Longstanding racial and ethnic disparities in the United States have hurt not only the people who experience the disparities but have hurt all Americans by depressing U.S. economic output by trillions of dollars over the past 30 years, suggests a paper discussed at the Brookings Papers on Economic Activity (BPEA) conference on September 9.

The authors— Shelby R. Buckman, Laura Y. Choi, Mary C. Daly¸ and Lily M. Seitelman, all of the Federal Reserve Bank of San Francisco—considered differences from 1990 to 2019 among white, Black, and Hispanic men and women, ages 25-64. They looked at disparities using five metrics: employment (the percentage of people with jobs); hours worked; educational attainment (the level of education completed); educational utilization (the extent to which people are in jobs that fully use their education); and earnings gaps not explained by those factors.

Then, in The economic gains from equity, they conducted a thought experiment, asking: “How much larger would the U.S. economic pie be if opportunities and outcomes were more equally distributed by race and ethnicity?” Their answer is $22.9 trillion over the 30-year period.

“The persistence of systemic disparities is costly, and eliminating them has the potential to produce large economic gains,” the authors write. Standard economic models often assume markets work efficiently and thus suggest explanations—such as unmeasured differences in productivity or cultural differences—that would support the existence and persistence of racial and ethnic gaps. The authors instead assume talent and job and educational preferences are distributed evenly across race and ethnicity. They then show the economic effects of disparities that hold people back from fully realizing their potential.

Read the full article about the economic gains from equity by Shelby R. Buckman, Laura Y. Choi, Mary C. Daly, and Lily M. Seitelman at Brookings.