The economic cost of discrimination.

Despite laws prohibiting employment discrimination, the economic costs of unequal treatment accorded African-Americans has risen steadily. But such discrimination doesn't hurt only blacks. in 1991, racial bias deprived the American economy of about $215 billion and was equal to roughly 3.8% of gross domestic product (GDP). While part of the loss can be traced to the lag in black educational achievement, the bulk is related to bias that hampers access to higher-paying jobs.

Moreover, the slow rate of blacks entering managerial, professional and technical positions - and the economic cost to the nation - will probably narrow only slightly this decade.

Applying a modification of a Census Bureau technique, I have updated the estimates of discrimination's economic cost (see chart). The figures show that over the last 25 years or so, the American economy has lost between 1.5% and 2.2% of GDP because racism limits the full use of black educational attainment in 1967, this loss amounted to $12.1 billion, or 1.5% of GDP. Another $11.1 billion, or 1.4% of GDP, was lost because of the failure to improve and fully use the educational level of African-Americans. In combination, lost GDP amounted to $23.2 billion, or 2.9% of the $814.3 billion total. By 1991, the GDP shortfall was $122.5 billion. Failure to improve the black education level cost $92.5 billion, or 1.6% of GDP. This totaled 3.8% of GDP, or $215 billion.

The chart's statistics enable one to apportion the GDP loss between present discrimination against African-Americans (failure to fully use their existing education) and the legacy of past discrimination (failure to improve their education). The figures suggest that, while no dramatic shifts occurred since 1967, modern discrimination has risen slightly.

A number of interrelated factors lie behind the GDP loss. Historically, bias did not allow blacks to use their full qualifications. Today, despite equal opportunity laws, many blacks are still concentrated in positions that do not make full use of their talents. If racial bias were eliminated, blacks could migrate freely from low- to high-productivity occupations. A gain in the total output of goods and services would result. Plus, an unbiased use of labor most likely would also require increased capital stock investment - further boosting output and labor income. Another plus would be that self-employed entrepreneurs - particularly blacks - would have greater market access and be more efficient, which would lead to higher productivity income and GDP.

It is unlikely that the economic impact of racial bias will diminish appreciably by the year 2000. Yes, overt industrial discrimination is declining, but the institutional legacy of previous discrimination persists. Consequently, the educational level of African-Americans will remain well below that of whites, and blacks will continue to be underrepresented in higher-paying jobs and overrepresented in the low-paying occupations. The result will be a continuation of large deficits in black employment rates and income levels. The latter will be translated directly into a sizable loss in GDP.

In 1990, blacks represented 10% of total occupational employment and hold 6% of executive and managerial jobs - but l6% were low-paying positions. By 2005, the overall occupational profile of blacks may change only moderately. African-Americans will hold only about 11.1% of all jobs. They will raise their already above-par share of administrative and clerical positions, and be near parity with respect to technical and related jobs. They will also slightly narrow the gaps between parity and actual managerial and professional positions. Still, African-Americans will be overrepresented in the lowest-paying jobs.