Racism in the U.S. Has an Enormous Pricetag: States Lose Billions of Dollars Because of Income Inequality

job-interview (1)Racism and job discrimination cost the state of Georgia nearly $4 billion a year in lost tax revenue—an amount that’s equivalent to 20 percent of the state’s budget last year. Or to put another way, it’s twice as much as the state spent to run the entire 30-school University of Georgia system, and almost four times as much as the state spent last year on prisons.

That’s the conclusion drawn from a fascinating report released this week by the Center for American Progress that quantifies approximately how much America’s fastest growing states are losing in tax revenue because of systemic racism against African-Americans and Hispanics.

Most studies on the impact of racism investigate its effects on the victims. But the Center for American Progress (CAP) decided to take it a step further and see how much it costs the country and individual states—in other words, how much it hurts white people—because there is such a big gap in the average income of whites and the income of Blacks and Hispanics.

Staying with the state of Georgia for a minute, the average income for whites in 2013 was $43,764. For Black residents the average was $28,272, while the average for Hispanics was $26,838. By CAP’s estimate, eliminating racial disparities in income in the state of Georgia would gain the state an additional $3.8 billion in tax revenue and would boost the state’s gross domestic product from $455 billion to $522 billion.

Clearly, eliminating racism in the arena of education and employment discrimination in the state would be of enormous benefit to every resident in the state.

This finding is especially relevant in states like Georgia because the Black and Hispanic populations are increasing while the white population drops, meaning the states’ coffers will be dramatically affected if the incomes of Black and Hispanic workers aren’t increased. In 2000, whites were 63 percent of Georgia’s population, Blacks were 29 percent and Hispanics were just 5 percent. But in 2013, the white percentage of the population had fallen to 54 percent while the Black percentage had risen to 31 percent and Hispanics had jumped to 9 percent. By 2020, Blacks and Hispanics combined are estimated to be 41 percent of Georgia’s population while whites will be 52 percent.

Some of the other states in the CAP study were Florida (which would receive a $5.6 billion tax boost if salaries were equal), California ($20.8 billion tax boost), Illinois ($4.8 billion), New Jersey ($4.2 billion), North Carolina ($2.6 billion), Texas ($14.1 billion) and New York ($8 billion).

For those who posit that the comparison is not consistent because many factors go into the average income difference between white workers and Black and Hispanic workers, it should be noted that most of those factors are due to racism—outright racism in the discriminatory hiring practices of employers and systemic racism in areas such as the disparate quality of education offered to whites and to Black and Hispanic communities.

Ending racial inequality “is not just going to benefit Black and brown people, but all Americans and the whole economy, and make us more competitive,” Vanessa Cardenas, vice president of Progress 2050, the arm of CAP that promotes policies it says benefit a diverse America, told Fusion.

“The important thing about this is it doesn’t matter [which party] one comes from in terms of elected leaders at the local level,” Cardenas added. “They all should be thinking about how their states are changing and what policies will create a ladder of opportunity for the next generation of Americans.”

Since the Census projects that people of color will be a majority of the U.S. population by 2043, a failure to address this issue will have enormous consequences for the U.S. in many areas, such as tax revenues, GDP and global competitiveness. If there is significantly less money in the nation’s coffers, ultimately it would harm such revered institutions as the vaunted U.S. military.

And the racism in the job market doesn’t appear to be on the verge of subsiding any time soon. A researcher from the University of Michigan recently confirmed that even when Black students excel in the classroom, obtain degrees from the most prestigious universities and perform at the level of their white counterparts, they are still far less likely to get callbacks for job positions if the employer suspects that they are Black.

S. Michael Gaddis, who conducted the study, wrote that, “The opportunities that arise upon graduation from an elite university are not equal between whites and blacks.”

Gaddis noted that Black graduates from elite universities still had an advantage over students from less prestigious universities when they entered the job market, but they still lagged significantly behind their white peers.

In addition, even when Black graduates finally received a request for a follow up interview, they were offered significantly lower salaries than their white counterparts.

“Black candidates receive responses for jobs that have a listed salary $3,071 lower than white candidates,” the study found.

The calculations by CAP are an important addition to the discussion of racism in the U.S., assessing that it will hit the nation where it hurts most—the pocketbook.




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