Equitable Growth in Conversation is a recurring series where we talk with economists and other academics to help us better understand whether and how economic inequality affects economic growth and stability. In this installment, Shira Markoff, mobility fellow at the Washington Center for Equitable Growth, speaks with Fenaba Addo, an associate professor of public policy at the University of North Carolina at Chapel Hill. Her research on racial disparities in student debt, older Black women and wealth, and the millennial racial wealth gap reflects her interests in bridging social demography with economic inequality. Addo’s work sheds light on the ways that societal inequalities stem from historical legacies of racial exclusion and discrimination and how they get reproduced over time. In their conversation, Markoff and Addo discuss:

Shira Markoff: Thank you so much for talking with me today about your work. I really appreciate it.

Fenaba Addo: I’m looking forward to it. Thanks for having me.

Markoff: A lot of your research centers around racial economic inequality, including student debt among Black students and the racial wealth divide. What led you to take up this research? And what central questions guide your research agenda?

Addo: I’ve always been interested in economic inequality. I grew up in New York City in the 1980s and 1990s, where I was exposed to examples of extreme wealth, as well as extreme poverty, from an early age. Just within a short train ride moving through different neighborhoods, you can visibly get a sense of what we used to call the haves and have-nots, and it was very clear that these differences were stratified by race. So, I think I’ve always had an interest in money and finance, and how people make financial decisions, how people become wealthy, which people have money, and, for those who do not, how do they survive?

I carried these questions with me to college and decided to study economics with a goal of working on Wall Street upon graduation. I, along with a lot of my friends and colleagues, graduated into the post-9/11 recession and struggled to find work. We knew that the student debt collectors were going to come calling, and I was having a lot of conversations with my friends, family, and people I met as I moved into the labor force about their student debt burden.

I was able to find work in hospital administration that paid a decent salary, and paying back my student debt wasn’t a struggle for me, but that wasn’t the case for a lot of my friends and family members. These experiences and conversations really stuck with me. So, when I went back to grad school, I was interested in decision-making among young adults about their finances, particularly involving student debt. Some of my earliest work was collaborating with one of my academic advisors on co-habitation and marriage, and I wanted to look at how student debt was factoring into the relationship decisions of young adults.

I felt like I was seeing the short-term effects of massive student debt all around me, but I wasn’t seeing it talked about in the classroom, and I wasn’t really seeing it in the work that was being published around the transition to adulthood or its connection to pursuing postsecondary education and later-life outcomes.

Markoff: I want to turn to talk about economic mobility. How do you view economic mobility from the lens of the research that you’ve done on racial economic inequality? And how do you see that relationship between economic mobility and inequality?

Addo: When I think about economic mobility, what automatically comes to mind is timing. I think about how important it is to have a financial foundation or access to finances at pivotal points in life. I think about how critical it is to have access to resources for decision-making, being able to take risks, being able to invest in oneself, and secure your family financially. So, I think a lot about, starting in childhood, what are the familial, social, political, and economic environments into which people are born that set them up for success?

And then, I think about how pivotal moments over the course of people’s lives and access to resources over time affect those trajectories both in the short and long term. How does the timing of access to financial resources affect people’s ability to move within our society economically? What circumstances determine their access to these resources, and who is responsible for providing them?

Markoff: Those questions relate to some really interesting research that recently came out from Opportunity Insights finding that the Black-White economic mobility gap has decreased when looking at cohorts of people born in 1978 versus 1992. How do you interpret those findings in light of your research on racial economic inequality, and what else would you add as context to those findings?

Addo: Economic mobility in the United States has traditionally been examined through an income-based lens, as reflected in much of the academic discourse on the subject. While this work is valuable and highlights how individuals experience social and economic mobility through the labor market, I believe this perspective is incomplete. To fully understand economic mobility, we must consider the entire household balance sheet, including both assets and debts, rather than focusing solely on income.

When economists start to expand the definition of economic resources to include household wealth, we can understand more about how economic mobility happens, how it’s created, how it has been secured over time, and how these trends have largely been stratified by race and ethnicity within our society. As a result, we also must talk about how the lower rates of economic mobility among Black households has been facilitated by public policy decisions.

Let’s go back to the recent results from Opportunity Insights, which is largely an income inequality story. Some of the findings that scholars tend to highlight are the narrowing of the income gap between Black and White households, as well as the decrease in this income gap between cohorts born in 1978 versus 1992. What I would want to focus on are the starting lines and relative differences in the magnitudes of the change.

The data show that Black households begin from a significantly lower starting point, and their economic gains still fall short of reaching the baseline starting point of White households. While there is some improvement, it is only relative. Inequality scholars analyzing these figures find that Black households have yet to attain the same median income that White households either start with or fall to during this period.

Markoff: So, let’s dig further into wealth inequality. Over the same time period as the Opportunity Insights research, what has been going on with wealth inequality between Black and White households?

Addo: Wealth inequality between Black and White households has remained largely stagnant or even has widened, particularly following the Great Recession of 2007–2009. Some economists argue that Black households face challenges in converting earned income into savings, often attributing this to higher consumption, spending beyond their means.

However, this explanation only tells part of the story. If economists overlook the broader wealth dynamics, they risk missing critical aspects, such as the rise in student loan debt or the impact of the foreclosure crisis on homeownership markets, which have played a significant role in shaping wealth disparities.

So, these are the types of questions that excite me. I’m always trying to understand what contributes to reducing and increasing inequality, and how we can reconcile what we see in the data with what we see people actually experience and the lived experiences of people within our communities.

Markoff: That’s really helpful context to add to the finding in the Opportunity Insights research that people are zeroing in on about the mobility gap closing. What is striking to me is the question of how durable the shrinking of the mobility gap is—acknowledging, as you pointed out, that gap still hasn’t closed—but even the shrinking of it, how durable is that really without that wealth component? When people are starting in a much lower wealth position, even though they’re starting to shrink the income gap, it’s not necessarily durable over the long term without that wealth piece.

Addo: Exactly. We’re looking at the complementary story of what’s going on with wealth inequality.

Markoff: So, that’s a great transition to talking about a paper that you recently wrote, “Setting the Record Straight on Racial Wealth Inequality,” with professors William Darity Jr. [at Duke University] and Samuel Myers Jr. [at the University of Minnesota], in which you argue that the mainstream economic view of the drivers of the racial wealth divide—that Black households have lower levels of human capital, such as education, causing them to have lower incomes and less savings—is wrong. Can you talk about what is really driving the racial wealth divide? Why do you think these misconceptions persist in the economic literature despite research findings refuting them?

Addo: Labor economists have really led the discussion on wealth inequality and mobility within the economics profession, and they tied this to a story about human capital accumulation. This is an argument that posits that Black households have lower levels of educational attainment, which, in turn, generates lower earnings and lower savings that produces less wealth. Therefore, the inferior economic position of Black Americans is due to their own lack of human capital and poor choices.

We know that many historical policies either hindered or outright exploited Black Americans’ ability to build wealth and access equitable educational resources. Discriminatory practices, such as the unequal application of the GI Bill and redlining in the housing market, made it nearly impossible for Black Americans to accumulate assets. Ironically, these same programs were instrumental in creating a White middle class in the 20th century. Any explanation of racial economic inequality that omits the role of discrimination is fundamentally incomplete.

Wealth accumulation and wealth inequality also is intergenerational. The ability to pass on wealth to one’s children is pivotal to persistent inequality over time. We find that White households are much more likely to leave inheritances or bequest wealth to their offspring, and the amounts that they give are larger than those of Black households.

We examine how wealth is generated and passed down across generations, taking into account the historical methods by which it has been secured and accumulated. Additionally, we consider more modern approaches to wealth accumulation, such as homeownership, which became increasingly exploitative during and before the Great Recession due to the subprime mortgage crisis. Black and Latino households were disproportionately targeted with subprime loans, exacerbating wealth disparities. Consequently, the continued emphasis on the returns to education and labor market outcomes fails to provide a full picture of how wealth inequality persists in our society.

We wanted to set the record straight. While we can focus on the human capital narrative, there’s also a more comprehensive story to tell. If we start with education, extensive research highlights the inequalities in K–12 education and how they are closely tied to geographic location. This connection points back to residential segregation and access to resources, ultimately revealing that the story is fundamentally about wealth disparities and the impact of public policy decisions.

Markoff: What you’re saying really dovetails with the research that you’ve done on student debt. How people pay for their education often relates to their household wealth and affects their long-term trajectory in life and what the returns are for them on that education. So, I want to talk about the book that you co-wrote with [Dartmouth University] sociologist Jason Houle, A Dream Defaulted: The Student Debt Crisis Among Black Borrowers. Can you talk about your key findings in the book, particularly how student debt affects Black households’ economic mobility and their financial trajectory over their lives?

Addo: Sure. This book is the culmination of work we explored separately and together for more than 10 years. Over the spring, summer, and fall of 2019, we interviewed nearly 50 Black student loan borrowers, all of whom attended 4-year colleges and universities. We weave these stories together with more than a decade of largely quantitative academic research on the causes and consequences of student loan debt. And what we show with our analysis, and that has been replicated across multiple datasets, is that Black borrowers tend to accumulate more student loan debt.

As Black students take on more debt, they accumulate more debt, and then, they take longer to pay it off, which means that they have larger loan balances, in our data, across young adulthood. And we find large and persistent debt disparities between Black and White student loan borrowers because White borrowers were able to pay off their debt faster than Black borrowers.

In our analysis, we show that, not surprisingly, this racial disparity is largely connected to wealth inequality within our society. We show that parental wealth is associated with student debt accumulation, and that those large racial student debt disparities are contributing to racial wealth inequality among this cohort of young adults. More specifically, we estimate that about 13 percent of the wealth divide in young adulthood is due to student debt disparities between Black and White individuals.

In the book, we share the stories of our respondents and their experiences with student loan debt accumulation and paying for college and then transition to the post-degree period, or after leaving school, and how they’ve navigated the repayment process. We delve into the psychological and emotional costs associated with navigating such large loan balances and how it has altered small or large decisions that they’ve had to make throughout young adulthood, such as decisions about starting a family, where to live, buying a home, changing careers, and pursuing more education with those undergraduate loans.

The book ends with a policy chapter that proposes several policy solutions that we believe may be critical to consider if we want to reduce the debt burdens of Black borrowers within the United States.

Markoff: Can you share some of those policy prescriptions? What do you think are the most promising policies for addressing the student debt crisis?

Addo: We talk about the debt crisis in two pieces: the accumulation phase and the debt repayment phase. In the accumulation phase, we discuss how policymakers can reduce the amount of financial aid that’s loan-based and increase grant-based financial aid.

For instance, the Biden administration has increased funding for the Pell Grant, but how can these efforts be expanded further? Additionally, how can schools help cover remaining costs? There are already promising initiatives, such as college promise programs like the Kalamazoo Promise in Michigan, but we need more widespread efforts to address these challenges.

During the repayment phase, I have been a strong advocate for student debt cancellation and have written extensively on the topic. I firmly believe that much of the debt accumulated, particularly by millennials, was acquired under exploitative conditions. Federal student loan cancellation would send a powerful message that the government acknowledges the problematic and often predatory origins of these loans.

There have also been significant improvements to programs such as the Public Service Loan Forgiveness program, which was designed to encourage people to pursue careers in public service by offering loan forgiveness after 10 years of service. While the program faced issues in its early implementation, the Biden administration has made substantial efforts to address these problems and improve its success rate.

Overall, policymakers need to consider the reasons why people take on student debt, why they are struggling and have so many problems with paying it back. Student loan repayment policies have tended to be more punitive and predatory rather than helpful, especially when people navigate both entry into the labor market in early adulthood and are working to pay off those loans.

There’s some work demonstrating that a lot of people struggle in those early months trying to start paying back those loans, and if they don’t, that’s when their loan balances are the highest. So, if they mess up or struggle within that really early period, it can have very long-term effects on the amount of debt that they have to pay off over time, or it kind of balloons. I’m thinking about a lot of these stories about negative amortization or owing more than you ever took out. How does that happen? One reason is because some people really struggle early on to pay off their debts when their debt balances are the largest.

There have been some efforts by the Biden administration to address issues of existing borrowers. Borrowers with outstanding balances have more access to income-driven repayment plans or the Public Service Loan Forgiveness program if they work for a qualifying employer. But we definitely need more innovative and supportive solutions to help people who are trying to invest in themselves and invest in their education and pursue economic security and stability and mobility for themselves and their families. I think under the old system, it was a punitive one rather than supportive.

Markoff: What does research indicate about the impact of canceling student debt, particularly for Black households? What kind of impact would it have on their financial situations?

Addo: Research consistently shows that student debt cancellation could be transformative, as it would allow households to redirect resources from debt repayment toward saving and investing. This is particularly critical for building both short-term financial security and long-term wealth, such as saving for retirement. Early and consistent investments are key to fostering wealth growth over time.

[University of California, Merced sociologist] Charlie Eaton and colleagues have shown that when wealth is used as a metric, a student debt cancellation program can be highly progressive. Critics often argue that it is regressive, benefiting financially secure individuals more than those with lower incomes. However, this perspective relies on an income-based lens.

When we broaden the analysis to consider borrowers’ wealth profiles, the picture changes. Many Black borrowers, for example, may have household incomes at or near the median but still possess zero or negative wealth due to historical inequities and the burden of student debt. Under this expanded definition, student debt cancellation appears far more progressive, disproportionately benefiting borrowers who are most financially disadvantaged in terms of wealth.

Markoff: This leads me to my next question. What does research show are some of the policies that could be most effective for addressing the racial wealth divide?

Addo: The racial wealth divide is large, and while I’ve spent significant time researching this area, I must acknowledge that student debt cancellation alone will not close the gap. Tackling racial wealth inequality requires more than addressing a single area, as this disparity manifests across multiple domains, including education, financial markets, credit markets, and housing. Its pervasive nature demands a comprehensive package of programs aimed at reducing debt and promoting asset accumulation.

One approach is to consider how to directly provide wealth to households lacking it. This is where innovative policy proposals have gained attention, with varying degrees of success. One notable idea is baby bonds, which have gained traction in recent years, especially since 2020. These bonds act as a trust fund for children, granting families a sum of money at birth that grows over time. Upon reaching adulthood, individuals can use these funds to pay for college, start a business, or acquire assets. Baby bonds are seen as a targeted solution to address the wealth gap, empowering households with the flexibility to invest in their futures.

Another area of interest is guaranteed income programs or guaranteed basic income. These initiatives, often piloted at the local level, typically provide financial support to families, particularly women with children. While promising, these programs raise questions about their sufficiency in helping households build the financial reserves needed to significantly reduce the wealth divide.

Reparations for descendants of enslaved Americans also stand out as a critical and ambitious proposal. Scholars, including professor William Darity and colleagues, estimate the cost of a reparations program at around $14 trillion, which would be a transformative step toward closing the racial wealth gap. However, reparations are a race-targeted policy addressing both wealth inequality and historical injustices. Despite its potential impact, political feasibility remains a significant challenge.

Currently, I’m collaborating with scholars to evaluate and compare various programs aimed at addressing the racial wealth divide. We’re analyzing factors such as effectiveness, political feasibility, and efficiency in closing the gap. It’s clear that no single solution will suffice, and the success of any program will depend on multiple interconnected considerations. This work is ongoing, but it underscores the complexity of addressing such a deeply entrenched issue.

Markoff: That’s a good segue to a more general question about the connection between research and policymaking. In an ideal world, we would want policymaking to be data-driven, but we know that a lot of other factors go into policymaking. So, how do you see research feeding into policy? How do you hope that it might have an impact on policymaking?

Addo: I believe research plays a foundational role in policymaking, though it is not the only component. Policymakers also value hearing personal stories and learning from their constituents’ lived experiences. It’s essential to go beyond treating individuals as mere data points and strive to understand the stories behind the numbers we analyze.

It’s also important for researchers to conduct their work independently of the political moment. Rather than being purely reactive, we should ensure that our research addresses important questions so that, when policymakers need information, it is readily available. This allows us to provide evidence-based policy recommendations in a timely manner. My guiding principle has always been to pursue questions that matter to me, and when the opportunity or need arises, I can offer insights and evidence to support informed decision-making.

This approach worked well with our research on racial disparities in student debt. Jason Houle and I were motivated by our own lived experiences and observations within our social circles. We decided to explore the data to investigate the trends we were witnessing. Over time, the issue gained traction due to various factors, and we were fortunate to have evidence ready when policymakers and stakeholders began reaching out. It was gratifying to contribute research that could inform meaningful discussions and policy decisions.

Markoff: That’s a great point. I’ve been having a lot of conversations with people working on policy about how they see research, and I often hear that research is not always timely and that it takes so long to get the research. So, I think your point of looking into the important issues, even if the policy world isn’t ready for them, makes sense. Because when the policy world is ready, you now have that evidence.

Addo: Absolutely. And you can continue to work and build on it and adjust given the current moment. But we should be driven by the important questions.

Markoff: My last question is, what are some topics related to economic mobility where you think there is interesting new research happening or where there are ripe opportunities for new research?

Addo: Two things that I want to highlight. I think there is some really great work being done on entrepreneurship. One of my co-authors, [Babson College sociologist] Daniel Auguste, is doing some really interesting work on the relationship between job precarity and wealth, in addition to his amazing research on entrepreneurship and racial wealth inequality. His research offers up a reimagining of the often-assumed merits of entrepreneurship, as well as the motivations for why Black Americans pursue that route. So, I think that’s an area that’s ripe for more research, and I’m very interested in following his work.

I’ve also been thinking about and following the work that’s been happening on taxation policy and racial wealth inequality. This is a conversation that really ramped up after [Georgetown University Law Center] professor Dorothy Brown’s book The Whiteness of Wealth came out. I believe several research groups are working to provide evidence on how our taxation policy is stratified by race and contributes to ongoing racial wealth inequality. So, those are the two areas that I’m really interested in and following right now.

As an aging millennial, I’m also personally interested in how we’ll approach economic mobility and aging in the context of intergenerational wealth transfers. Specifically, I’m focused on the large transfers of wealth from baby boomers to millennials and Gen Z in the years ahead. I will be following how this process unfolds and how policy will shape and influence these transfers and what it might mean for racial wealth inequality.

Markoff: Those are really some interesting and important areas to look at for the next few years.

Addo: I’d also like to highlight the valuable research on place-based inequality, particularly the work connected to The Opportunity Atlas. This research goes beyond income and neighborhood effects, considering factors such as poverty and extreme poverty in rural areas and how they influence social mobility and intergenerational poverty. The intersection of place and economic mobility is a rich area for further exploration and study.

Markoff: Yes, absolutely. Well, thank you so much for talking with me. This has been great.

Addo: Thank you.