LONDON (Bloomberg) - Inequality in employment, education and earnings has cost the U.S. economy nearly $22.9 trillion over the past 30 years, a sum that is likely to increase as minority populations expand, according to a new paper from economists including Federal Reserve Bank of San Francisco President Mary Daly.
“The opportunity to participate in the economy and to succeed based on ability and effort is at the foundation of our nation and our economy,” the authors wrote. “Unfortunately, structural barriers have persistently disrupted this narrative for many Americans, leaving the talents of millions of people underutilized or on the sidelines. The result is lower prosperity, not just for those affected, but for everyone.”
The paper, published in the Brookings Institution’s Brookings Papers on Economic Activity journal on Thursday, calculates how inequality in the economy has affected growth since 1990. The paper’s authors include Shelby Buckman from Stanford University, Laura Choi, vice president of community development at the San Francisco Fed, and Lily Seitelman from Boston University.
The new research adds to a growing body of literature that seeks to measure the impact of inequality in the U.S. Last year, economists Dana Peterson and Catherine Mann found that closing racial gaps would have garnered an additional $16 trillion in the U.S. economy since 2000. Economists including William Darity, Lisa Cook and others have done extensive research to show the cost of racial biases, and that these are inherent in the labor market.
“This is a simple exercise, in many ways, to demonstrate an important point, which is that the gains to GDP are for everyone and closing the gaps isn’t a zero-sum game,” Daly told reporters on a call. “It’s not just that we’re rearranging distributionally the proceeds from the same-sized pie, we’re actually improving the size of the pie and then distributing the proceeds from that improvement, so that’s a different game than what many people think about when they think about equity.”
The economists in the Brookings paper measure the cost of inequality in a series of labor and employment indicators for workers aged 25 to 64. Disparities such as the average Black male earning $8 less per hour than his White counterpart, an unchanged gap in employment rates between Black and White men since 1990, and a widening wage gap between Black and White females all contribute to the loss in potential economic output.
The trends in inequality also hurt the U.S. on a global stage, Daly said. The share of Americans in this age group who are working has declined over the past few decades, which itself means reduced economic output and puts the world’s largest economy at a competitive disadvantage.