Closing racial gaps in four key areas would add $5 trillion of gross domestic product to the U.S economy over the next five years, a new study by Citigroup shows.
The analysis shows that if “four key racial gaps for Blacks—wages, education, housing, and investment—had been closed 20 years ago, $16 trillion
could have been added to the U.S. economy”.
The study, compiled as a part of Citi’s thought-leadership series Global Perspectives & Solutions, concluded that if those four gaps were closed today, $1 trillion per year could be added to U.S. GDP over the next five years.
The GDP of a country is the monetary value of all finished goods and services made within it during a specific period, usually used to estimate the size of a country’s economy and growth.
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U.S. GDP in 2019 was $21.3 trillion, dwarfing that of China, which has the second-highest GDP in the world with $14 trillion last year.
The report highlights that disparities in economic and social metrics between Black and white citizens in the U.S. remain in place after 60 years of the civil rights movement.
When it comes to housing, for example, the study found that improving access to housing credit might have added 770,000 black homeowners over the last 20 years, which could have seen another $218 billion added to the GDP over that time.
According to the NAACP, African Americans have the lowest homeownership rate of any racial or ethnic group at 46.2 percent, compared to whites who have the highest homeownership rate at 74.4 percent.
Looking at the wage gap, the report found that if the gap between minority and white males had been closed 20 years ago, it might have generated an additional $2.7 trillion in income for Black workers.
It notes that, as of 2020, the gap for Black male wages compared to white male wages was 80 cents on the dollar and the gap for Black female wages to white male wages was just below 70 cents on the dollar in 2020.
Citi estimates that the total amount of income that could have been generated since 2000 if all income gaps were closed sums to “an astounding $12 trillion”, with $7 trillion from closing the gaps between white males and their Black and Hispanic counterparts.
The impact of the coronavirus pandemic is also analyzed in the Citi report, which cites a Bloomberg News study showing a disparity in the number of minority-owned businesses that received Paycheck Protection Program (PPP) loans compared to white-owned businesses.
Similarly, a study from the Urban Institute in July found that nearly three-quarters of white Americans reported receiving the $1,200 stimulus check provided by the CARES Act, compared with 68.8 percent of Blacks and 63.7 percent of Hispanics.
Citi’s analysis includes actions that both the government and individuals could take in order to close the racial gap in education, housing, investment and wages, including, for example, tax reform and implementing salary history bans, a step already taken in the state of New York.