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The economic potential of closing gender and racial gaps

Goldman SachsSharon Bell, Gizelle George-Joseph, Alison Nathan
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Research Context and Drivers

  • Goldman Sachs research has focused on inclusive growth and economic inequality for nearly 25 years, treating these issues as integral to, rather than separate from, general economic performance.
  • Increased client demand and external factors have driven a sharper focus on these topics over the last three to five years, including:
    • A surge in ESG-focused funds where diversity is a key investment factor ("following the money").
    • Societal recognition of the enormous economic contribution made by women and people of color.
    • Recent Supreme Court rulings on affirmative action, which coincided with the release of research on HBCUs and created a timely narrative around historical underfunding.
  • Recent publications include "Women Still Hold Up Half the Sky" (Sharon Bell) and "Historically Black, Historically Underfunded" (Giselle George-Joseph).

Higher Education and HBCU Economics (Giselle George-Joseph)

  • HBCUs constitute only 2.5% of U.S. colleges but produce:
    • 13% of all bachelor's degrees awarded to Black Americans.
    • Over 20% of Black STEM degrees.
    • 10% of Black American doctorate degrees.
  • Despite lower raw graduation statistics (38% for HBCUs vs. 61% nationally), HBCUs outperform non-HBCUs when controlling for socioeconomic factors like family income and school endowments.
  • HBCUs move students from the bottom two income quintiles to the top two at roughly twice the rate of non-minority-serving institutions, creating a scalable model for upward mobility.
  • Enrollment at HBCUs correlates with periods of racial unrest; for example, Morehouse College saw a 60% year-over-year increase in applications in 2020 following the murder of George Floyd.
  • Systemic underfunding remains the primary barrier to HBCU expansion, with historical disparities in private donations and government funding affecting institutional capacity.

Women's Labor Force Participation and Education (Sharon Bell)

  • Women's labor force participation has risen by approximately six percentage points over the last 15 years, driven primarily by improved educational access rather than increased propensity to work at existing education levels.
  • Current participation rates stand at:
    • ~73% for women in developed markets.
    • ~60% for women in emerging markets.
    • Consistently into the 80% range for men in both market types.
  • Key Regional Disparities:
    • Scandinavian countries (e.g., Sweden, Norway) show the highest participation rates globally, remaining slightly below men but exceptionally high in absolute terms.
    • India exhibits exceptionally low female labor force participation (20% in formal employment), a figure that has declined even as the broader economy grew.
  • The gender pay gap has narrowed globally but remains significant:
    • Japan reduced its gap from 50% in the late 1990s to just over 20% currently.
    • The U.S. pay gap has barely moved in 15 years, remaining near 20%, making it one of the highest among developed markets.
  • High crime rates in emerging markets, particularly against women, act as a deterrent to labor participation by reducing mobility and access to education.

Economic Impact of Closing Inequity Gaps

  • Closing gender and racial gaps is projected to raise global GDP by 5% to 6%:
    • Emerging market gains are primarily driven by women entering formal employment.
    • Developed market gains stem from narrowing the pay gap and increasing labor force participation among educated women.
  • Educated women significantly improve family outcomes:
    • Higher female education levels correlate strongly with better health and education outcomes for children.
    • Educated women are more likely to demand and provide resources for their children's education.
  • HBCU presence in a community correlates with higher shares of adult Black Americans holding college degrees, driving broader local income growth.

Policy and Private Sector Recommendations

  • For Policymakers:
    • Emerging Markets: Prioritize expanding access to education for women and reducing barriers to mobility.
    • Developed Markets: Implement family-friendly policies, including subsidized child care and shared parental leave, to boost participation.
    • Funding: Ensure sustained, equitable governance for financial support to low-income families and students.
  • For the Private Sector:
    • Corporate Governance: Broaden leadership pipelines beyond board seats to C-suite and management roles, with specific focus on the Technology and Financials sectors where female representation lags.
    • HBCU Support: Provide unrestricted donations and set aspirational goals for hiring HBCU graduates and interns.
    • Retention: Create internal mentoring, coaching, and development programs to sustain the participation of HBCU students within corporate structures.