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WASHINGTON – On January 20, 2021, the U.S. Select Committee on Economic Disparity and Fairness in Growth – led by Chairman Jim Himes (CT-04) – held a hearing, “Race, Ethnicity, and the Economy: How Improving Economic Opportunity Benefits All,” to listen to experts on how the legacies of discrimination and exclusionary policies have led to uneven economic outcomes for communities of color, as well as the federal government’s role in correcting these injustices. American Enterprise Institute’s Ian Rowe is shown above.
“Today, our committee joins one of our most important and most difficult national conversations,” opened Chairman Himes. “Our committee and its work on economic disparity will grapple with the fact that communities of color are, in the aggregate, behind white communities on pretty much every indicator of economic health and prosperity.”
“We will look at the progress in the hunt for solutions—and not just solutions that stem from the power of the federal government, but for all solutions that work,” continued Chairman Himes. “We sometimes talk about a whole of government effort. The problems we address today are whole of society. And so, the solutions lie, as they always have, partly with the government, but also in our neighborhoods, our businesses, our families, and our houses of worship.”
Majority Whip James E. Clyburn (SC-06) was a special guest at the hearing.
“The 20th century was a time of great economic growth, but also a time of significant inequities and widespread racial discrimination,” said Congressman Clyburn. “Unfortunately, while the New Deal was credited with having ended the Great Depression, it was not a good deal for Black Americans. Racial discrimination [in] employment marginalized Black Americans at a very critical juncture, preventing them from an equitable economic recovery. Roosevelt’s implementation of Social Security was significant. It lifted millions of senior citizens out of poverty, but it did not cover farm and domestic workers, where over 65% of Blacks were employed.”
“I often invoke Alexis de Tocqueville, who said that the greatness of America lies not in being enlightened [more] than any other nation, but rather in her ability to repair her faults,” added Congressman Clyburn. “Together we can, and we must, heed de Tocqueville’s words through this committee’s work. We must work to dismantle barriers that have prevented Black Americans from achieving the American Dream and identify public policy and business practices to encourage and assist every American to reach their economic potential.”
The Select Committee also presented a recorded video testimonial from an individual personally affected by federal discrimination: Sergeant First Class (E-7) Johnnie W. Cheatom.
“I didn’t get the chance of getting the G.I. Bill – I wish I had it. I’ve been in this world for 92 years, and I was in the army 25 years. I was in Vietnam 11 months. I was in Korea 16 months. I was in Germany 6 years. I didn’t receive the same benefits as the rest of the G.I.s because they got the G.I. bill and got a house with a low interest rate…I was on my way to Vietnam, and I had five kids and a wife, and [if] I [had gotten] killed over there, I wanted them to have a place to stay. [The Federal Housing Administration] said, “you’re a soldier, we cannot sell you that house because soldiers move around too much.” I think they steered me away from getting the G.I. loan. I feel discriminated against…The blacks, you know, they don’t have a chance to get ahead like the whites.”
Watch Sgt. Cheatom’s full video here.
The following witnesses testified before the Select Committee to the issues of current economic disparity arising from past discrimination and exclusionary policies based on race and ethnicity:
Dr. Valerie Wilson, Director of the Program on Race, Ethnicity, and the Economy at the Economic Policy Institute, testified on the state of racial and ethnic economic inequality and the macroeconomic implications of allowing disparities to persist.
“Earnings and employment inequalities limit labor income for affected workers of color, undermining the economic well-being of those households, and by extension, the U.S. economy as a whole,” said Dr. Wilson.
“The fact that labor market discrimination has persisted well beyond the passage of Title VII of the Civil Rights Act of 1964 and the Equal Pay Act should not be overlooked or taken lightly,” continued Dr. Wilson. “Meaningful accountability for discrimination requires…policies that encourage employer transparency, funding of federal, state, and local enforcement agencies that is consistent with the tens of thousands of discrimination charges filed annually, revising legal doctrines to better align with the purpose of anti-discrimination laws in order to relieve the overly onerous burden of proof that workers face, and protection for all workers against practices that coerce employees to waive their rights to legally challenge unfair or unequal treatment.”
Dr. Darrick Hamilton, Henry Cohen Professor of Economics and Urban Policy and Founding Director of the Institute for the Study of Race, Power, and Political Economy at the New School, focused on how government facilitated the creation of a middle class in the postwar period through bold policies and how it can do so again.
“What is critical to note is that it was never the case that a middle class simply emerged,” noted Dr. Hamilton. “Rather, it was government policy, basically entitlement programs that provided the finance, education, land, and infrastructure to accumulate and pass down wealth.”
“Baby Bonds…could address our nation’s extreme wealth inequality by effectively establishing an economic birthright to capital for all children,” added Dr. Hamilton. “These accounts would be held in public trust, similar to Social Security, and could be used as a capital foundation when the child reaches adulthood to access an appreciating asset like a home or new business that generational wealth affords. The accounts could go a long way towards establishing a more moral and decent economy that facilitates assets, economic security, and social mobility, for all its citizens, regardless of the race and family economic position in which they are born.”
Janet Murguía, President and Chief Executive Officer of UnidosUS, spoke to how the COVID-19 pandemic affected the Latino population and how UnidosUS is using its extensive network of affiliates to address ethnic economic inequality.
“The economic stress of the pandemic… [is preventing] too many Latinos from being able to save or build wealth and is keeping Latinos from accessing entry points to the middle class, such as homeownership or saving for retirement,” remarked Ms. Murguía.
“Alongside 47 of our affiliates, we participate in a national network of U.S. Department of Housing and Urban Development (HUD) Housing Counseling Intermediaries,” added Ms. Murguía. “This group of HUD-approved nonprofit organizations provides housing counseling, education, and community reinvestment programs. Housing counseling is demonstrated to reduce evictions, mortgage delinquencies, and foreclosure rates, and to increase access to, and the success of, loan modifications. In 2020 alone, Affiliates in our housing counseling network helped 22,325 families remain in their homes.”
Dr. Jamie Riley, Director of Race and Justice at the National Association for the Advancement of Colored People (NAACP), testified on how the NAACP is working to promote economic mobility for African Americans.
“Throughout our 113-year history, the NAACP has prioritized and advocated for solutions to the issues addressed by this Select Committee,” said Dr. Riley. “The ensuing economic disparities faced by Black Americans, who continue to lag behind in all of the economic drivers that contribute to financial well-being, has been exacerbated by the pandemic.”
“While the pandemic has exacerbated long standing economic problems plaguing the Black community; it did not create these inequities,” added. Dr. Riley. “The NAACP has been active in addressing these issues by establishing public-private partnerships that bring together elected officials, government agencies, non-profit organizations, and corporations in developing sustainable programs and strategies that seek to eradicate racial economic inequities. The national office and our 2,200 local branches and state conferences, have been steadily working to combat economic inequities.”
Mr. Ian Rowe, Senior Fellow at the American Enterprise Institute, spoke on his experiences as a former public charter school network CEO in building evidence-based curricula to support the most vulnerable children. He outlined how “ensuring that every parent has the right to choose the education that best meets their child’s needs” will contribute to young people understanding the ways to access capital and build wealth.
The subsequent Q&A portion of the hearing produced the following points of exchange between the Select Committee Members and invited witnesses:
Chairman Jim Himes (CT-04) opened by asking Ms. Murguía, about “the most effective things that we, as a government, could do to encourage homeownership.” She replied by noting that “having access to homeownership is so critically important [to addressing the wealth gap],” adding that UnidosUS has “the largest network of homeownership counselors engaging the Latino community in the country.” She also said, “investments in homeownership counseling services is really key, but also… making sure that we are looking at the underlying barriers that are there when…we look to the traditional methods of how individuals can have access to credit.”
Rep. Gwen Moore (WI-04) rebutted the notion that personal choices are solely to blame for the racial wealth gap, and asked Dr. Hamilton to comment on the fact that “parental marital status, education and wealth have negligible power in explaining the Black White income gap at all levels of income.” He agreed, adding that the data reveal that racial and ethnic disparities don’t disappear with education or marriage, but that “they actually increase in multiple domains, especially when we look at wealth.”
Rep. Pramila Jayapal (WA-07) noted there are three broad categories in addressing racial and ethnic inequalities: building wealth, ensuring savings, and stopping destruction. She asked Dr. Hamilton about “how the racial wealth gap limits economic opportunity and reinforces income inequality for people of color,” to which he replied we need to provide “capital,” “quality jobs,” and “quality income.” Dr. Hamilton also stated that we need “the regulatory environment that limits the predation, particularly on something as vulnerable as somebody’s racial identity” to ensure that economic opportunity remains in reach for communities of color.
Rep. Sara Jacobs (CA-53) cautioned against relying too much on individual choice – particularly the decision to marry – in explaining the racial wealth gap, noting that “Black boys raised in two-parent households still earn less in adulthood than white boys with similar backgrounds.” She then asked Dr. Wilson what the “the cost of the racial wealth gap [is] to the broader economy and what some of the economic and social benefits would be to narrowing this gap for everybody.” Dr. Wilson responded by noting “the existence of wealth disparities has an impact on people’s ability to…expand their job search.” She added that the wealth gap “limits [people’s] ability to opt out of working for someone else and starting their own business because they don’t have that capital,” which limits entrepreneurship.
Rep. Marcy Kaptur (OH-09) lamented how children across the country are being failed by the educational sector due to high rates of transiency among lower-income families and neighborhoods. Ms. Murguía agreed, noting that a permanently expanded Child Tax Credit would provide families with the means to maintain a safe place to live and in turn allow children to attend school with greater regularity.
Summary of Memorandum Prepared by the Select Committee’s Majority Staff:
Communities of color tend to experience worse economic outcomes than their white counterparts. Race and ethnicity prove to be powerful predictors of educational attainment, labor market outcomes, lifetime earnings, economic mobility, and even life expectancy—a fact that is antithetical to the idea of the American Dream. Many of these inequities remain even when taking age, education, occupation, and industry into account. Starting at birth, ramifications from historic discriminatory and exclusionary policies and societal racism and xenophobia inhibit communities of color from achieving their full economic potential, negatively impacting everyone in the United States.
Key Facts about Racial and Ethnic Economic Disparities
• Overall, the average Black child will settle in the 35th household income percentile in adulthood, while the average white child born in the same cohort will settle around the 56th percentile. Parental marital status, education, and wealth have negligible power in explaining this gap.
• White workers who completed high school earned 26%, 17%, and 20% more than Black, Hispanic, and Asian workers with the same education. Wage gaps between white and Black and Hispanic workers exist at all levels of education.
• 73% of white families own homes, compared to just 40% of Black families and 47% of Hispanic families. Homes owned by Black and Latino Americans are worth 16% and 10% less than those owned by white Americans.
• In 2019, the median white family had about $184,000 in family wealth, compared to just $23,000 for the median Black family and $38,000 for the median Hispanic family. This gap persists at all age levels and is especially stark in early adulthood.
• Black, Hispanic, and Native Americans have died from COVID-19 at rates of 1.9, 2.1 and 2.2 times that of white Americans, respectively. Women of color—who are more likely to be both frontline workers as well as caretakers—are disproportionately harmed by the pandemic.
Historical Context
Past government actions have substantially contributed to the economic disparities observed today between white and nonwhite Americans. The legacies of slavery, sharecropping, debt peonage, legal occupational segregation, forced relocation, land seizures, and the intentional exclusion from government aid actively destroyed wealth for many communities of color and continue to exacerbate the disparate rates of wealth accumulation observed today.
These disparities create massive costs for the overall US economy. If racial, ethnic, and gender inequities in the economy were eliminated in 2019, the US could have created an extra $2.6 trillion—or 14%—in gross domestic product (GDP) that year. The Federal Reserve Bank of San Francisco notes that with “considerable pressure weighing on US economic potential in coming decades, eliminating disparities in labor market opportunities and outcomes will be critical to producing faster growth and maintaining global competitiveness.”
Today, the American middle class is more diverse than it has ever been. In 1979, 9% of the middle class was Black, and 5% was Hispanic. In 2019, those figures stood at 12% and 18%, respectively. Yet it is important to note that the narrowing of these gaps was not inevitable. Through targeted programs to achieve parity and correct some historical harms, the federal government was able to make meaningful progress in addressing racial and ethnic disparities.
• Through the Civil Rights Act of 1964, the federal government outlawed discrimination in public accommodations—including public schools—and federally funded programs on the basis of race or color.
• The 1966 amendments to the Fair Labor Standards Act extended minimum wage protections to sectors of the economy that had been previously exempt, including agriculture, nursing homes, laundries, hotels, restaurants, schools, and hospitals—all of which employed disproportionately high shares of Black workers.
• Since the creation of the Earned Income Tax Credit (EITC) in 1975, the EITC has been shown to encourage work, particularly among low wage-earning single mothers, and lift working families out of poverty, a disproportionately large share of whom are Black. Research has shown that the children of EITC beneficiaries “perform better in school, are more likely to attend college, and have higher wages as adults.”
• By both increasing the Child Tax Credit (CTC) and making it fully refundable, the 2021 American Rescue Plan narrowed the white-Black and white-Hispanic childhood poverty gaps by 7 and 6 percentage points, respectively.
Proposals to Further Narrow the Gaps
Baby Bonds: The American Opportunity Accounts Act would create federally funded savings accounts, also known as “baby bonds,” of $1,000 for every American child at birth and contribute up to $2,000—depending on family income—per year until the age of 18. In 2021 Connecticut started investing $50 million annually in its own “baby bonds” program.
GI Bill Benefits Restoration: The Sgt. Isaac Woodard, Jr. and Sgt. Joseph H. Maddox GI Bill Restoration Act of 2021 would restore benefits of the original GI Bill to Black veterans of World War II who never received them due to discriminatory implementation.
Raising the Minimum Wage: Raising the minimum wage to $15 an hour for all workers would lead towards greater economic equity for Black and Latino workers, due to the fact that these groups of workers are “more likely to work at or below the current federal minimum wage of $7.25 an hour. The Biden Administration increased the minimum wage for federal contractors to $15 an hour, which provided a raise to 390,000 low-wage federal contractors, roughly half of whom are Black or Hispanic.
