3 minute read 3 Aug 2020
Woman working on couch

How inclusivity is directly proportional to economic development

By

Amy Holloway

EY US Economic Development Advisory Services National Director

National economic development strategist serving more than 200 communities since 1995. Austinite and Ashevillian, arts lover, outdoor enthusiast and parent to two tenacious terriers.

3 minute read 3 Aug 2020

As measures of economic health, inclusion and equity are as important as job creation and capital investment.

During the past two months and in the wake of recent tragedies, the US has witnessed a wave of mass protests related to racial justice. These protests have helped fuel a long-simmering dialogue on systemic racism and injustices that the black community faces, as well as underscored a desire to do more to advance justice, inclusion and equity.

Our Economic Development Advisory Services (EDAS) team is a strong proponent of a holistic approach to economic development. As measures of economic health, inclusion and equity are as important as more traditional factors such as job creation and capital investment. Our approach is based on EDAS’ analysis of U.S. Census Bureau data that indicates communities that promote greater inclusion typically enjoy greater economic growth than their less-inclusive peers.

Few regions are exempt from racial inequities. According to the U.S. Census Bureau, median income for white households exceeds that of non-white households in each of the country’s 100 most populous metros. When it comes to poverty, the same applies. The non-white poverty rate exceeds the white poverty rate in all of the country’s 100 largest metropolitan areas. Additionally, in the country’s 35 largest metropolitan areas, poverty rates among communities of color are at least 50% greater than white poverty rates. In Minneapolis, for example, more than 1 in 4 black/African-American residents live in poverty, while the figure is less than 6% for white residents.

Employee growth bar chart

In the world of economic development, demonstrating the competitive benefit of a more inclusive growth agenda is often the quickest path toward galvanizing support. In recent years, for example, our team has incorporated an inclusivity component into our competitive assessments to help underscore the issue’s important role in economic performance. Four of the metrics of our inclusivity index directly address racial inclusivity, including non-white vs. white median household income; non-white vs. white educational attainment at the bachelor’s degree and above level; non-white vs. white poverty rate; and the ratio of non-white management workers relative to proportion of non-white workforce.

Employee growth dot chart

Ultimately, the data paints a clear picture — regions that boast greater levels of racial inclusivity generally enjoy greater levels of employment growth. While there are exceptions (including my hometown of Austin, Texas), regions characterized by less severe economic, educational and employment disparities between communities of color and the rest of the population typically outperform their less-inclusive counterparts. Among the country’s 50 most populous metropolitan areas, for example, the 10 regions that score highest on our inclusivity index all posted employment growth of 12% or greater between 2014 and 2019. Among the 10 metros with the lowest scores on measures of inclusivity, only one enjoyed double-digit job growth during this period. The exact relationship between economic prosperity and racial inclusion is varied and complex, but the two forces are likely to contribute to a virtuous circle: that inclusive regions are able to more effectively leverage their human capital to generate economic vibrancy, and this in turn creates greater opportunities for historically disadvantaged populations.

The views expressed by the author are not necessarily those of Ernst & Young LLP or other members of the global EY organization.

Summary

Amid a global pandemic that has wreaked havoc on our economy, there is a pressing need to advance recovery efforts. As a result of the social movement to address racial disparities, there is also a growing awareness for the need to create more broad-based opportunity. The reward is clear — a more vibrant, equitable world.

About this article

By

Amy Holloway

EY US Economic Development Advisory Services National Director

National economic development strategist serving more than 200 communities since 1995. Austinite and Ashevillian, arts lover, outdoor enthusiast and parent to two tenacious terriers.