Racial inequity has wreaked a tremendous economic toll on the United States to the tune of trillions of dollars, a newly released report found.
“The Business Case for Racial Equity” weaved together research from several organizations, including the Center for American Progress, National Urban League Policy Institute, Joint Center for Political and Economic Studies and the U.S. Department of Justice. The threads became a tapestry that depicted how race and class discrimination, residential segregation and lopsided income levels represent lost opportunities for minorities; and incurs great costs to the country—including the burden of incarceration.
“Racism in the U.S. has left a legacy of inequities in health, education, housing, employment, income, wealth, and other areas that impact achievement and quality of life,” the report stated. “When people face barriers to achieving their full potential, the loss of talent, creativity, energy, and productivity is a burden not only for those disadvantaged, but for communities, businesses, governments, and the economy as a whole.”
In terms of income, people of color are currently earning 30 percent less than Whites, after adjustments for age and sex, according to the report. If that gap were closed, higher productivity would increase total U.S. earnings by 12 percent or nearly $1 trillion and gross domestic product, or GDP, would increase by $1.9 trillion. That would translate into $180 billion in additional corporate profits, $290 billion in additional federal tax revenues, and a potential reduction in the federal deficit of $350 billion.
As the percentage of minorities in the labor force increases over time, those gains would increase exponentially, the report concluded.
Similarly, the National Urban League Policy Institute found that differentials in health cost the U.S. an estimated $60 billion in excess medical costs and $22 billion in lost productivity in 2009. They projected that the burden will to rise to $126 billion in 2020 and $363 billion by 2050 if these health disparities remain. Premature deaths further cost the economy $250 billion in 2009.
Inequities in education were also expensive. In one example, if the educational achievement gap between Hispanic and African American and White students in the U.S. were closed in 2008, the nation’s GDP would have seen a boost of between $310 billion to $525 billion, a McKinsey & Co. analysis determined.
The resonance of these findings and the importance of achieving racial equity will gain even more importance as anticipated demographic changes begin to materialize. The U.S. Census Bureau has projected that children will be “majority minority” by 2018. And, overall, people of color will account for more than half of the U.S. population by 2043.
The report was created by the Altarum Institute and the W.K. Kellogg Foundation and funded through the latter’s America Healing effort, which was launched in 2010 to support programs that promote racial healing and address racial inequity.
“Our hope is to bring another lens to the urgency of addressing disparities that are not only putting vulnerable children at a disadvantage, but are also costing our nation a great deal,” said Ani Turner, deputy director of the Center for Sustainable Health Spending at Altarum Institute. “When disparities in health alone are costing the U.S. $82 billion per year in excess medical costs and lost productivity, the message is clear: our future depends on racial equity.”