Racism And Sexism Are Extremely Bad For The Economy

Over the past 50 years, our nation’s institutions have become less racist and less sexist. This decline in discrimination has been very good for America’s economy.

For a group so fond the idea of American economic muscle, extreme right-wingers have oddly little to say about the economic downside of our nation’s “golden age,” when only white men were allowed to have the good jobs. A study this August by economists from Chicago and Stanford took a stab at quantifying just how much our economy has gained from a half-century of gradual improvement in basic fairness.

In 1960, 94 percent of doctors and lawyers were white men. By 2010, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage.

Common sense tells us that allowing people who are innately talented in certain fields to pursue work in those fields should increase our nation’s productivity. (The study assumes “that the distribution of innate talent is similar across sex/race groups.” If you disagree with this premise then your needs are beyond the scope of this discussion.) Indeed, the study finds that the economic benefit of a less racist and sexist society has been huge:

We find that roughly one-quarter of growth in U.S. GDP per person between 1960 and 2010 can be explained by declining labor market discrimination and barriers to human capital attainment facing white women, black men and black women. These factors also contribute to large gains in average consumption and consumption-equivalent utility during the same time period. They also account for about one-half of rising labor force participation over the last five decades. Falling barriers facing white women were particularly important given their large share of the population.

It’s enough to make you wonder whether the guy advocating xenophobia, discrimination, isolationism, trade wars, and pussy-grabbing is really the economic expert he claims to be.

[ The full study via SIEPR]