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Closing the racial wealth gap should be the big focus right now: Professor

Michigan State University Professor Lisa Cook joins Yahoo Finance’s On The Move panel to express the shortage of black of economists and its impact on communities.

Video Transcript

- Lisa, thank you so much for joining us. Really appreciate your time. You know, we talk to a lot of economists on this show, and I know that, in general, there are not-- there's an underrepresentation, can we say, of black economists. And I wonder how that informs the field of economics, economic policy. I mean, I know this is a big question, but what are your thoughts on that, especially given the past couple of weeks of protests?

LISA COOK: So first of all, thank you for having me, and thank you for seeing my research. I think it's important because violence is something that affects even industrialized countries. We used to think about it being the purview of developing countries and fragile economies, but this is something that can be visited on industrialized rich countries. And I think it's becoming the case more and more.

We have these sporadic outbursts of protests. We have these sporadic killings, police-involved killings. And then we have something that may affect innovation, from that paper that you saw, that might then affect GDP, and could affect GDP long-term. So that's why I incorporate lynching. It's a proxy for the rule of law. So I did my dissertation in Russia. I know a lot about the rule of law and how it can depress economic activity. This just happens to be an example from American history.

- Adam, you need to unmute yourself.

- Thank you. Professor Cook, Adam Shapiro here. Thank you for joining us. This paper that you put out in 2017, none of us believe that separate but equal is valid. How do you protect people of color and disadvantaged communities as we try to improve this economic system, or is the system itself-- I think it was Cornel West, and I won't quote him directly, but he said that what we're witnessing is an attack on capitalism.

LISA COOK: So I don't necessarily see an attack on capitalism. Again, I've lived in countries that call themselves socialist, and there were some big flaws, especially related to racism. I've lived in other economies they call themselves capitalist. Again, problems associated with racism and other types of problems. So I wouldn't go straight to capitalism.

But what I would say is that people are concentrated-- let's say during the COVID crisis, we found this out-- African-Americans and Latinos are concentrated in jobs that are front-facing with people and, therefore, are disproportionately affected by it. So I think that occupational segregation is a big issue. Are there problems with respect to advancement in other jobs? Research jobs like mine, there are only five African-American women who are full professors at universities in the United States in the economics departments. Five. So that suggests to me, that's just one indication of the pipeline not working for many different jobs and occupations in this economy. So I think there's a lot more that can be done.

- Lisa, you know, we talk about how COVID-19, coronavirus has disproportionately impacted minority communities. I guess, you know, obviously, that also leads-- bleeds over, rather-- into the jobs market and disproportionate affecting of job loss. So I guess when we talk about bringing the economy back online or improving the economy, how do we ensure that minority employees get better jobs on their way back in?

LISA COOK: So that's a good question. And I guess my first question would be, how do we protect them when they're going back into the jobs they're already in, if that's the baseline assumption. So what we don't want to do is to have them negotiating people wearing masks, for example. We've seen security guards shot and hurt because they tried to enforce people wearing masks coming into establishments. So the first thing we have to do is to guarantee safe, healthy workplaces.

So I think that, in the short run, we may not be able to address the issue of occupational segregation, but I think that this is a moment-- I hope it's a moment-- in American economic history and American history when we start seeing the fundamental flaws, the structural flaws that plague capitalism, and can plague other systems, I just want to say. So maybe we can start thinking about how workplaces' climates can be more open, let's say in the tech industry, to African-Americans and other minorities. I have a whole other line of research on the lack of African-American and women's participation in innovation. And GDP could be 4.4% higher, GDP per capita could be 4.4% higher if we had greater participation from African-Americans and women. So I'm just saying there are lots of things to fix in the pipeline and in the workplaces.

RICK NEWMAN: Hey, Lisa, Rick Newman here. I'm interested in your view on reparations for slavery and the legacy of slavery. Complicated topic. It might be morally justifiable, but it seems-- also seems kind of unworkable to do in an effective way. What do you think about it?

LISA COOK: You know, that's a really good question, and it's a big question. And because I have seen so many proposals over the decades-- let me be clear, I haven't just seen one recently, I've seen them over the decades-- we'd have to address a specific one for me to have an opinion on it, because as a macro economist, I need more of the details, more of the moving pieces that any such big proposal might have. I think we certainly need to make a distinction between, let's say, a job guarantee or, let's say, basic-- a basic income proposal. And different reparations schemes have different assumptions in that regard.

- So Lisa, I want to ask you about the how, then, because when you talk about unlocking 4.4% GDP growth, that's obviously a big number. And this is another big question, I guess, but what do you think, from a policy perspective, is or are the most key things that we can do to unlock that, to level the playing field?

LISA COOK: That's a really good question. And in fact, based on my research, there two pieces of legislation, the Success Act and the Idea Act. So the Success Act was passed in 2019, and the Idea Act is being contemplated now. And it is trying to open up innovation opportunities for more women and more minorities, and to try to close the racial wealth gap. I think closing the racial wealth gap is the-- should be the big focus right now, because it is widening, it's not diminishing. And I think that's where you're seeing lack of social cohesion when you have inequality that's growing and growing and growing, and it has a racial component.

And I would argue, too, it has implications for women, as well. Women are not in these high-paying innovation jobs. They're going to be less secure, let's say, going into retirement. And women are going to be more increasingly single going into retirement. So I think that these measures, they bring out how women and minorities can participate at every stage of the innovation process, from basic STEM education to patenting and to commercialization, so that many more of them could be in the top 10 wealthiest people who are-- or let's say seven of them are associated with the tech industry. So there certainly need to be more African-Americans, more diversity in general at that stage, at the commercialization stage.

- Lisa, thank you so much for your perspective. Look forward to continuing the conversation another time, when we hopefully have you back. Lisa Cook is Professor of Economics at Michigan State University. Thank you again.

LISA COOK: Thanks so much.