The impact of income inequity

Most nonprofit leaders accept the idea that income inequality really exists in this country and that it is a serious, and growing, problem. Of course, every time anyone tries to raise this issue, the response is, “We’ve got to cut the federal budget or the world will come to an end.”

It’s easy to talk about the cost of income inequality, but is that cost easy to quantify?

According to Gail Christopher, Ph.D., of the W.K. Kellogg Foundation and Tamara Draut of Demos, the answer is yes, and during the Independent Sector (IS) conference in New York, they offered several areas in which to put numbers on the price of income inequality and the ways by which ending it will benefit everyone.

  • The earnings gap. If the average incomes of minorities were raised to equal their white counterparts, total U.S. earnings would increase by 12 percent or $1 trillion. This earnings gain would result in $180 billion in corporate profits.
  • Gross Domestic Product (GDP). Closing the earnings gap would increase GDP by $1.9 trillion. Closing the educational gap between African-American and Hispanic students and white students would increase the GDP by 2 to 4 percent, or between $310 and $525 trillion.
  • Tax revenue. Closing the earnings gap would lead to $290 billion in additional federal tax revenue. Minorities will make up 46 percent of the work force in 2030 by some projections. Closing the earnings gap would lead to tax revenue exceeding $1 trillion in 2030.