The United States’ longstanding discrimination against minority groups, especially Blacks, is biting the U.S. economy hard. A new report by US-based firm Citigroup claims the U.S. economy lost $16 trillion due to racism and discrimination faced by Blacks since 2000.
The report noted that the loss includes gaps in wages, access to housing and higher education and investment in Black-owned businesses.
The report adds to the plethora of research that has attempted to quantify the economic impact of systemic racism in the U.S.
Citigroup arrived at the $16 trillion figure by estimating that:
Wage gap suffered by Black Americans cost the US economy $2.7 trillion $218 billion lost as a result of the housing deficit between Blacks and Whites $90 billion to $113 billion lifetime income lost because of discrimination from accessing higher education $13 trillion in business revenue lost in the last 20 years because of discrimination in lending to Africa American entrepreneurs. The study warned that not acting to reverse discriminatory practices against Blacks could further cost the U.S. economy. Citigroup estimates that the U.S. economy could see a $5 trillion boost in the next five years if racial gaps are closed.
According to the report, the gaps in many cases remain wide 60 years after the Civil Rights Movement. In some cases, including in homeownership rates and college degree attainment, the gaps are wider now than in the 1950s and 1960s.
“These gaps are apparent in unemployment, net worth, debt levels, wages, peak income, financing for businesses, spending on education, and rates of imprisonment and sentencing levels,” the study noted.
“Racial inequality has always had an outsized cost, one that was thought to be paid only by underrepresented groups,” said Raymond J. McGuire, Vice Chairman of Citigroup and Chairman of Banking, Capital Markets and Advisory at Citi.
He added: “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. Now, more than ever, we have a responsibility and an opportunity to confront this longstanding societal ill that has plagued Black and brown people in this country for centuries, tally up the economic loss and as a society, commit to bring greater equity and prosperity to all.”
Citigroup said the incarceration rate among Black Americans, conscious bias in hiring and voter suppression all play a role in hindering the effort to close the racial gap in the U.S.
According to Moody’s Investor Service, 44% of Black households owned their homes in 2019, compared with 74% of white households. “The disproportionate representation of Black households in poorer income and wealth brackets in the US suggests that those households have been more affected by the macroeconomic trends that have led to a broad rise in inequality,” said Moody’s Vice President William Foster.
“These trends include globalization of trade, capital and labor; displacement of labor through automation; rising educational requirements alongside highly uneven quality of schooling; and uneven access to credit.”
Also, data from the U.S. Federal Reserve show that between 1995 and 2016, White households’ net worth grew 43%, to $61,200, between 1995 and 2016, while it remained flat at $35,400 for Black families.
Last year, a study by consulting firm Mckinsey examined how racial discrimination and other inequalities have reduced America’s wealth. The firm noted that U.S. GDP could hit 6% if the racial wealth gap is closed by 2018. “The country has over a trillion dollars to gain from the effort,” the study concluded.