How much could US states gain by closing racial and gender gaps in the labor market?

Tuesday, July 27, 2021

Imagine a future where racial and gender labor market disparities don’t exist. How much would each state economy stand to gain? That’s the question behind this simulation. While we can’t predict the future, we can look to the past for clues.

For this thought experiment, we crunched the numbers for 15 years of data spanning 2005-2019. For every US state and Washington DC, we modeled how much gross domestic product (GDP) would have increased each year by eliminating racial and gender gaps in earnings, hours worked, educational attainment, and employment.

This simulation adapts methodology from a recent Federal Reserve working paper, which estimates that these gaps cost $2.6 trillion of foregone GDP nationally in 2019. Simulated GDP in our scenario assumes that every group has at least the same average labor-related measures as a comparison group that has historically faced the fewest systemic barriers in the labor market; for example, closing the gender gap imagines women’s labor measures are at least at the level of men’s.

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