How Much Does Racial Inequality Cost?

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"How Much Does Racial Inequality Cost?"

blackworkersEliminating the economic disparities between white America and the country’s minority population would put another trillion dollars into the economy, boosting businesses and producing far-reaching benefits across a variety of measures of U.S. economic health and opportunity, according to a new report from the W.K. Kellogg Foundation (WKKF).

People of color earn 30 percent less than non-hispanic whites. Closing that gap in average income would increase total earnings nationwide by 12 percent, or roughly $1 trillion given the current size of the total earnings figure. That means another trillion dollars for consumers to spend, which is good news for business and workers alike. “The earnings gain would translate into $180 billion in additional corporate profits,” WKKF writes, and “$290 billion in additional federal tax revenues, and a potential reduction in the federal deficit of $350 billion, or 2.3% of GDP.” The economy would have been $1.9 trillion larger in 2013 if the earnings gap were eliminated.

While the report warns that the parade of gigantic dollar figures it presents cannot be easily combined into one overall price tag for racial inequality in America due to the varied methodologies of the research it surveys, the takeaway is unmistakable. These estimates are above what the Center for American Progress’ Progress 2050 project had found over the summer due to differences in the scope of the studies.

Disparities in earnings mirror other sorts of inequities, such as in health. The racial gap in preventable disease rates costs $24 billion per year, according to one study reviewed by WKKF. Another puts the total cost in lost productivity and unnecessary medical spending at over $80 billion per year. All studies agree that racial disparities in health are a rapidly growing drag on the economy.

Even leaving the moral imperatives aside, persistent racial inequities cost the country staggering amounts of money. Non-white Americans face discrimination in hiring, and if hired they often face discrimination in opportunities for advancement on the job even in high-qualification industries like financial services. From housing discrimination that impairs wealth-building for minority families to mass incarceration that disrupts basic economic security, America’s racial divides undermine its economic growth in a variety of ways.

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