Bank of America says US economy is hurt by a lack of workforce diversity
Having diversity in the workforce and among leaders isn’t just about doing the right thing, it also makes economic sense, according to analysts at Bank of America Corp.
If US business and government leaders had decided more than 30 years ago to take action on diversity and inclusion, about $70 trillion would have been added to the nation’s economic output, said Haim Israel, the bank’s head of global thematic investing research, in a report published Tuesday.
In 2019, for example, closing the gender and race gaps would have generated $2.6 trillion of additional U.S. economic output, while a continuation of racial inequality may cost the country between $1 trillion and $1.5 trillion in lost consumption and investment over the next decade, the bank said.
Gender and racial biases lead to persistent labor market disparities and limit the economy, Israel said.
“Rule 101 of investing is to diversify investment capital to maximize returns, so why don‘t we do the same with human capital?” he said in the report.
Companies in the S&P 500 Index with above-median gender diversity on their boards generally report a 15% higher return on equity, and those with ethnically and racially diversified workforces tend to show an 8% higher return on equity, according to Bank of America’s research. More diverse companies also encounter lower earnings risks relative to less-diverse peers.
Israel cautions that most corporate diversity and inclusion efforts focus on gender diversity at the expense of other groups -- LGBTQ, the disabled and religious minorities -- which all risk falling behind.
Citigroup Inc. said in a report last year that closing racial gaps in the U.S. would have generated an additional $16 trillion of economic output since the start of the century. And, in the next five years, the U.S. could add $5 trillion of economic activity by closing the gaps between Black and White Americans, the bank said.