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$16T in lost U.S. GDP due to racial inequality: Citi

Yahoo Finance’s Kristin Myers joins Zack Guzman to discuss how $16 trillion in GDP was lost due to racial inequality in the United States, according to Citi.

Video Transcript

ZACK GUZMAN: As we've been discussing through this pandemic, it's been hitting some communities a bit harder, and that's reinvigorating the conversation this nation is having around inequality. And a new report from Citi is highlighting just how much the nation could gain by addressing that gap. According to a new report, fixing the black-white wealth gap could add an average of about a third of 1% to GDP a year in the US. And joining us now for more on that report is Yahoo Finance's Kristin Myers. And Kristin, I mean, that's no small number.

KRISTIN MYERS: No, not at all, Zack. So you just did the flip side of what I'm going to talk about in just a second. You just said, essentially, by fixing that gap, how much that would add that the US economy. But I want to talk first specifically how much racism has actually cost the United States. When we think of racism, we often think of that cost being borne only by those communities-- those black and Hispanic communities-- that are discriminated against. Well, that's actually not true.

So systemic racism in the United States alone has actually cost, just in the last two decades-- so since 2000, Zack-- the US GDP $16 trillion. So you were mentioning no small number. That is a huge number here that we're talking about, in terms of a hit to the US economy. So the question, of course, is why? Where did that $16 trillion come from? I'm going to quickly run through where those gaps are causing these big costs.

So one, we're talking about the black wage gap. That has also taken a hit of almost $3 trillion over the last 20 years. That's 0.2% of GDP. Also, housing, Zack. So we already know that black communities, and black homeowners, in particular, don't have as good an access to credit for mortgages. That has cost over $200 billion to the US economy, and that's just in home sales alone.

When it comes to education, there's inequities in the education system, as well. If black students had essentially an easier job of accessing higher education, they, over their lifetime income, could have added $90 billion to $113 billion to the US economy.

And now here's where the really, really big number comes from, Zack. So essentially, black entrepreneurs-- we've talked about this a lot-- do not have as much access to capital-- venture capital and investments. And that has meant that they have not been able to produce as many jobs or as much revenue to the US economy. That has cost $13 trillion in business revenue, and Citi says, potentially 6.1 million jobs per year.

Now, you've already hinted on one of those numbers about closing that gap between black and white households, what that could do to the US economy. So as you mentioned, it could add, on average, about a third of a percentage point to the US GDP growth per year. Just for a big total, nice big round number for you, Zack, that's $5 trillion over the next five years. I want to be clear here. That's $5 trillion dollars over the next five years, a third of a percentage point per year for the next five years. And globally, 0.9% to global growth would be added per year if those gaps are addressed.

Now, to their point and to their part, Citi has decided that they are actually going to put some money behind this study. They are going to be spending over $1 billion to address the racial wealth gap. They say that's going to be for programs that would provide greater access to banking and credit for those black and brown communities, as well as increased investment in black-owned businesses, and as well, increase that capital and that access to credit for black homeowners, Zack.

ZACK GUZMAN: Yeah, so big numbers there, and perhaps why we keep hearing it stressed from Fed Chair Jerome Powell when we talk about inequality and the way that the pandemic's impacting communities of color. But Kristin Myers, appreciate you bringing us that.