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.

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.