Baby bonds could reduce racial wealth gap in Oakland, study says
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A new study says state-funded savings accounts called baby bonds could give some Bay Area residents born into poverty a financial head start in adulthood.
Why it matters: Reducing the racial wealth gap could help build economic mobility and generational wealth by giving low-income kids the chance to buy a home, pay for college or start a business.
State of play: The study predominantly focused on low-income Black residents in Oakland, who make up about 22% of the city's population, compared with San Francisco's Black population, which stands at 5.2% as of 2023.
Context: Over the years, both Oakland and San Francisco's Black populations have fallen due to increasing gentrification, lack of affordable housing, discriminatory housing practices and racial wealth disparities.
By the numbers: San Francisco's Black residents have been pushed into the East Bay, other Bay Area suburbs or cities, and out of state.
- From 2013 to 2017, about 18% of the Black residents who left San Francisco moved to Alameda County, a Quartz analysis shows.
- Oakland has experienced similar demographic shifts as housing prices and cost of living expenses in the Bay Area have grown.
Between the lines: A baby bonds program would increase the median financial wealth for Hispanic families by roughly 40%, and 20% for Black families, according to the Urban Institute's study.
- The savings, which recipients could withdraw when they reach adulthood, would also increase equity for homeowners in Oakland.
- Recipients would take on less student debt and retire with more savings, according to the think tank.
How it works: The study's model uses a federal baby bond program proposed by U.S. Sen. Cory Booker (D-N.J.) and U.S. Rep. Ayanna Pressley (D-Mass.) that would create a $1,000 trust account for every newborn in the country.
- The program would provide children from the lowest-income families an estimated $50,000 at 18 under the bill.
- If passed, Black and Hispanic residents in Oakland from the bottom 40% of the income distribution could average between $33,000 and $34,000 in baby bond account balances.
Zoom in: Oakland has the Brilliant Baby program, a universal child savings account funded with private and public dollars.
- California, meanwhile, offers college savings accounts through CalKids.
- The state also created the HOPE program in 2022, which provides baby bonds for long-term foster care children and kids who lost parents or caregivers during the COVID-19 pandemic.
Yes, but: Baby bonds are a tool, not a silver bullet. Advocates say the policy should complement programs that help people buy a home or pursue a diploma or certificate.