Economic gaps between Black people and white people in the U.S. persist. Some racial gaps, like the wealth gap, have widened since 2020. Others, such as the racial gap in business ownership, have narrowed[1].
Racial gaps continue to be a material headwind to the U.S. economy, impacting Black communities and individuals through unequal access to work, housing, and business ownership.
We update the scenario analysis contained in our 2020 Citi GPS report Closing Racial Inequality Gaps: The Economic Cost of Black Inequality in the U.S, to estimate the potential size in dollar terms of racial gaps in income, business ownership, and home ownership.
We find that the scale of these three racial gaps could have totaled up to $3.9 trillion between 2020 and 2024, driving the potential cumulative size of the same three racial inequalities since the turn of the millennium to up to $21.3 trillion, which would have been a significant boon for the entire U.S. economy.
The analysis does not account for substitution effects. The economic impact of closing the gaps that we describe will not be entirely additional to current economic productivity. For example, some of the jobs created by closing the racial gap in business ownership are likely to be filled by those leaving other jobs.
Therefore, some of the economic activity generated by closing the racial wealth gap is a substitution for other economic activity. We highlight where such substitutions might occur and underline that our analysis is simply an economic approximation of the scale of three racial gaps–in business ownership, income and home ownership.
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[1] We note that the capitalization of “black” and/or “white” is the subject of much debate. In this report we have followed the style of the Associated Press Stylebook.