December 30th 2023.
The state of Massachusetts is considering a groundbreaking proposal that could help to diminish the racial wage gap. Called “baby bonds,” the government program would create a savings account for eligible children at birth and grant them access to the funds when they turn 18. Connecticut was the first to propose the concept, and since then other states, including California, Vermont, and New York, have followed suit.
If implemented, the program could provide a substantial financial opportunity for low-income families. Darrick Hamilton, an economist who helped devise the baby bonds idea, said “You have this inequality, but also a state that’s been at the forefront of innovative power-making. It’s a prime place to [implement baby bonds].” The state commission has estimated that, with an initial deposit of $6,500 in an account, the funds could accumulate to over $15,000 by the time the recipient turns 18.
The idea for baby bonds in Massachusetts first arose in 2015 after the Federal Reserve Bank of Boston published its Color of Wealth report, which revealed a stark financial disparity between Black families and white families in the state. The report showed that Black households had a median net worth of $8, while white households maintained a median of $247,500. This was reflective of a much larger issue in the United States: cyclical poverty.
Treasurer Deborah B. Goldberg wrote in a findings report from 2022 that “The persistent racial wealth gap and increased economic inequality present serious risks to the state’s economy. By creating a Baby Bonds initiative, Massachusetts can address the unique needs of our residents and our economy.” If effective, the program would be overseen by Goldberg’s office, as well as an advisory panel and community advisory committee.
Though the state has yet to determine where the funds will come from, private donors can make financial contributions on top of state financing. With support from the government and donors, baby bonds have the potential to drastically alter the socioeconomic conditions of thousands of residents within Massachusetts. New York Governor Kathy Hochul recently signed a bill creating a statewide reparations task force, indicating that the issue of racial wage gap is being taken seriously and hopefully will soon be addressed.
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