Lingering racial inequality is holding back America’s economy.
The report – focusing on inequities that exist in wages, education, housing and investment – underscores racial tensions that are helping to fuel unrest in the United States today.
“The 400 years of enslavement of Black populations in the Americas has residual effects that persist to this day despite tomes of legislation providing equal access to various aspects of American life under the law,” Citi economists wrote in a 104-page report that quotes Martin Luther King, Jr.
This comes as protests gripped major US cities Wednesday amid outrage over the news that none of the three officers involved in Breonna Taylor’s death were charged with her killing – and as the pandemic has worsened America’s inequality problem by dealing a particularly heavy blow to minorities.
“The dual health and economic crises resulting from the coronavirus lays bare long simmering racial tensions and inequities that have plagued the US for centuries,” the Citi report said.
The economic impact of the pandemic combined with “repeated incidences of police brutality involving Black Americans has proven too great to ignore,” the economists wrote.
“The result not only precipitated protests in the streets, but also a general reassessment of the very soul of the nation,” the report said.
The findings in the Citi report make clear that although the United States has made strides in addressing inequality, huge gaps still exist today:
- White families have eight times more wealth than Black households
- The US homeownership rate among Whites is nearly 80%, compared with 47% for Blacks
- Blacks are five times as likely to be incarcerated as Whites and make up 33% of the US prison population even though they only represent 12% of the total US population
- Income levels peak for Black men sooner and lower (age 45-49 and $43,849 ) than for White men (age 50-54, $66,250)
- The total wealth held by US billionaires ($3.5 trillion) is equal to three-quarters of all Black wealth ($4.6 trillion)
These gaps are restraining the economy at large.
“Societal inequities have manifested themselves into economic costs, which have harmed individuals, families, communities, and ultimately the growth and well-being of the U.S. economy,” the Citi report said.
Many Black families have missed out on rising home prices
In fact, some key metrics suggest that the divide between Black and White Americans has gotten worse.
For instance, Citi found that the gaps in homeownership rates and college degree attainment are wider now than in the 1950s and 1960s.
“The U.S. is light-years more equal than it was in the 1950s, but systems perpetuating inequalities among different racial groups either still remain or are being reinvented, either consciously or unconsciously,” the Citi report said.
The report pointed to the long-reaching impact of discriminatory housing practices.
“Fifty years of barriers to Black home ownership means that Black families have missed out on the benefits of home price appreciation — a key ingredient to wealth accumulation,” the Citi report said.
And the divide in housing is also playing a role in unequal education.
The Citi economists pointed out that there is a “strong correlation between high-value housing and the quality of schooling” because school districts are largely funded through property taxes.
“If neighborhoods are segregated, then so are the schools,” the report said.
Pandemic magnifies inequality
The health crisis is exacerbating the racial divide in the United States.
Black Americans have been hit hardest by the pandemic, dying at a rate 2.4 times higher than White Americans. And Black Americans are over-represented in essential jobs like healthcare, food service and childcare that can’t be done from home. Black-owned businesses suffered greater business destruction between February and April than companies owned by other ethnicities, according to the National Bureau of Economic Research.
Federal Reserve Chairman Jerome Powell recently expressed concern about how inequality is hurting the economy.
“The productive capacity of the economy is limited when not everyone has the opportunity, has the educational background and the healthcare and all the things that you need to be an active participant in our workforce,” Powell said last week in response to a question from CNN Business.
Yet Powell said the Fed doesn’t really have the ability to “target particular groups,” adding: “Ultimately, these are issues for elected representatives.
How to fight inequality
The Citi report lays out a blueprint for how the government, as well as Corporate America, can help address inequality in a meaningful way.
Closing inequities in wages, education, housing and investment today could boost US GDP by $5 trillion over the next five years, the report said. But it won’t be easy.
A sampling of the policy suggestions include:
- Minimum wage hikes (38% of Black workers currently work for minimum wage even though they only represent 11% of the workforce)
- Reform the tax code in a way that would raise revenue in a more progressive manner and spend the money to address the wage gap
- Ban employers from asking about salary history to stop prior wage discrimination
- Continue funding tax provisions that have “proven to reduce poverty” such as the Earned Income Tax Credit and Child Tax Credit
- Expand tax incentives encouraging low-income housing in affluent areas
- Encourage residential and commercial development in poor and minority communities
The Citi report also urged companies to implement policies that address racial gaps that exist in the hiring, firing and retention of workers.
Earlier this week, Citi revealed plans to spend more than $1 billion to help close America’s racial wealth gap, including $550 million to help people of color buy homes and promote affordable housing built by minority developers.
“To emerge from a history of entrenched segregation and active discriminatory policy into an era of genuine equity will require conscientious reform at individualistic, corporate, and governmental levels,” the Citi economists said.