New Study: Closing Racial Wage Gap Would Add $55 Billion to Bay Area Economy

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With debate heating up nationally over diversity, equity and inclusion (DEI) policies to address historic racial inequities in hiring, pay and other factors, the Bay Area Council Economic Institute last week (March 7) released a first-of-its-kind study highlighting the huge economic opportunity of addressing racial inequity in the Bay Area and closing what amounts to a massive wage gap.

The study finds that achieving wage equity among racial groups would inject $55 billion annually into the Bay Area economy, an amount that reflects the gap between what white workers make annually and what people of color of the same ages and education levels earn for doing the same jobs. Individually, closing the gap would increase the incomes of people of color by an average of $23,000 annually.

Read the full report>>

Among job types, wage inequities are most pronounced in the Bay Area’s sprawling tech sector. Software developers of color accounted for $13.5 billion of the overall wage gap, the study found, or almost $65,000 per worker. The study ranked the 20 job categories that contribute most to the region’s racial wage gap, with general management positions, financial and professional services, and real estate brokers and sales agents all near the top.

The pandemic only worsened the racial wage gap, according to the report, increasing it by $3.4 billion from 2019-2022, with Hispanic/Latinx workers as a group bearing the biggest brunt of the increase. Black workers, who comprise a smaller portion of the overall worker population, experience the largest per capita wage gap, with earnings of $30,000 less than their white counterparts. Wages for the region’s Asian/Pacific Island population are on par with white residents, both with median annual incomes of $90,000, while the median incomes for Black, American Indian and Hispanic/Latinx residents sit at $43,200, $40,000, and $35,400, respectively.

To address economic inequity, the report outlines a series of public and private sector strategies, including:

·     Creating wealth-building accounts or so-called “baby bonds” for newborns

·     Promoting greater wage transparency among employers

·     Improving access to educational resources and business and entrepreneur-building investments

·     Strengthening educational and career pathways for diverse communities, specifically through apprenticeships and better aligning curriculum with employer needs

·     Creating a regional “racial equity index” for employers to track their progress against a variety of factors, including pay, hiring and promotions, among others

·     Creating an equity-focused community investment fund to provide capital to diverse entrepreneurs, business owners and other investors

·     Improving access to mortgages, including using the Bay Area Housing Finance Authority to provide financing assistance to first-time homebuyers

The report was produced with financial support from Ernst & Young LLP (EY US), with additional support from Alaska Airlines, KPMG and LinkedIn.

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