A new report from the president's Council of Economic Advisers quantifies the extent to which some of these opportunity gaps are weighing on our economy — and the economic returns to reducing them. The effects CEA finds are large in their own right, but when one considers the long-term productivity gains from a smarter, better-educated workforce, CEA's findings are just the tip of the economic iceberg.
These effects help explain the recent announcement by Starbucks and several major American corporations of a program to offer full-time positions as well as apprenticeships and internships to 100,000 disconnected youth over the next three years. Howard and Sheri Schultz shared what we know to be true: "This is not charity. It solves a real business problem," Schultz wrote in an op-ed for the New York Times. Schultz cited a Manpower Group survey in which one-third of employers said they have trouble filling open positions because of talent shortages, and 43 percent said those shortages hurt their ability to serve clients.
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The talent is there, we just need to foster it.
Human capital — the skills, knowledge, and experience that help workers succeed and foster innovation — is paramount to driving our nation's productivity.
Early childhood interventions and education develop human capital, yet there are distressing and glaring disparities in access. High-school graduation rates for black and Hispanic students, for example, are 16 and 12 percentage points lower than white students, respectively, according to the National Center for Education Statistics at the Department of Education.
Young men of color are also less likely to complete a college degree. Only 12 percent of Hispanic men and 21 percent of black men have a college degree by their late 20s, compared to nearly 40 percent of white men, according to the National Center for Education Statistics at the Department of Education.
Creating better educational opportunities for disadvantaged youth would have a significant positive effect on the economy. Closing the education gap faced by working-age men of color, for example, would boost their aggregate annual earnings by $170 billion; average weekly earnings among U.S. workers would rise 3.6 percent; and total U.S. GDP would increase by 1.8 percent, according to the Council of Economic Advisers. And, these numbers do not even include the benefits to productivity and economic growth that would stem from innovation by better educated Americans.
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We are also losing the economic output of those we incarcerate disproportionately. In 2011, most state and federal prisoners were minorities — black and Hispanic prisoners alone accounted for over 60 percent of total prisoners, far greater than their share of the total U.S. population, according to the Bureau of Justice Statistics. Even when there is little difference in the likelihood of committing a crime, individuals of color are much more likely to be arrested. If convicted, black offenders are more likely to be sentenced to incarceration than white offenders and receive longer sentences for the same offenses. This has direct economic costs too — we spend much more incarcerating these young men than it would cost to educate them. The annual cost of incarceration for a single juvenile is over $100,000 — more than twice as high as tuition at the most expensive college in the country, according to the American Correctional Association and the Chronicle of Higher Education.
Lower educational attainment and higher incarceration contribute to a staggering employment gap. A black baby boy born 25 years ago, for example, has only a roughly 1 in 2 chance of being employed today, as roughly half are missing from employment because of early death, incarceration, low labor force participation, and high unemployment. Prime-age black men are 13 percentage points less likely to be employed than prime-age white men. This gap surges to over 20 percentage points when calculated to include among the non-employed prime-age black men who are "missing" primarily due to incarceration or early death, according to the Council of Economic Advisers.
We can, and must, do something to expand opportunity for every young person — not simply as a moral imperative but out of economic necessity and competitiveness. There is clear evidence of programs and interventions that work. Programs that provide skills development, mentoring and clear pathways to success from cradle to college and career, can generate benefits that are more than three times their costs, exceeding the rates of return seen in many private sector business investments. Identifying and scaling those programs is critical.
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The core focus of the president's domestic policy agenda has been to expand opportunity for all Americans because America is at its best when we are fielding a full team. This is at the root of the president's policies to improve access to high quality childcare, preschool for all, and free community college. The My Brother's Keeper initiative was launched to address persistent opportunity gaps as part of ensuring that all young people can achieve their full potential. These efforts are about all of us, and the initiative has inspired more than 200 communities to redouble efforts to create pathways for all youth and led to more than $500 million in private-sector commitments to do the same.
When we invest in our young people, we won't just make their lives better. We'll make our entire country stronger, including speeding up our rate of economic growth.
Commentary by Betsey Stevenson, a member of the White House Council of Economic Advisers and Broderick Johnson, White House cabinet secretary and chair of the My Brother's Keeper Task Force. Follow them on Twitter @CEABetsey and @Broderick44.