB process to decide how to spend $1 million, committing to link the process to racial equity.

  • Offices or task forces devoted to community wealth building and comprehensive equity packages/funds: A growing number of states, cities, and counties are formalizing their commitment to addressing the racial wealth gap through dedicated entities and funding streams. Richmond, Virginia, created the first Office of Community Wealth Building. Charlottesville, Virginia passed a $4 million equity package specifically for marginalized communities to fund public housing redevelopment, GED training for public housing residents, scholarships for low-income residents, and other programs.

Through a charter amendment (passed by ballot referendum), Baltimore created an Equity Assistance Fund — a dedicated, non-lapsing funding stream to support racial equity in housing, access to education, redressing past inequities in the capital budget, and addressing structural racism. Brookline, Massachusetts, established an Economic-Equity Advancement Fund for community programs, benefiting communities of color through a 3% tax on sales of marijuana in Brookline. With a $1.5 million initial donation, this fund will focus on supporting women, LGBTQIA+ individuals, and entrepreneurs of color. To support immigrant entrepreneurs, who represent about a quarter of all U.S. innovation and entrepreneurship, state and local initiatives to remove barriers to participating in the economy and encourage immigrant entrepreneurship, such as Chicago’s New Americans Plan, are described in the Law paper.

Promise for Improving Health and Racial Equity

The proposed policy solutions of housing trust funds, participatory budgeting, and equity funds are investments that support both the infrastructure and the people of a community and hold much promise for improving health and racial equity.

Housing trusts provide dedicated flexible investments that can be used to support community needs for affordable housing, thus improving housing stability, which has a positive impact on health and well- being. Equity funds offer similar flexibility for addressing a range of community needs, including housing, education, job training, and other priorities. The impacts of improving housing stability and community development on health and racial equity are detailed in the Separation paper.

Investments and opportunities for meaningful engagement can help to build trust between government agencies and communities, demonstrate to communities that their existence and opinions matter, and help them feel valued, worthy, engaged, and ultimately, empowered. PB specifically, as a form of civic engagement, may improve the health and well-being of residents through improving their self-efficacy, strengthening civic sector alliances, and allocating resources to communities’ greatest needs. Studies have shown that community engagement may have mental health benefits for youth, and some have suggested higher civic engagement is related to more health equity and higher well-being. In Brazil, PB has also been associated with greater spending on sanitation and health services and reduction in child and infant mortality.

Reducing barriers to community participation in decision-making and improving inclusive discussions are critical to improving racial equity, and PB has long been advocated as a process to advance equity. By providing those who traditionally have been excluded as policy actors with access to decision-making, PB may, over time, contribute to benefiting the health and well-being of marginalized residents and communities.

In Greensboro, North Carolina, the PB process has demonstrated that when equity is established at the onset as a goal, public participation can serve as a critical route for both advocacy and decision-making to advance social justice. An ethnographic study of the PB process in Greensboro found that it led to the city reframing public spending issues into questions of ethics and fairness, through participants’ centering social justice concerns in discussions of community planning.

Compensatory Redress to Rectify Historical Injustices that Economically Disadvantage Communities of Color

A spectrum of options for compensatory redress has been explored and implemented, including direct compensation, community investments, and land returns for Indigenous communities. A 2019 report by Prosperity Now and the Institute on Taxation and Economic Policy documented that if current economic trends continue, “it will take the median Latino family over 2,000 years just to match the current wealth (financial and housing assets) of the median white household, and Black families will never catch up with white families’ current level.”6 This prediction was prior to the COVID-19 pandemic, which has  highlighted and exacerbated wealth inequities. The gap between Black and white households appears to have widened again in the latter part of 2020, as the pandemic and deep recession took hold. As a result, Black households have needed to rely more on their savings to cover both health care emergencies and the economic fallout from layoffs than white households.

Racial equity, especially for Black Americans and Indigenous people, will not be realized without closing the wealth gap for current and future generations.

Policy Examples

One recommended strategy for closing the racial wealth gap is acknowledgement of the centuries of deprivation, exploitation, and discrimination, and financial payment to redress these egregious historic injustices. This can be achieved through several actions:

  • Compensatory redress to individuals for past harms: Historically, the federal government provided monetary compensation to former slave owners through the District of Columbia Compensated Emancipation Act of 1862. Through this act, former slave owners were compensated for their “loss of property” and received up to $300 for each freeperson. It also paid reparations to Japanese Americans for forcibly relocating and incarcerating them in camps during World War II.

Today, compensatory redress policies are being considered and adopted at the local level to rectify centuries of injustices toward Black, Indigenous, and other people of color. In 2015, Chicago enacted a reparations ordinance covering hundreds of African Americans tortured by police from the 1970s to the 1990s. The law calls for $5.5 million in financial compensation, as well as hundreds of thousands more for a public memorial, and a range of assistance related to health, education, and emotional well-being.62 The Chicago City Council created a subcommittee tasked with analyzing the historic harms of slavery and segregation, along with the present harms of institutional discrimination and massincarceration.

Asheville, North Carolina, passed a resolution calling for a plan to provide reparations to its Black residents and created a Community Reparations Commission. California is the first-in-the-nation effort by a state government to study reparations, launching in May 2021 a two-year process to study the consequences of slavery and systemic racism against African Americans in California. In June 2021, Mayors Organized for Reparations and Equity (MORE), a coalition of 11 U.S. mayors, was formed with a commitment to develop pilot projects for reparations in their cities. Members of the coalition agree to support the Commission to Study and Develop Reparation Proposals for African Americans Act (H.R 40/S. 1083), establish advisory commissions composed of members of local, Black- led organizations in their respective cities, and work toward developing and implementing reparations pilot programs geared towards a cohort of Black residents.

Despite advocacy from Black leaders, inclusions on several 2020 presidential candidate platforms, and slight movement at the federal level, reparations remains a polarizing issue. In addition, one technical barrier for localities to providing direct payments, identified in Evanston, Illinois, is the tax burden on recipients. Because of its inability to exempt payments from state and federal taxes, the city chose to create a fund (described below) where disbursements of funds would go directly to the financial institution or vendor that would hold the tax liability, rather than the resident.

  • “Super fund” for community development and investment in Black American communities: A dedicated fund to provide major investments in health care, education, jobs, and infrastructure has been proposed as a form of compensatory redress for Black Americans.

In Evanston, Illinois, the local reparations fund was established to support initiatives addressing historical wealth and opportunity gaps for Black residents. The first initiative, the Restorative Housing Program, acknowledges the harm caused to Black Evanston residents due to discriminatory housing policies and practices and inaction on the part of the city from 1919 to 1969. The funds support homeownership, home improvement, and mortgage assistance, all with the goals of increasing homeownership, building wealth, and creating intergenerational equity among Black Evanston residents.

  • Tribal sovereignty acknowledgements and land return: Given the United States’ history of genocide of Indigenous nations, it is critically important for the U.S. to look back at previous treatment of Native people to ensure the same damage does not continue to persist or reoccur. Albuquerque, New Mexico, recognizes Tribal sovereignty and self-determination for Tribal governments and requires the city to establish a government-to-government relationship between the city and the surrounding pueblos and Tribes. The new law mandates regular consultation with Tribal governments on actions that affect federally recognized Tribal governments and to assess the impact of city programs on Tribal communities.

It also increases the size of the city commission from five to nine members, with additional members required to be representatives chosen by the Tribal nations. Eureka, California passed a resolution to return Duluwat, a Wiyot village site on 202 acres of land on Indian Island, back to the Wiyot Tribe by declaring the land surplus property. It will be the first such transfer of land ownership in U.S. history that was not prompted by litigation. While land transfer is an example of a small step toward reparations for Indigenous communities, it is critical to be clear that land transfers as a step toward achieving equity is separate from compensation and redress. Previous practices to rectify past wrongdoings have equated compensation to achieving equity rather than as a step toward addressing previous harms and inequities.

Promise for Improving Health and Racial Equity

Scholars have acknowledged both the monetary compensation and acknowledgement of historic injustices being proposed have tremendous potential for improving health and racial equity. By narrowing the current and future wealth gap, supporting these investments can improve community conditions and access to resources, and reduce racism-induced allostatic load. A recent study in the New England Journal of Medicine posits that “a restitutive program targeted towards Black individuals would not only decrease COVID-19 risk for recipients of the wealth redistribution; the mitigating effects would also be distributed across racial groups, benefiting the population at large.”7

Scholars have also acknowledged that compensatory redress is the only way to counteract the centuries of oppression and disinvestment that has prevented Black families from acquiring and maintaining the resources needed for good health and overall life outcomes. The Brookings Institution notes “an $800,000 increase in net worth per Black household could have a dramatic impact on Black health, outcomes, homeownership, education, economic security, and more.”8


1 Bhutta, N., Chang A.C., Dettling, L.J., & Hsu, J.W. (2020). “Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances,” FEDS Notes. Washington: Board of Governors of the Federal Reserve System, September 28, 2020, https://doi.org/10.17016/2380-7172.2797.
2 W.K. Kellogg Foundation. (2016). Truth, Racial Healing & Transformation Implementation Guide. https://healourcommunities.org/wp-content/uploads/2018/02/TRHTImplementationGuide.pdf
3 Hamilton, D., & Darity, W. (2010). Can ‘Baby Bonds’ Eliminate the Racial Wealth Gap in Putative Post-Racial America? The Review of Black Political Economy, 37(3–4), 207–216. https://doi.org/10.1007/s12114-010-9063-1
4 Kijakazi, K., Simms, M., McKernan, S.-M., & Lou, C. (2021, February 12). How Policymakers Can Ensure the COVID-19 Pandemic Doesn’t Widen the Racial Wealth Gap. Urban Institute. https://www.urban.org/urban-wire/how-policymakers-can-ensure-covid-19-pandemic-doesnt-widen-racial-wealth-gap.
5 National League of Cities. (2020, October 23). City-Led Children’s Savings Account (CSA). https://www.nlc.org/initiative/city-led-childrens-savings-account-csa.
6 Greer J, Newville D, Nieves E, and Wiehe M. Race, Wealth and Taxes: How the Tax Cuts and Jobs Act Supercharges the Racial Wealth. Institute on Taxation and Economic Policy. https://prosperitynow.org/sites/default/files/resources/ITEP-Prosperity_Now-Race_Wealth_and_Taxes-FULL%20REPORT-FINAL_5.pdf
7 Bassett, M. T., Author Affiliations From the FXB Center for Health and Human Rights, T. T. Shimabukuro and Others, Others, E. H. and, & Others, J. S. and. (2021, April 21). Reparations as a Public Health Priority – A Strategy for Ending Black– White Health Disparities: NEJM. New England Journal of Medicine. https://www.nejm.org/doi/full/10.1056/NEJMp2026170.
8 Darity, W. “S., & Mullen, K. (2020, June 15). Black reparations and the racial wealth gap. Brookings. https://www.brookings.edu/blog/up-front/2020/06/15/black-reparations-and-the-racial-wealth-gap/.

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