Eliminating Racial Income Gaps Would Boost GDP By $2.1 Trillion

A new study shows that the U.S. economy—and that of every large metro area—would soar if minorities had equal access and opportunities in the job market.

National Journal
Add to Briefcase
Janie Boschma
Oct. 29, 2014, 8:40 a.m.

A new study shows that the U.S. eco­nomy would ex­pand by $2.1 tril­lion in gross do­mest­ic product if ra­cial minor­it­ies had equal ac­cess and op­por­tun­it­ies in the job mar­ket. The re­port, “The Equity Solu­tion,” was re­leased last week by Poli­cyLink and the Uni­versity of South­ern Cali­for­nia’s Pro­gram for En­vir­on­ment­al and Re­gion­al Equity.

Each of the 150 ma­jor metro areas and 50 states stud­ied stand to gain mil­lions in ad­di­tion­al an­nu­al rev­en­ue if the wage gap didn’t ex­ist and res­id­ents of col­or were able to earn, on av­er­age, what their white peers already do.

Cit­ies that have high levels of di­versity—think Los Angeles, Hou­s­ton, San Ant­o­nio—un­der­stand­ably have more to gain from ra­cial equal­ity. But the re­search demon­strates that every single city in the list of the biggest 150 metro areas would grow its eco­nomy. Even Spring­field, Mo., the city that would gain the least com­pared with the oth­er 149, would still be­ne­fit from an ad­di­tion­al $287 mil­lion in rev­en­ue if it could cre­ate bet­ter op­por­tun­it­ies for the city’s minor­it­ies.

“If people are not con­trib­ut­ing fully to the work­force, for whatever reas­on, we all miss out on their po­ten­tial con­tri­bu­tions,” says Dav­id Lev­ine, cofounder and CEO of the Amer­ic­an Sus­tain­able Busi­ness Coun­cil. “Ra­cial dis­par­ity is hurt­ing our eco­nomy today. The soon­er we ad­dress it, the soon­er we can reap the re­wards of a more equit­able and vi­brant eco­nomy.”

The re­port also points to each city’s root cause of ra­cial in­equal­ity—how much of the in­come gap is at­trib­ut­able to a dis­par­ity in wages and how much to un­em­ploy­ment and un­der­em­ploy­ment. For ex­ample, in­equal­ity in Santa Bar­bara, Cal­if., is mostly driv­en by a dis­par­ity in wages and could be ad­dressed by rais­ing wages or in­tro­du­cing more bet­ter-pay­ing jobs. On the oth­er side of the spec­trum is Flint, Mich., where in­equal­ity is en­tirely caused by dis­par­it­ies in em­ploy­ment.

Cit­ies on the coasts and in the Sun­belt tend to share Santa Bar­bara’s ex­per­i­ence, be­cause they typ­ic­ally have high im­mig­rant pop­u­la­tions and ser­vice-dom­in­ated (low-wage) eco­nom­ies. The Mid­w­est and North­east re­gions with cit­ies like Flint struggle with ra­cial em­ploy­ment gaps be­cause they also struggle with high un­em­ploy­ment over­all that dis­por­tion­ately hurts low-in­come and minor­ity res­id­ents. 

Poli­cyLink has also re­leased an on­line tool, the Na­tion­al Equity At­las, which any­one can use to ex­plore the data for their own city and state. They hope it might also in­spire loc­al gov­ern­ment and com­munity lead­ers to take ac­tion.

“Amer­ica’s cit­ies and met­ro­pol­it­an areas are di­verse, but we don’t al­ways un­der­stand the depth or the nu­ances of that di­versity,” says Mark Rid­ley-Thomas, Los Angeles County su­per­visor. “We don’t al­ways un­der­stand what ra­cial dis­par­ity looks like and we do not al­ways un­der­stand what in­come in­equal­ity is really about.”

What the study doesn’t do is cal­cu­late the cost of policy changes that would ad­dress un­der­ly­ing so­cioeco­nom­ic reas­ons for in­equal­ity. The au­thors do re­com­mend sev­er­al lower-cost le­gis­lat­ive solu­tions, such as re­mov­ing ques­tions about crim­in­al his­tory on job ap­plic­a­tions, as well as en­act­ing com­pre­hens­ive im­mig­ra­tion re­form. But they ac­know­ledge that more costly, high-re­turn in­vest­ments in pub­lic edu­ca­tion and job train­ing, as well as en­force­ment of civil-rights laws, would be ne­ces­sary in or­der to make real pro­gress in clos­ing the ra­cial in­come gap.


Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.