Is employment segregation holding back economic growth?

Real Time Economics blogger Rani Molla at The Wall Street Journal recently pointed out the still significant segregation of many U.S. industries by race and gender. Molla’s article was pegged to the on-going conversation about diversity in the technology industry. But the phenomenon has a much larger importance: it may well be slowing the growth of the U.S. economy.

Despite the large gains of the past 40 plus years, employment segregation is still quite high. Women are disproportionately employed in industries that, on the whole, pay relatively less. Women are 52 percent of the population but are just under 75 percent of the employed workers in the education and health industry. The average pay for that industry is $44,971 a year compared to $86,801 for the information industry, where women are only 39 percent of the industry.

Black Americans also are segregated by industry. They are 12 percent of the population but 17 percent of the transport and utilities occupation, which pays a relatively low average annual salary of $41,761. And they are underrepresented in many industries such as financial services.

In additional to industry segregation, there is also segregation by occupation. In 2012, just under 44 percent of women worked in just 20 occupations. Those occupations included relatively low paying jobs such as home health aides and child care workers. The concentration of men in occupations is less severe, with only 34 percent of men working in the top 20 occupations by male employment.

This segregation doesn’t just affect the individual workers but our overall economy, too. If talent and skill cannot or do not flow to the right industry then economic growth may be slower. Some telling economic research says that’s the case. A paper by Chicago Booth School economists Chang-Tai Hsieh and Erik Hurst along with Stanford University economists Charles Jones and Peter Klenow finds that the opening up of top occupations to women and workers of color had significant growth effects. Specifically, they found that 15 percent to 20 percent of the growth in economic output per person in the United States between 1960 and 2008 was because of the opening up of these occupations.

Reducing employment segregation can help boost economic growth. The gains of the past have been significant, but they can be improved upon. Helping reduce this problem will require a variety of policy options but they will almost certainly be worth the effort.