The Economic Gains from Equity

Shelby R. Buckman, Laura Choi, Mary Daly and Lily Seitelman

No 2021-11, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: How much is inequity costing us? Using a simple growth accounting framework we apply standard shift-share techniques to data from the Current Population Survey (1990-2019) to compute the aggregate economic costs of persistent educational and labor market disparities by gender and race. We find significant economic losses associated with these gaps. Building on this finding, we consider which disparities generate the largest costs, paying specific attention to differences in employment, hours worked, educational attainment, educational utilization, and occupational allocation. We also examine gaps in the returns on these variables. Our findings suggest that differences in employment opportunities and educational attainment make the largest contributions by race; differences in returns on these variables also contribute materially to the total costs. Differences by gender are primarily driven by gaps in employment and hours. Given the disproportionate impact of COVID-19 on the labor market outcomes of women and people of color, as well as the fact that the U.S. population is increasingly racially diverse, these costs will only increase in the future.

Keywords: Economic growth; productivity; labor market gaps; misallocation; equity; covid-19 (search for similar items in EconPapers)
JEL-codes: E24 J15 J7 O4 (search for similar items in EconPapers)
Pages: 30
Date: 2021-04-07
New Economics Papers: this item is included in nep-cwa, nep-lab and nep-mac
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DOI: 10.24148/wp2021-11

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