How does the American economy benefit from preventing the costs of structural racism?

In 2011, the American Academy of Pediatrics released a report that, “examines extensive evidence of the disruptive impacts of toxic stress, offering intriguing insights into causal mechanisms that link early adversity to later impairments in learning, behavior, and both physical and mental well-being.” At the forefront, they propose a framework that explicitly acknowledges the impact of structural racism[1]:

The implications of this framework for the practice of medicine, in general, and pediatrics, specifically, are potentially transformational. They suggest that many adult diseases should be viewed as developmental disorders that begin early in life and that persistent health disparities associated with poverty, discrimination, or maltreatment could be reduced by the alleviation of toxic stress in childhood.

The increased incidence of chronic diseases in adulthood are just one consequence of structural racism. Other significant disadvantages resulting from structural racism that impact of all society include poverty, housing discrimination, and criminal victimization. Failure to enact and implement evidence-based prevention policies and programs that would reduce poverty, replenish wealth from housing discrimination, reduce crime and improve poor health is costly and a lost opportunity.

In addition to the moral costs of these disparities, each of these adverse outcomes represents a significant drag on the US economy. The argument is not that the harms from structural racism are primarily economic. Rather, an analysis of the economic gains from reducing disparities is one of many ways to demonstrate the fundamental benefits of removing barriers erected due to structural racism. Shedding light on the relationship between the GDP and structural racism, thus, provides critical input into directing strategic investments in prevention policies and programs that remove those barriers.

This brief describes the GDP gains in economic health that would occur if structural racism was effectively eradicated, as measured by less poverty, higher housing values, reduced crime costs, and health gains.

In this analysis, the GDP represents the likely size of those gains to highlight the macroeconomic effect of discrimination. There are numerous other consequences from structural racism that result in significant disparities across sectors—poverty and marginalization impair child development, reduce educational attainment, increase risk for mental and behavioral health problems, and environmental toxins are concentrated in poor areas, all of which have many direct detrimental consequences of their own. As the graphic from McKinsey and Company shows, the overall gains from removing these structural barriers to economic, physical and mental health would total 4-5% of GDOP each year. This narrow lens is conservative and does not address the myriad of human and economic benefits to reducing disparities (see the Urban Institute Report, 2019), but nevertheless demonstrates the substantial opportunity to improve the US economy that accrue from effectively eradicating structural racism and preventing associated disparities.

  • Poverty. In Congressional Testimony before the House Ways and Means Committee, Harry Holzer (Georgetown University) defines poverty as growing up in a poor environment, with poor parents, attending poor schools, and living in a poor neighborhood. If those factors were improved, the gains to the US economy would total at least 1.3% including:

  • Improved productivity and economic output. The primary outcome for reduced poverty would be increased wages.[2] Higher wages reduce the need for entitlement spending, which produces a dead weight loss to society from the necessary costs of administering those programs and the tax itself. Adding jobs to the economy has a