Economic Development, Human Resources, and Nonprofits

Study shows business case for racial equity

Report finds Michigan can gain $92 billion in economic output by 2050 if racial disparities are eliminated.

June 22, 2018
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A recent study found Michigan could gain $92 billion in economic output by 2050 if racial disparities in health, education, incarceration and employment are eliminated.

Released by the W.K. Kellogg Foundation and Altarum, an Ann Arbor-based nonprofit health systems research and consulting organization, “The Business Case for Racial Equity Michigan: A Strategy for Growth" outlines racial equity disparities and provides a blueprint for eliminating them.

The study analyzed data from public and private sources, including the U.S. Census, Johns Hopkins University, Georgetown University, Brandeis University and Harvard University.

The methodology included applying established models to estimate the economic impact of the disparities faced by people of color. A national "Business Case for Racial Equity" was released in April, and the new Michigan study is an updated version of research published in 2015.

According to the report, ending discriminatory policies and practices in Michigan would annually yield an additional $4 billion of spending on housing, $2 billion on automobiles and transportation, $1.5 billion on food, $625 million on entertainment and $423 million on apparel.

The increased spending levels would give state and local governments an additional $1.5 billion in tax revenues, allowing them to upgrade services, such as education, public safety and infrastructure.

Ani Turner, co-director of sustainable health spending strategies at Altarum who led the research for the study, said establishing equity is not only the right thing to do, but it is also economically necessary.

She said the research takes into account factors such as differences in unemployment rates and incarceration rates that contribute to income inequality.

“These and other factors combine to create a situation where the average earnings for people of color in Michigan are about two-thirds the average of their white counterparts,” Turner said.

If society were to eliminate “legacy effects” and ongoing biases established by historical racist culture and policies, there would not be such a large disparity between races, Turner said.

The report notes 40 percent of Michigan's workers and consumers will be people of color by 2050, and advises raising levels of education and capabilities to narrow the skills gap between employer demand and available talent, lower unemployment and enable businesses to more efficiently meet the market demands for goods and services.

It also said 70 percent of the jobs in Michigan will require some postsecondary education by 2020, but today, only 65 percent of whites, 55 percent of African-Americans, 54 percent of Hispanics and 53 percent of Native Americans have had some postsecondary education.

The Grand Rapids Area Chamber of Commerce is aware of these issues and is proactively working to engage minority- and women-owned businesses, according to Dante Villarreal, the chamber’s vice president of business services.

“We want to be the chamber that promotes economic development for all,” Villarreal said. “We know that if there are pockets of our community that are not advancing, we’re not going to move forward.”

He said the chamber strives to reduce barriers many minority business owners face, which often includes the business side of the work.

The West Michigan Minority Contractors Association is one program the chamber has created to help with these issues, Villarreal said. The association is meant to provide opportunities to cultivate corporate relationships and new business partnerships among members.

Even with the large number of construction projects in the area, he said many minority contractors do not receive the benefits they could because their companies often are three or four subcontractors down the line.

So, this association works to help educate minority business owners on what it takes to be more heavily involved.

“They’re great at doing the work, but they struggle with the business side of it,” Villarreal said.

The study also said reducing health disparities would impact productivity and profitability, as well. Researchers estimate today’s health disparities in Michigan account for $2.2 billion in excess medical care costs and $1.9 billion in untapped productivity.

That’s because people in underserved communities often cannot afford health care and do not prioritize it until they are seriously sick or injured, Turner said. And when people are sick, their productivity goes down, she noted.

The report said addressing these disparities could create a potential economic gain of $4.1 billion per year.

The report also noted the importance of early childhood education and prenatal care through home visiting programs. The Business Journal has recently reported efforts in Kent County by First Steps Kent and Camp Fire West Michigan to work on initiatives surrounding these issues.

Turner said she hopes the report will be considered by government officials making policy decisions and individual businesses making decisions about employment and other aspects.

Villarreal said minority-owned businesses tend to hire more minority employees, so supporting those businesses is a good way to support those communities.

“We’re saying that it’s very important to our future workforce and our future economy to make these investments in our people and to help all groups achieve greater potential,” Turner said. “If we can create the best workforce, we’ll sustain our businesses, and we’ll bring in more investment.”

If that does not happen, she expects people and businesses to leave, and there will be a larger population of retirees.

“If we’re not a state that’s getting a lot of migration from other parts of the country, we really have to invest in who’s here and make them the best they can be,” Turner said.

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