Racial inequities cost US economy trillions, researchers find

September 9

Racial and ethnic inequities have cost the US economy some $51 trillion in lost output since 1990, San Francisco Federal Reserve President Mary Daly said Wednesday, citing data from a paper she and three co-authors will present at The Brookings Institution.

Large and persistent gaps in rates of employment, education, and earnings across races “add up to a smaller economic pie for the nation as a whole,” Daly said in a briefing ahead of the paper’s release Thursday.

“The imperative for equity, for closing some of these gaps, is not only a moral one, but it’s also an economic one.” The paper maps out what GDP would have been if gaps in the labor market didn’t exist.

Employment for Black men, for instance, is consistently lower than that for men of other races.

Earnings by Black and Hispanic workers also lag those of whites.

Daly and her co-authors calculated what the gains to GDP would be if those and other race-based gaps were erased: if Black and Hispanic men and women held jobs at the same rates as whites, if they completed college at the same rates as whites, and if they earned the same as whites.

From labor alone, they figured, the gains would add up to $22.9 trillion over the thirty years from 1990 to 2019, with bigger gains in more recent years as the share of non-white populations has increased while the gaps have remained fairly steady.

The larger $51.2 trillion estimate factors in the increase in capital investments that a more productive labor pool could be expected to trigger, Daly said, and includes $2.57 trillion in 2019 alone.

The paper was written with Shelby Buckman, a graduate student at Stanford University, Boston University post-grad Lily Seitelman, and San Francisco Fed vice president of community development Laura Choi. Reuters

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