Citi Group recently published an eye-opening report on racial inequality in the U.S. The bank’s report outlines four main racial gaps that confront many Black Americans: wages, education, housing and investment. Citi concludes that if these gaps had been closed 20 years ago, $16 trillion could have been added to the U.S. GDP. If those gaps were to be closed today, the results would potentially add as much as $5 trillion to the country's GDP over the next five years.
In a foreword by Citi executive Raymond J. McGuir, he shares his experience of being a successful Black man in America. He notes that even for successful Black Americans like himself, things are not perfect at the top either, stating: “Even today, with all those credentials and as one of the leading executives on Wall Street, I am still seen first as a six-foot-four, two-hundred-pound Black man wherever I go — even in my own neighborhood.”
McGuir’s insight on racial inequality brings to light the inherent bias that seeps into every aspect of American life to this day, regardless of an individual’s success. If a Black person can succeed in the current system and still experience abuse or wariness from others, then it’s the system that perhaps needs to change, not just the internal metrics embedded in the current system as it stands.
For example, one 2006 study found 78 percent of those who took Harvard University's Implicit Association Test (IAT) displayed implicit bias, with 85 percent of whites showing bias against Black people. This bias is a distant remnant of the legacy of slavery, writes Richard Rothstein in his book, The Color of Law. The many barriers to ending racial inequality in the U.S. is “the byproduct of explicit government policies at the local, state, and federal levels,” Rothstein asserts.
The Citi report discusses these issues at length, analyzing how these past problems have created the racial inequality that continues today, with some alarming statistics. Citi reports that gaps in homeownership rates, a key wealth and equality metric, are wider now than in the 1950s and 1960s, and that this problem continues to grow. The same holds true for college degree attainment.
On that point, the Center for NYC Neighborhoods, which launched the New York Black Homeownership Project to identify current gaps, found that Black home ownership in the borough of Queens, New York, has alone fallen by 20,000 between 2005 and 2017. The project identified predatory lending leading up to the 2008 financial crisis as being partly to blame.
U.S. House Speaker Nancy Pelosi hammered that point during a recent discussion at the National Low-Income Housing Coalition, saying: “Housing security is a matter of justice, as structural racism puts communities of color unfairly at risk of being rent burdened or homeless.”
Citi notes that closing racial gaps and increased diversity, “while imperfect,” can end up generating positive developments for business and society. Businesses cannot tackle housing inequality or intergenerational wealth directly, but they can do so indirectly by helping Black Americans build wealth and attain affordable mortgages. To sum up the challenges facing Black Americans, these families “have missed out on the benefits of home price appreciation — a key ingredient to wealth accumulation,” the Citi report reads.
According to Citi, “the body of literature suggests that when executed well, diversity and inclusion in the workplace could lead to increased revenue, reduced costs, greater innovation, and increased employee engagement, productivity, and commitment,” with companies in the top quartile for both gender and ethnic diversity 12 percent more likely to outperform companies in lower quartiles. Taking a far more proactive approach on race can result in good news for business and good news for Black Americans wanting to get on the housing ladder.
The findings about racial inequality and “trouble at the top,” as identified by Citi’s McGuir, should be a warning sign that correcting certain metrics such as wage gaps and diversity targets, though excellent aims with positive outcomes for business and society today, should not make us complacent about tackling wider systemic issues.
The U.S. must look deeper if it wishes to dig out the roots rather than trim the symptoms of racial inequality. This huge social challenge must be tackled at the front end and the back end of the economic and political system.
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James has been writing about investing and sustainable finance and development for over ten years. With a background in sustainability consulting, his book 'Green your business now', was used as the basis for a sustainable business accreditation scheme in the U.K. He also helped PepsiCo with branding and investment strategy for its Tropicana product line as part of its Performance with Purpose agenda. His views on sustainable development and responsible investing have been featured in Morningstar magazine and the UKs Urban Design Journal, an organization that promotes sustainable development. He has an active interest in ESG having written for ESG investor platform Curation, where he helped curate content used in environmental risk briefings for FTSE100 companies. Topics James has covered include governance issues, renewable energy adoption, accessible design, sustainability reporting and climate related financial risk disclosures.
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