What Has Already Been Lost Due to Racial Inequality
The basic pillars in which Citi measured inequality were wages, education, housing, and investment in the last 20 years. What was concluded from the report was that an astounding $16 trillion could have been added to the economy over these 20 years by correcting the inequalities within those four different areas specifically. Citi stated that the racial gaps in wages, education, housing, and investment are due to long-term discrimination against African Americans and that the gaps in homeownership rates and college education are wider now than they were in the 1960s.
Breaking down each different racial gap shows a clearer picture of that astronomic $16 trillion. By closing the Black wage gap, this could have added $2.7 trillion or .2% of the gross domestic product (GDP) per year. Creating more accessible higher education for Black students could have added a potential 90 to $113 billion to those students’ lifetime incomes. Another major point was the lack of accessible housing credit for prospective Black home buyers, which could have created an extra $218 billion in sales. The final and by far the largest point of economic loss came from the lack of fair and equitable lending to Black entrepreneurs. If this point of inequality was properly addressed, it could have led to $13 trillion in business revenue and the creation of 6.1 million more jobs to the American economy.
While obviously, these gaps cannot be retroactively corrected, they were addressed today. In doing so, the next five years could still build incredible economic prosperity. Citi reported that if these four factors of racial inequality were immediately addressed and fixed, it could generate $5 trillion of additional GDP in the US over the following five years. This translates to about .35% growth of the annual GDP every year.
What Citi Is Doing to Address the Racial Gap
On September 23, Citi announced an initiative to help address these racial gaps through more than $1 billion in investments. This money will be spread out over a series of different initiatives that partially address all of the different major areas of disparity pointed out in Citi’s earlier report. The dispersal of this money breaks down to five different points of investment. The first of these would be $550 million going toward supporting homeownership for people of color and investing in minority developers to create more affordable housing. Citi will also be investing $350 million into opportunities for procurement from Black-owned business suppliers as well as an additional $50 million into impact investing capital for Black entrepreneurs. Citi’s next investment will be $100 million into supporting Minority Depository Institutions to help grow and create revenue. The final $100 million will be given out in grants to different community support organizations created to help address racial inequality.
Citi goes into further detail outlining more precisely where that money goes in each different sect as well as providing more opportunities that are not directly related to straightforward investing, such as expanding the Citi Start Saving platform to promote higher education for young people. Another initiative like this will be the Citi Start CreditSM, which will educate entrepreneurs on raising their credit score to increase access to more affordable credit.
While the $16 trillion lost due to the United States’s failure to address racial inequality to an appreciable level cannot be regained, the clear path that Citi has laid out in their report, as well as their own actions as a company, give a strong start toward creating the $5 trillion in annual GDP in the coming years. The $1 billion investment and how that money will then be used gives an obvious game plan for all other major financial institutions to follow suit in a way that can reap genuine results within a short timeframe.
About the Author
Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.