How Diversifying the Economy Can Solve the Racial Wealth Gap – Forbes Advisor
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Black voices have been suppressed in America for far too long. And the problem has become so glaring in the economics industry that an entire federal agency still struggles to diversify its workforce, even after federal law required it.
The Federal Reserve, the country’s central bank tasked with controlling the monetary system and fending off financial crises, is predominantly white. Ten years after the Dodd Frank Act forced the system to diversify its hires, a New York Times analysis found it to be still far from inclusive.
Even on a smaller scale, it can be difficult to find black voices in economics. #EconTwitter is dominated by white males. Studies show the voices of black economists were largely absent from the initial discussions on the financial impact of the Covid-19 pandemic.
In a country where systemic racism steals the promise of a flourishing financial future for black Americans, representation is important, especially when it comes to those charged with researching, proposing and implementing economic policy that can help the community thrive.
The economy lacks black voices, prospects
There is a long history of racial inequality in economics. The first black woman to earn a doctorate in economics, Sadie Alexander, was unable to practice after earning her doctorate because of racism and sexism in the industry in 1921, the same year Black Wall Street was destroyed. The incident took place in Tulsa, Oklahoma, where one of the richest territories of black-owned businesses was reduced to ashes by a mob of whites.
George Stigler, Nobel Laureate in Economics in 1982, once argued that black Americans are inferior as workers and can succeed economically with a “willingness to work hard.”
Today, there is still a glaring lack of representation of blacks in the economic industry. Alone 4% PhDs in economics in the United States went to black economists in 2018.
Few of these professionals end up in one of the country’s top economic agencies, the Federal Reserve – just 0.5% of Fed staff in Washington were black in April 2021, according to the New York Times analysis.
The Federal Reserve is one of the cornerstones of economic research in the United States, and its work has a great influence on research and policy development. The agency is responsible for implementing monetary policy that strongly affects vulnerable groups in the country, including black Americans.
When there is not an appropriate representation among its researchers and principal economists, policy choices may not be sufficient to help improve these demographics along with the rest of the economy.
“If you block out certain perspectives or voices, you are missing out on a wide range of experiences representative of culture and the population at large,” says Valerie Wilson, PhD in Economics and Director of the Economic Policy Institute. Program on Race, Ethnicity and Economy, which analyzes the impact of political decisions on the economic situation of people of color in the United States. “By doing this, you are automatically limiting your ability to resolve policy issues. “
Even though the issue of racial representation has been resolved at the Fed, there is still an alarming lack of research and discussion around racism and equality.
An analysis of the International Monetary Fund in 2020, only 0.2% of articles in the top 10 economic journals published in the past 10 years, or about 16 articles out of a total of 7,920, covered issues of race, racial inequality and racism. And when it comes to amplifying the few black voices on the ground, the world of economics is strikingly lacking. A study finds that black business authors are slightly less likely to publish in leading journals than their white counterparts.
Without additional emphasis on these topics and the voices of experts from these communities, blind spots persist throughout economic research. Little change can happen when problems are not properly identified and addressed.
William Spriggs, a doctorate in economics and a professor at Howard University and chief economist at the AFL-CIO, acknowledged these blind spots at a conference in April where he said economists were completely not to recognize everyday racism at all in their research.
Why representation is important in economics
The industry’s lack of attention to – and sometimes blatant disregard for systemic racism – can result in economic policy that neglects the financial condition of much of the country. And these political blind spots perpetuate the racial wealth gap.
The racial wealth gap is the result of institutionalized racism that has eaten away at the incomes, economies, home values, and overall wealth of Americans of color. The gap makes these communities more at risk of financial insecurity throughout their lives, including in retirement.
Adding more black voices to the economy is becoming a way to overcome the racial wealth gap. Wilson says black economists are largely responsible for bringing the problem to the fore as “a problem worthy of serious consideration.” Their role is crucial in creating solutions.
“Your interpretation of [economic] the disparity will be largely influenced by your personal experiences, and that comes into play in thinking about how we decide to solve a problem, ”says Wilson.
But it’s not as easy as telling the federal government or research organizations to hire more black economists. There must be systems in place that promote and ensure diversity at every stage of life.
“As with any other institution in this country, the way to make it more diverse is to prioritize diversity, but unfortunately this is not happening organically in this country due to the long history of segregation,” Wilson said. “In order to make it a more diversified field, [it] must be a priority for those in positions of power and influence and who can make their voices heard.
The Biden administration has focused heavily on diversifying its core advisory roles, particularly in the offices of labor and economics. He appointed Janelle Jones, 36, chief economist for the Department of Labor, making her the first black woman to hold the post. Treasury Secretary Janet Yellen also expressed urgency to diversify those responsible for changes in economic policy, declaring that “diversity is important to ensure that research carried out in economics adequately reflects the priorities of society”.
These diverse voices will prove crucial to rebuilding communities of color as they continue to disproportionately bear the economic burden of the pandemic. At the height of the pandemic in April 2020, black or African American workers had an unemployment rate of 16.7%, compared to 14.1% for whites.
And although the economy is recovering, the black community is being left behind. The unemployment rate for black and African American workers was 9.7% in April; for white workers it was 5.3%.