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San Francisco, CA — Economics researchers, including San Francisco Federal Reserve President Mary Daly, say that inequality in employment, education, and earnings has cost the U.S. economy nearly $22.9 trillion over the past 30 years, a figure that is likely to rise as minority populations expand.
“The opportunity to participate in the economy and to succeed based on ability and effort is at the foundation of our nation and our economy,” the authors wrote. “Unfortunately, structural barriers have persistently disrupted this narrative for many Americans, leaving the talents of millions of people underutilized or on the sidelines. The result is lower prosperity, not just for those affected, but for everyone.”
During the past two decades, the Brookings Papers on Economic Activity journal has calculated how inequality in the economy has affected growth. Stanford University’s Shelby Buckman, Brookings’ Laura Choi and Boston University’s Lily Seitelman wrote the paper detailing this research.
The new research contributes to a growing literature that seeks to measure inequality in the United States. Economics professors Dana Peterson and Catherine Mann published a study last year finding that closing racial gaps would have added more than $16 trillion to the U.S. economy since 2000. Some economists have done extensive research on the labor market’s racial biases, including William Darity, Lisa Cook, and others.
“This is a simple exercise, in many ways, to demonstrate an important point, which is that the gains to GDP are for everyone and closing the gaps isn’t a zero-sum game,” Daly told reporters on a call. “It’s not just that we’re rearranging distributionally (sic) the proceeds from the same-sized pie, we’re actually improving the size of the pie and then distributing the proceeds from that improvement, so that’s a different game than what many people think about when they think about equity.”
Several labor and employment indicators are used by the Brookings paper economists to calculate the cost of inequality. There are disparities such as the average Black male earning $8 less per hour than his white counterpart, the employment gap between Blacks and whites not changing since 1990, and the widening wage gap between Blacks and whites that all contribute to the loss of potential economic output.
The authors argue that educational attainment cannot solve racial disparities on its own because racial groups utilize education differently. A white or Asian American is much more likely than a Black or Hispanic American to hold a job that requires the same amount of education they achieved, rather than a position that requires a lesser degree.
“The persistent and large differentials in the employment opportunities of racial and ethnic minorities, even after controlling for educational attainment, point to considerable underutilized human resources that if more equitably allocated could boost aggregate output,” the authors wrote.
Furthermore, they point out that future output will be even more negatively impacted as large minority groups — such as Hispanic Americans — are expected to continue growing in number.
“Given that the population share of racial and ethnic minorities continues to rise, the gains will only grow in the future,” the authors wrote. “More equitable allocation of talent by education, employment, and jobs improves innovation, invention, and entrepreneurship, which set the foundation for growth today and growth in the future.”
This is a personally sensitive issue-I played an instrument in high school, and practiced 4-6 hours every day for over three years to get better. I did not go out, I didn’t go to movies, I sacrificed most of my high school years for this. Amazing; somehow, the harder I worked the more “gifted” I became.
I have not forgotten the audition where I (and two others) were “pre-graded” and given a substantially harder piece of music to sight-read in order to make it “fair” to the rest of the musicians that weren’t as “fortuitous” as we were. These guys were friends but serious competitors; I had to stay on my toes with them.
No, this doesn’t have a happy ending; they put a far less accomplished player as the lead-he was completely over his head and screwed up royally. When he couldn’t handle the complexity or the register, their answer was to lower the standard and rewrite both solos. The three of us still laugh about this every now and then.
Ideally, true “equality” would mean that everyone gets to see over the baseball fence regardless of height-perhaps by way of adding boxes for the shorter folks to stand on. In reality, equality seems to end up being applied by cutting off the legs of the tall guys-and now no one gets to see the game.
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