The social arguments for erasing the racial economic divide are clear. Systems and institutions have been stacked against Black people and others who are not white and the initial conditions of slavery and segregation and other racist policies still exert forces on the finances of many Americans.
According to a lengthy note from Goldman Sachs (GS) about racial income inequality, fixing these circumstances would also be very good for the economy. The key takeaway from the bank’s chief economist Jan Hatzius: boosting America’s Black community would mean a boost for America’s GDP.
“Although the case for reducing Black employment and earnings disadvantages is mainly one of fairness rather than efficiency, it could also deliver a boost to the level of US GDP of around 2%, which currently equates to just over $400 billion per year,” wrote Hatzius in a research note circulated Tuesday. Throughout American history, the gaps between Black and white Americans have been dramatic across a wide range of economic indicators: employment, wages, and capital.
“Except for a temporary improvement during the late 1990s labor market boom, these disadvantages have been strikingly constant over time — in the case of the household income gap, since at least 1967,” Hatzius wrote.
Part of the problem is a general shift towards inequality. As Moody’s vice president-senior credit officer William Foster pointed out on Yahoo Finance, the decline of unions and the value of labor has driven a general trend toward inequality in American society, making this more difficult to solve. And adding racial discrimination and disadvantages for Black communities at work or in the credit markets only makes this worse.
Not only is upward mobility lower for Black men, downward mobility is also greater. That means that Black men from rich families are more likely to tumble down the income spectrum than maintain their position, and that Black men lower on the income spectrum are less likely to move upwards to the mean as well.
“Only around 3% of Black men born into the bottom quintile make it into the top income quintile, compared to around 10% of white men,” wrote Hatzius. “ If left unchecked, this perpetuates the income disadvantage of Black men across generations.”
Read the rest of the article here at Yahoo News