Economics of Race: a Top Research Priority

Numerous articles have appeared here in recent months about the ways that racial disparities are infused into our financial and economic systems.

Two barriers to Latinx and Black workers’ ability to save, for example, are less health insurance coverage and more burdensome student loan payments than White workers have. Or consider the different long-term housing options available to Black and White seniors. And while COVID’s financial toll hit people with disabilities especially hard, it was even tougher for people of color with disabilities.

The theme of the research studies featured in these and other articles is no accident. The studies are funded by the U.S. Social Security Administration (SSA), which encourages researchers around the country to explore the socioeconomic aspects of race.

The agency described its ongoing research priority this way in a request for proposals for fiscal year 2024: “SSA encourages all researchers to consider equity – including the structural barriers that may contribute to disparate outcomes among people who have been historically underserved, marginalized, or adversely affected by persistent poverty.”

Full disclosure: SSA supports this blog through a grant to the Center for Retirement Research at Boston College.

The racial disparities young Black and Latinx workers face in the lifelong challenge of saving for retirement are illustrated in two recent blogs about SSA-funded studies.

Health insurance. One out of every five Latinx workers lacks health insurance. Insurance not only covers health care but serves the purpose of reducing large, unexpected medical expenses that can eat into savings by capping out-of-pocket costs and dictating how much doctors and hospitals charge. A Stanford researcher found that the wealth gap between Latinx and White workers would shrink if the Latinx community’s coverage rate were as high as the rate Whites enjoy.

Student loans. Today’s Black workers who still haven’t paid off their college loans by retirement will be two times more likely to default than White and Latinx retirees. Blacks’ higher expected default rate is due to having borrowed more – for their own or their children’s education – and earning less now. If retirees can’t make their loan payments, the federal government can garnishee the payments from their Social Security checks.

The upshot of the smaller benefit checks will be 4 percent less retirement income, according to an estimate by the Center for Retirement Research. A current U.S. Supreme Court case will determine whether the Biden Administration’s proposal for loan forgiveness will help these young adults move forward.

Employment. Older Black workers in this country have worse health than their counterparts in England, where the National Health Service provides universal coverage. This puts Black U.S. workers over 50 at greater risk of having to quit a job if they suddenly develop a medical condition, according to one study.

“The [negative] impact of health shocks on employment is larger for nonwhites than for Whites and is larger in the U.S. than England,” the researchers said.

Long-term care. When Black people need more help in old age, adult day care is the main form of long-term care available in their neighborhoods, researchers find. But assisted living facilities, which cost two times more than adult day care, dominate in White neighborhoods and reflect the socioeconomic divide between these two communities.

Policy. Research shows that government policies can ease racial disparities. Social Security benefits are an obvious example. In Black and Latino multigenerational households, University of Wisconsin researchers found that the retirement benefits received by a grandparent living in extended families provide financial support for the entire family.

“Low-income households with children rely on a range of support programs beyond wages, but Social Security programs are a critical source of income for many,” they concluded.

Other blogs covering research on the racial disparities in our economic system include:

“COVID’s Toll on Minorities with Disabilities”

“The Racial Roots of Retirement Inequality”

“Examining the Black-White Wealth Gap”

“Top Economists Seek Solutions to Inequality”

“Economists Show Inequities’ Roots in Slavery”

Most of the research studies reported herein was derived in whole or in part from research activities performed pursuant to grants from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.