A new study shows that racial and ethnic discrimination is holding back the economy–and likely has affected your company.
A report published Thursday by nonpartisan think tank The Brookings Institution found that racial and ethnic inequality cost the U.S. economy about $22.9 trillion between 1990 and 2019. Earnings gaps and differences in employment rates, among other factors, have played a role.
“The opportunity to use one’s talents fully, unbridled by prejudgment or other artificial barriers, is at the foundation of a dynamic economy,” the authors write.
The paper estimated how much larger U.S. economic output would be if there were a level playing field across racial and ethnic lines. Equity, the authors conclude, would benefit everyone–when people work hard and still face enormous barriers, they have less desire to invest in themselves and in the economy, slowing GDP growth.
Closing wage gaps is one way to start. The authors found that if average earnings among non-Hispanic Blacks, Hispanics, and non-Hispanic API+ men and women were the same as White worker’s average earnings, it would add $660 billion to GDP and boost labor income by 10 percent. In 2019 alone, closing that wage gap could have increased the GDP by $1.15 million, per their calculations.
As Inc. has reported, pay gaps, which can be unintentional, reduce productivity and increase turnover. You can root out pay gaps by creating an organization flowchart to ensure you have an accurate sense of your employee’s job descriptions. From there, focus on conducting regular pay audits.
The Brookings report also found that along with educational attainment, equalizing the employment rates–i.e., how many people are employed in White populations versus Black, Hispanic, and API populations–boosted GDP the most, compared with other measures such as hours worked.
Besides helping the economy, hiring diverse teams improves company performance and innovation. Still, White founders often hire from their immediate (and predominantly White) networks, resulting in a lack of diversity among startups, Inc. has reported. To combat that issue, consider combing through your job descriptions for subtle, discriminatory language, and try using platforms that focus on recruiting people of color.
For the report, the authors examined Black, White, Hispanic, and API+ people ages 25 to 64 and used Current Population Survey (CPS), a collaborative survey between the U.S. Census Bureau and the Bureau of Labor Statistics, to explore the damage of historical discrimination.
Unfortunately, inequality is baked into our society, and removing it would take substantial efforts, the authors write. But the payoffs would be huge: “More equitable allocation of talent by education, employment, and jobs improves innovation, invention, and entrepreneurship, which set the foundation for growth today and growth in the future.”
