Racism stymies national economic growth and is bad financially for business
“We’re in the midst of a national reckoning on race, and words are not enough. We need awareness, education and action that drive results.” Mark Mason, Chief Financial Officer of Citigroup
Citigroup research found that if the U.S. could instantly end the most severe forms of economic discrimination against African Americans, it could give the economy a $5 trillion boost to gross domestic product (GDP) over the next five years.
Racial inequalities shaved about $16 trillion from U.S. GDP
During the past 20 years, race-based inequalities shaved about $16 trillion from GDP, Citigroup estimated in a CLOSING THE RACIAL INEQUALITY GAPS: The Economic Cost of Black Inequality in the U.S. study. Citigroup said it “studied the costs of lost wages, fewer opportunities for higher education and less access to home and small-business loans” for African Americans.
“What this report underscores is that this tariff is levied on us all and, particularly in the U.S., that cost has a real and tangible impact on our country’s economic output,” Citigroup Vice Chairman Raymond J. McGuire said in the report. “We have a responsibility and an opportunity to confront this longstanding societal ill.”
Furthermore, today in the midst of the COVID-19 pandemic, Black, Latin, and Native Americans have been hospitalized for COVID-19 at a disproportionately high rate, a direct result of what the Centers for Disease Control and Prevention has identified as “long-standing systemic health and social inequities.” Blacks and People of Color are also bearing a disproportionate share of the pandemic’s economic devastation.
Citigroup believes that they, as a major U.S. financial institution, “have a responsibility to address complex societal questions” and “to address current events and to frame them with an economic lens in order to highlight the real costs of longstanding discrimination against minority groups, especially against Black people and particularly in the U.S.”
Four key racial gaps for Blacks
The analysis in the report shows that if four key racial gaps for Blacks —wages, education, housing, and investment — were closed 20 years ago, $16 trillion
could have been added to the U.S. economy. And if the gaps are closed today, $5 trillion can be added to U.S. GDP over the next five years. The Citi study assessed that:
- Closing the Black racial wage gap 20 years ago might have provided an additional $2.7 trillion in income available for consumption and investment.
- Improving access to housing credit might have added an additional 770,000 Black homeowners over the last 20 years, with combined sales and expenditures adding another $218 billion to GDP over that time.
- Facilitating increased access to higher education (college, graduate, and vocational schools) for Black students might have bolstered lifetime incomes that in aggregate sums to $90 to $113 billion.
- Providing fair and equitable lending to Black entrepreneurs might have resulted in the creation of an additional $13 trillion in business revenue over the last 20 years. This could have been used for investments in labor, technology, capital equipment, and structures and 6.1 million jobs might have been created per year.
Closing the wage, housing, education, and business investment racial gaps can help narrow the wealth gap, which is significant for facilitating homeownership, business, and job creation, plus establishing a pipeline for intergenerational wealth accumulation.
It’s hoped that Citigroup’s study brings perspective that collectively Americans can find substantive and sustainable opportunities to address the racial inequality gaps identified in the research.
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According to the Washington Post, less than 5 percent of those holding senior executive positions at Wells Fargo in 2018, a year before Scharf became chief executive officer, were Black.