We’re not bending the arc towards justice

This month, a new study by four economists at the Federal Reserve Bank of San Francisco estimated the economic benefits of creating a more equitable economy. The study, “The Economic Gains of Equity,” published as part of the fall 2021 edition of the Brookings Papers on Economic Activity, is far from the first one to estimate the costs of structural racism in our economy. But two specific findings from it stood out to me…

First, by comparing data across 30 years, this paper can ask a crucial historical question: is the GDP cost of inequity increasing or decreasing over time? It finds that inequity costs us 2.36x more today ($0.66 trillion) than in 1990 ($0.28 trillion).

This means we’re not currently bending the arc towards justice; economic inequities, and the costs associated with them, are getting worse.

The second finding from this paper that stands out to me is its exploration of the drivers of lost GDP. Are these costs driven more by differences in employment rate between racial groups or hours worked? Education level or hourly pay?

This paper finds that employment & educational disparities are the most costly ones. Disparities in hours worked, pay, and utilization (whether someone gets a job in their field of study) are important secondary drivers.

Note how much more skills & credentials matter today than in 1990. As the value of education has skyrocketed in the knowledge economy, so too have the economic costs of educational disparities by race.

These findings – that the economic costs of inequities are growing & that education and employment disparities cost us most – suggest a path forward.

First, disparities won’t go away by themselves. We need deliberate, collective action to counter the spiraling costs of inequality in the modern economy and create more equitable systems.

And second, strategies to boost employment & educational attainment will produce the biggest gains for all of us. Providing stable hours, creating pathways for Black & brown grads to enter their fields of study, & ensuring equal pay for equal work will also help.

My biggest takeaway from this research is not a new one. It’s a theme that countless people (including Heather McGee and my former Brookings colleague Dr. Andre Perry) have championed. It’s this: ending systemic racism & building a fair and equitable society is good for all of us. Let’s get to it.

One final note: this report’s findings also affirm why the Center for Economic Inclusion, where I work, matters. We collaborate every day with private & public sector partners to advance these strategies and build a more equitable society. I’m feeling grateful to be part of the team.