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Racism Impoverishes the Whole Economy

Discrimination hurts just about everyone, not only its direct victims.

New research shows that while the immediate targets of racism are unquestionably hurt the most, discrimination inflicts a staggering cost on the entire economy, reducing the wealth and income of millions of people, including many who do not customarily view themselves as victims.

The pernicious effects of discrimination on the wages and educational attainment of its direct targets are being freshly documented in inventive ways by scholarship. From the lost wages of African-Americans because of President Woodrow Wilson’s segregation of the Civil Service, to the losses suffered by Black and Hispanic students because of California’s ban on affirmative action, to the scarcity of Black girls in higher-level high school math courses, the scope of the toll continues to grow.

But farther-reaching effects of systemic racism may be less well understood. Economists are increasingly considering the cost of racially based misallocation of talent to everyone in the economy.

My own research demonstrates, for example, how hate-related violence can reduce the level and long-term growth of the U.S. economy. Using patents as a proxy for invention and innovation, I calculated how many were never issued because of the violence — riots, lynchings and Jim Crow laws — to which African Americans were subjected between 1870 and 1940.

The loss was considerable: The patents that African-Americans could have been expected to receive, given equal opportunity, would have roughly equaled the total for a medium-size European country during that time.

Those enormous creative losses can be expected to have had a direct effect on business investment and therefore on total economic activity and growth.

Other economists are beginning to estimate harm to the economy caused by racism in broad ways.

An important principle suggests that the person who can produce a product or service at a lower opportunity cost than his or her peers has a comparative advantage in that activity. Recent research calculates the effects of the discriminatory practice of placing highly skilled African-American workers, who might have flourished as, say, doctors, into lower-skilled occupations where they had no comparative advantage. Such practices 50 years ago — which linger, to a lesser extent, today — have cost the economy up to 40 percent of aggregate productivity and output today.

Similarly, other research estimates that aggregate economic output would have been $16 trillion higher since 2000 if racial gaps had been closed. To put that total in context, the gross domestic product of the United States in 2019 was $21.4 trillion. The researchers estimate that economic activity could be $5 trillion higher over the next five years if equal opportunity is achieved.

Right now, if more women and African-Americans were participating in the technical innovation that leads to patents, the economist Yanyan Yang and I calculate that G.D.P. per capita could be 0.6 to 4.4 percent higher. That is, it would be between $58,841 to $61,064 per person compared with $58,490 per person in 2019.

This entire line of research suggests that organizations — companies, laboratories, colleges and universities — are leaving colossal sums of money on the table by not maximizing talent and living standards for all Americans.

I have thought and written a lot about remedies. Here are a few ideas aimed at addressing discrimination in the innovation economy. First, we need more training in science, technology, engineering and mathematics (STEM), like the extensive and highly successful program once sponsored by Bell Labs to encourage participation in these fields by women and underrepresented minorities

STEM fields should not be the sole target, however, because the innovation economy encompasses more than this narrow set of subjects. Two of the last three people I’ve talked to at tech firms have a B.A. in international relations and a Ph.D. in political science. Clearly, problem-solving skills matter, but these skills are not unique to the STEM majors.

Second, there is substantial evidence of systemic racism in education, which needs to be addressed. Research shows that professors are less likely to respond to email inquiries about graduate study from Black, Hispanic and female students than from people who are discernibly white and male. A system of incentives — and penalties — could hold those responsible accountable at every level of the education and training process.

At the invention stage, such as at corporate, government and university labs, my research shows that mixed-gender teams are more prolific than those whose members are all female or male. And a large body of literature has documented the positive effects of diversity in teams. Managers at each level should be held responsible for being good stewards of the resources of their companies and promoting diverse teams and behavior and, therefore, better outcomes.

When invention is commercialized and companies sell shares to the public, the wealth gaps are stark. Seven of the world’s 10 richest people on the Forbes list are associated with tech companies that commercialize inventions. Jeff Bezos, Bill Gates, Mark Zuckerberg and Elon Musk are in the top five. None among the top 10 (or 50) is Black.

The statistics for venture capital funding are striking. In 2014, less than 1 percent of venture capital funding went to businesses founded by African-American women, and in 2015, only 2 percent of all venture capitalists were African-American.

A number of worthwhile recommendations have been made to address the lack of diversity at the commercialization stage of innovation. These include:

  • Enhancing mentoring opportunities through programs such as those of the Small Business Administration.

  • Seeking and recruiting founders to invest in places like Atlanta, and not exclusively in Silicon Valley.

  • Addressing systemic racism at every level of management and within venture capital firms.

  • Diversifying corporate boards so that senior leadership will be held accountable for diversity and workplace climate. (California has done this with women on the boards of public companies.)

The Kapor Center, a think tank that promotes participation by underrepresented minorities in tech fields and education, has proposed noteworthy remedies at many stages, including at the pre-college level.

The social compact most societies have with their governments is that standards of living will rise continually and that each successive generation will be better off than preceding ones. We are robbing countless people of higher standards of living and well-being when we allow racial discrimination to flourish from generation to generation.

Lisa D. Cook, a professor of economics at Michigan State University, is a member of the Biden-Harris transition team.

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The Digital Divide Starts With a Laptop Shortage

When the Guilford County Schools in North Carolina spent more than $27 million to buy 66,000 computers and tablets for students over the summer, the district ran into a problem: There was a shortage of cheap laptops, and the devices wouldn’t arrive until late October or November.

More than 4,000 students in the district had to start the school year without the computers they needed for remote learning.

“It’s heartbreaking,” said Angie Henry, the district’s chief operations officer. “Kids are excited about school. They want to learn.”

Millions of children are encountering all sorts of inconveniences that come with digital instruction during the coronavirus pandemic. But many students are facing a more basic challenge: They don’t have computers and can’t attend classes held online.

A surge in worldwide demand by educators for low-cost laptops and Chromebooks — up to 41 percent higher than last year — has created monthslong shipment delays and pitted desperate schools against one another. Districts with deep pockets often win out, leaving poorer ones to give out printed assignments and wait until winter for new computers to arrive.

That has frustrated students around the country, especially in rural areas and communities of color, which also often lack high-speed internet access and are most likely to be on the losing end of the digital divide. In 2018, 10 million students didn’t have an adequate device at home, a study by education nonprofit Common Sense Media found. That gap, with much of the country still learning remotely, could now be crippling.

“The learning loss that’s taken place since March when they left, when schools closed, it’ll take years to catch up,” Ms. Henry said. “This could impact an entire generation of our students.”

Sellers are facing stunning demand from schools in countries from Germany to El Salvador, said Michael Boreham, an education technology analyst at the British company Futuresource Consulting. Japan alone is expected to order seven million devices.

Global computer shipments to schools were up 24 percent from 2019 in the second quarter, Mr. Boreham said, and were projected to hit that 41 percent jump in the third quarter, which just ended.

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Credit…Jeremy M. Lange for The New York Times

Chromebooks, web-based devices that run on software from Google and are made by an array of companies, are in particular demand because they cost less than regular laptops. That has put huge pressure on a supply chain that cobbles laptop parts from all over the world, usually assembling them in Asian factories, Mr. Boreham said.

While that supply chain has slowly geared up, the spike in demand is “so far over and above what has historically been the case,” said Stephen Baker, a consumer electronics analyst at the NPD Group. “The fact that we’ve been able to do that and there’s still more demand out there, it’s something you can’t plan for.”

Adding to the problem, many manufacturers are putting a priority on producing expensive electronics that net greater profits, like gaming hardware and higher-end computers for at-home employees, said Erez Pikar, the chief executive of Trox, a company that sells devices to school districts.

Before the year began, Trox predicted it would deliver 500,000 devices to school districts in the United States and Canada in 2020, Mr. Pikar said. Now, the total will be two million. But North American schools are still likely to end the year with a shortage of more than five million devices, he said. He added that he was not aware of any large-scale efforts to get refurbished or donated laptops to school districts.

Districts that placed orders early in the pandemic have come out ahead, industry analysts said, while schools that waited until summer — often because they were struggling to make ends meet — are at a disadvantage.

The Los Angeles Unified School District, for example, spent $100 million on computers in March and said in September that it was unaffected by shortages. But Paterson Public Schools in New Jersey had to wait until it received federal coronavirus relief money in late May to order 14,000 Chromebooks, which were then delayed because of Commerce Department restrictions on a Chinese manufacturer, Hefei Bitland.

In July, the Commerce Department added Hefei Bitland, which worked with the computer giant Lenovo, to a list of companies accused of using Uighurs and other Muslim minority groups in China for forced labor. That worsened laptop shortages just a month or two before schools were set to reopen.

“It took a bad situation and made it worse,” Mr. Pikar said. “It was quite dramatic — there were hundreds and hundreds of school districts that got caught.”

A spokesman for the Commerce Department said Lenovo should have known that “they are supplying computers to American schoolchildren that could have been produced from forced labor.” Lenovo did not respond to requests for comment.

Paterson was able to secure more laptops just nine days before school started, but other districts have not been as lucky.

Alabama schools are waiting for more than 160,000 devices, and Mississippi did not receive the first of the 320,000 computers the state had ordered until early October. Staples said it would receive 140,000 Chromebooks for schools in November and December, 40,000 of which are earmarked for California districts.

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Credit…Michael Starghill Jr. for The New York Times

Daniel Santos, an eighth-grade teacher in Houston, logs into his virtual classroom from home each morning and starts the day’s American history lesson. Once he turns his students loose to work on assignments, the hard conversations begin.

If students stop turning in homework consistently, Mr. Santos asks them privately: Do you have access to a laptop? One boy said he and his brother were sharing one computer at home, making it difficult for both to attend class. Others were completing assignments on their cellphones.

“It breaks my heart,” said Mr. Santos, who hears the “demoralization” in students’ voices. “They want to do their work.”

Nearly all of the almost 700 students at the school, Navarro Middle School, are Hispanic or Black, and most are eligible for free lunches. Mr. Santos said Navarro had been underfunded for years. It does not even have a functioning library, he said.

The district said it had spent $51 million and obtained more than 100,000 devices since April. But a month into the school year, Houston teachers are still encountering children without laptops.

Mr. Santos’s students are intelligent, inquisitive and unaccustomed to struggling in school, he said. But since classes started in early September, about 10 of his 120 students have told him that they need a laptop. For the first time, some are falling behind, he said.

Guilford County Schools, with 73,000 students, is encountering the same problem in North Carolina. The district ordered laptops in August with help from the March coronavirus relief bill, Ms. Henry said.

Many children in the area live in poverty and lack personal computers or reliable internet service, she said. Those who cannot attend virtual classes are receiving printed assignments delivered to their houses. Some are watching recordings of classes when they can log onto a device, and a small number have been allowed into district buildings for occasional access to computers and Wi-Fi, Ms. Henry said.

The district is pushing to resume some in-person instruction in late October because of the growing divide between rich and poor.

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Credit…Jeremy M. Lange for The New York Times

For about a month, Samantha Moore’s four school-age children shared one iPad provided by the Guilford district and took turns going to class. Their grades have suffered as a result, she said.

“Not everybody is financially stable enough to buy laptops, and some families are big like mine,” said Ms. Moore, the manager at a sports bar. “I can’t just go out and buy four computers.” She said she received food stamps, and had lost out on a $6,000 work bonus because the pandemic temporarily closed the bar.

Eric Cole, who teaches Ms. Moore’s 13-year-old son, Raymond Heller, eventually secured more tablets for the family and other students through his church.

Being unable to attend class was “a little frustrating,” Raymond said. Now that he has his own device, “the work is easy — the live classes make everything easier.”

In eastern Idaho, the Bonneville Joint School District is holding in-person classes, but hundreds of students have had to quarantine after possible virus exposure — and the district said it did not have enough Chromebooks for them all. It didn’t place its $700,000 order for 4,000 devices until late September because of budget challenges, said Gordon Howard, Bonneville’s technology director.

While they wait for the order, students without computers are missing out on education.

“Those that are behind continue to get further behind, and it’s through no fault of the kids at all,” said Scott Miller, the principal of the Bonneville district’s Hillcrest High School in Ammon.

Many students at the Sante Fe Indian School, operated by New Mexico’s Pueblo tribes, live in tribal homes without Wi-Fi access, said Kimball Sekaquaptewa, the school’s technology director. The school ordered laptops with built-in SIM cards that do not require Wi-Fi to connect to the internet.

But the delivery date for the July order was pushed to October, forcing students to start the school year without remote classes. Instead, they were asked to find public Wi-Fi twice a week to download and upload assignments.

“There’s a lot of frustration,” Ms. Sekaquaptewa said. “We really wanted to hit the ground running, and now we’re in limbo.”