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How Institutional Racism Affects The U.S. Gross Domestic Product

How Institutional Racism Affects The U.S. Gross Domestic Product

Gross Domestic Product is the market value of all final or finished goods and services produced within a country’s borders during a specific time period. GDP is an indicator of a country’s economic health. It is calculated by adding personal consumption, private investment, government spending, and net exports. Let’s see how institutional racism affects the U.S GDP.

The Relationship Between GDP And the Female Labor Force Participation Rate 

The labor force participation rate reflects the share of adults working or seeking employment. They are also a vital component of economic output. So, increasing labor force participation of women and men increases production. The percentage of women working increases per capita GDP.  President Biden has said he intends to work with Congress to pass a coronavirus relief package. This includes sending $1,400 checks to millions of Americans. According to Biden’s proposal, direct payment of $1,400 would be part of a $1.9 trillion package of economic stimulus.  

But according to The Hamilton Project, there has never been such a severe GDP decrease as the one created by the current 2020 recession. In December 2020, not only did the U.S. workforce lose 140,000 jobs, but women lost a net 156,000 jobs, while men gained a net 16,000.  

Meanwhile, the Bureau of Labor Statistics states, in December, black and Hispanic female professionals’ unemployment rate was 7.7% and  8.8%, respectively. Compare these percentages to the unemployment rate for White female professionals, which was 5.3%. 

The “Great” Fear: History Repeating Itself 

 After all, just before the 2020 recession black and Hispanic buying power were on the rise.

Case in point: the number of single black mothers who earned more than $75,000 grew 106% (compared to the growth of single White mothers at 76%). These communities historically experience challenges regarding savings and net worth. Especially after a national recession.  

For example, the Great Recession of 2007-2009 disproportionately affected black households. They were more likely to have received subprime mortgage loans from banks. A subprime mortgage loan carries a higher interest rate than a prime mortgage. This institutionally racist practice contributed to the foreclosure of about 30% of black and Hispanic borrowers’ homes. 

In addition, a Prudential study also reported that the median household savings for black people are far lower. This in comparison with the average median household savings for the general population. After the Great Recession, black and Hispanic families’ wealth continued to fall an additional 20%. While white families’ wealth was essentially unchanged. The related factors include:

  • Our nation’s GDP,
  • the decline of black and Latina women in the workforce, and
  • the net worth of these marginalized groups.

In order to avoid the long-term effects of the Great Recession, America needs to address its ongoing problem. These policies and practices encourage institutional racism and increase the divide between the general population. In turn, hindering the development of our entire nation’s economy. 

Read more on how institutional racism affects the US gross domestic product.



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