Racial inequity may cost U.S.billions
Dismantling racial barriers to economic opportunity — from policing practices to exclusionary zoning — is critical to building stronger, more cohesive communities, according to many housing and community practitioners.
But what about the economic cost of these persistent racial inequities? Might segregated regions not just undermine the country's moral fabric, but also hinder its long-term economic success, especially as we bolt toward a more multiracial future?
That's a line of thinking PolicyLink, a national research and action institute, has been exploring for the past few years with professor Manuel Pastor and his colleagues at the Program for Environmental and Regional Equity at the University of Southern California. The group just released a new analysis that adds some numbers to our assertion that "equity is the superior growth model."
We asked the question: How much higher would total earnings and economic output have been in 2012 if racial differences in income were eliminated and blacks, Latinos, Native Americans and other communities of color had similar average incomes (and income distributions) as whites?
Our top-line finding: America's annual GDP would have been $2.1 trillion higher with racial equity — a 14 percent increase. That's about the size of California's economy, the eighth largest in the world.
Drilling down to metropolitan areas, the research found even more dramatic potential gains. The country's largest 150 regions could collectively grow their gross domestic product 24 percent by addressing racial inequities, compared with the national gain of 14 percent. Metropolitan Los Angeles — which includes Long Beach and Santa Ana, California — stands to gain the most: $510 billion per year, producing a 67 percent growth in gross domestic product. Metropolitan Detroit — which includes Warren and Livonia — stands to grow $26 billion per year, producing a 12 percent growth in gross domestic product, according to the researchers.
The smallest potential gain would be recorded in Springfield, Missouri — where the population is 91 percent white — and would amount to about $287 million, increasing its gross domestic product 2 percent, the researchers found.
The researchers found that employment differences by race account for a larger share of the racial income gap than in most regions (58 percent employment/42 percent wages in Detroit vs. 34 percent employment/66 percent wages nationwide). This trend is similar in other, older industrial metropolitan areas as well.
In other words, the economic return on racial equity is enormous. What's more, this "equity dividend" — for people, places and the nation — will only continue to grow as people of color become the majority.
It's important to note that these are estimates, the researchers warn. We were conservative in that we did not include the inevitable "multiplier effect" of increasing incomes for people of color. In reality, more money in the pockets of low-wage workers of color would increase local spending, bolster neighborhood businesses and create jobs. We also did not factor in the costs of moving toward equity.
While some strategies to achieve racial economic inclusion — like removing the question about conviction history from job applications — would cost very little, others — like upgrading public education systems — will certainly have a higher price tag, but are smart, strategic investments.
Though these figures are just estimates, they are useful because they start to reveal just how much stronger America's regions and states would be with equity. For years, advocates, practitioners and government officials have asked us for a way to quantify the economic benefits of racial equity.
Now, these figures — and a host of other demographic and equity indicators — are available for all states and the largest 150 metros through the National Equity Atlas — a first-of-its-kind data and policy tool for those working to build a more equitable economy. PolicyLink and PERE built the Atlas to provide community leaders and policymakers with the data they need to advocate for the policies and investments to build a new economy that is inclusive, resilient, and prosperous.
The atlas, the researchers contend, can help policymakers and community leaders understand how their area's demographics are changing, how well these areas do on a series of measures of equity and inclusion, and what strategies they can implement to advance equitable growth. The data can be found at www.nationalequityatlas.org.
The researchers contend that the racial inequities are the result of policies that were subtly maintained by racially biased policies and practices embedded in public and private institutions. The researchers contend the practices have been exacerbated by a failed model of trickle-down economics that has underinvested in people and communities and created rising inequality, slow job growth and stagnant wages for all but the very top earners.
A research brief, "The Equity Solution: Racial Inclusion Is Key to Growing a Strong New Economy," composed by this writer and colleagues Justin Scoggins, and Jennifer Tran, addresses a major complaint about these findings and cautions:
"This analysis also does not account for the costs of investments that would be needed to raise the incomes of people of color. American's racial inequities in employment and earnings result from many persistent barriers, from lack of access to high-quality basic and higher education to employer discrimination.
"Some strategies to achieve racial economic inclusion — such as removing conviction history questions from job applications and implementing comprehensive immigration reform — can have high impact at low cost.
Other crucial solutions — such as upgrading public education and job training systems, and enforcing civil rights laws — will cost more, but are smart, strategic investments that will bring long-lasting economic and social returns."
About the author
Sarah Treuhaft is a deputy director at PolicyLink, a national research and action institute advancing economic and social equity. She coordinates the organization's work on demographic change and the economy, collaborating with local and national partners on research and action projects that aim to build a more equitable economy. She manages the development of the National Equity Atlas, a Web-based data and policy tool produced in partnership with the USC Program for Environmental and Regional Equity.
Using the data
The writer offers these ideas on how researchers and city planners can use the data:
■ Pull up a quick snapshot of demographic change and equity in your region or state here. Host a community roundtable to discuss demographic change and your community's economic future using this information, or start with a staff meeting about this topic.
■Access data on your region or state's housing burden by race, how it changed between 2000 and 2012, and how it ranks here. Download these charts to include in your next conference presentation.
■Find out racial differences in home ownership in your region, and whether the racial gap is increasing or decreasing. Share these charts with social media followers.
■Help us evolve this living resource. We plan to add more indicators, geographies, displays, and analyses to the Atlas and are on the lookout for indicators that are available at the regional level and can be disaggregated by race/ethnicity. Share your dream indicators with us.
Metropolitan Detroit — which includes Warren and Livonia — stands to grow $26 billion per year, producing a 12 percent growth in gross domestic product, according to the researchers.