Racial Equity in the Bay Area

How Closing Gaps Can Result in Broad Economic Gain for the Region


This report, a first of its kind for the nine-county Bay Area, addresses how racial inequity hinders the longterm economic opportunities for the region, and quantifies what the region stands to gain by putting equitable policies at the forefront of its agenda.

This research was generously sponsored by Ernst & Young LLP (EY US), with support also coming from Alaska Airlines, KPMG US, and LinkedIn. 

Key Findings

In the last decade, racial equity has sprung to the forefront of the national dialogue. Spurred by protests calling for racial justice – most notably through the Black Lives Matter movement – many government entities around the country are ensuring that policymaking occurs through a racial equity lens and more employers are focused on diversity, equity, and inclusion as part of their missions.

However, the tone of the diversity, equity, and inclusion conversation in America has recently shifted – particularly in universities and corporations – with the pros and cons of such programs now the subject of intense debate. Solving for racial inequity is often viewed from a zero-sum perspective, where one group must lose for another to be lifted up. This research will instead employ a regional benefit perspective, and ask what can we gain by achieving racial equity in the Bay Area.

This report, a first of its kind for the nine-county Bay Area, addresses how racial inequity hinders the longterm economic opportunities for the region, and quantifies what the region stands to gain by putting equitable policies at the forefront of its agenda.

Defining the Problem:

■ The nine-county Bay Area region became majority people of color at the turn of the century, 45 years before the nation is projected to become majority people of color. However, Hispanic/Latinx Bay Area residents experience poverty (12% living below poverty line) at double the rate of White residents (6%), and Black residents experience poverty at triple the rate (18%).

■ The per capita median income for White Bay Area residents is nearly 2x higher than median incomes for Hispanic/Latinx, Indigenous, and Black residents.

■ 65% of all White residents of the Bay Area hold a bachelor’s degree or above. That same level of educational attainment is achieved by 20% of Hispanic/Latinx residents and 32% of Black residents.

■ In the Bay Area, 65% of White households and 62% of Asian or Pacific Islander households own their homes. Conversely, 35% of Black households and 42% of Hispanic/Latinx households own their homes.

■ Black and Hispanic/Latinx borrowers received only 13% of all home loans that originated in the Bay Area in 2021-2022. And despite comprising 27% of the adult population, Black and Hispanic/Latinx households accounted for 14% of all mortgage
applicants in 2021-2022.

■ Black, Hispanic/Latinx, and Indigenous households are twice as likely to be denied for a loan when compared to White borrowers. Even after controlling for creditworthiness metrics, borrowers of color are still denied at a higher rate.

Making the Case for Closing Racial Gaps as an Economic Priority:

■ On a national level, numerous studies have attempted to quantify the economic impact of racial equity: one study found that U.S. GDP would gain $2.1 trillion annually by closing racial gaps in income; another found that racial gaps in income, homeownership, education, and entrepreneurship have cost the U.S. economy $16 trillion over the past 20 years.

■ It has also been widely documented that racial equity and diversity is good for business: greater diversity is associated with increased sales revenue, more customers, greater market share, and greater relative profits. Organizations in the top quartile of diversity metrics are also 33% more likely to outperform their peers in terms of profitability.

■ The current lack of investment in Black and Hispanic/Latinx communities through business, consumer, and mortgage lending potentially results in billions of dollars in untapped potential to grow the Bay Area as a region inclusive to all.

Quantifying the Opportunity in the Bay Area: 

Closing racial gaps in wages—if workers of the same age and educational attainment had equal earnings—could add $55 billion in wages to the regional economy, an approximately 12% increase in wages across the region. This number represents a top bound for long-term economic opportunity in the region if access to jobs were to be equal across racial groups. Attaining these economic benefits would also require additional high-paying jobs to be added to the economy to match this gap. 

After adjusting for inflation, the racial wage gap in the Bay Area grew by $3.4B, driven mostly by Hispanic/Latinx wages that have not kept up with their White counterparts. Most racial groups saw decreases in the racial wage gap from 2019 to 2021, while Hispanic/Latinx workers, who bore the brunt of pandemic-related inequality, saw a widening of the wage gap. 

On a per worker basis, the average person of color in the Bay Area would earn nearly $23,000 more per year if they earned the same as their White counterparts in similar age and educational attainment brackets. This increase in income could afford people of color a year of childcare expenses or a year of transportation expenses. 

If applicants of color were approved at the same rate as White applicants in the same age bracket and income group, the number of approved mortgages to borrowers of color would increase by 330 annually in the Bay Area. Denial rates are higher for borrowers of color, but that has long been explained by lower credit-worthiness. When adjusting for credit-worthiness metrics, denial rates for borrowers of color are still higher. 

The racial wage gap narrowed for Black and Asian workers from 2019 to 2021 – but for Hispanic/Latinx workers, the inverse occurred, widening from $20B to $24B in potential wages if they earned as much as their White counterparts.

Steps on the Path Toward Racial Equity

To truly bridge the deeply entrenched divides and to unlock the economic opportunity of achieving racial equity will require new policies, new investments, and new strategies. Most importantly, it requires racial equity to become the primary criteria in decisions made by both business and government. 

Key public sector policy considerations include:

1. Employer Pay Transparency and Pay Audits 

There is a growing movement toward pay transparency policies. In California, recently passed Senate Bill 1162 requires pay scales to be listed in job postings and requires private employers with over 100 employees to disclose median and average wages by race, ethnicity, and sex within job categories. Outside of policy mandates, many companies have made voluntary efforts to create greater understanding of any wage gaps through wage audits.

2. Improved Access to Mortgages 

Several programs have been implemented around the region that provide down payment assistance to first-time homebuyers. At the state level, multiple California lawmakers have proposed a bond issuance of $25 billion to fund silent, no-interest second mortgages for homebuyers that would be repaid when the home is sold. At the regional level, similar programs could be created through the Bay Area Housing Finance Authority to support first-time homebuyers. Greater access to capital may allow for more mortgage applications from households of color, but it does not address bias in lending practices. Policies that boost credit scores – requiring credit agencies to factor in rental payments in credit scoring, for example – and seek to eliminate biases in mortgage application review must accompany policies that provide capital to potential homeowners.

3. Encouraging Wealth-Building Activities

In addition to disparities in housing and income, there are also racial differences in access to factors 

that affect wealth-building, such as education and entrepreneurship. Many geographies have created programs that provide small business supports in underinvested communities, while others have formed funds that provide capital to real estate development firms owned by people of color. A long-term strategy might include wealth-building accounts at birth, often referred to as baby bonds, which have been implemented in various forms in Connecticut, New York City, and Oakland. A regional approach to baby bonds could take best practices from these programs and scale a solution to the generational racial wealth divide. 

Key private sector considerations include: 

1. Connect to Diverse Talent Pipelines and Support Equity in Education 

In the Bay Area, several efforts are underway at individual companies to connect to more diverse talent pipelines, both today and in the long term. First, apprenticeship programs in technology and professional occupations are gaining popularity as they remove an educational barrier to entry that is present for many high-paying office jobs. Second, employers are working to ensure that community college curricula are aligned with the skill needs of the region’s employers. Lastly, multiple Bay Area companies provide philanthropic support to direct-service K-12 education organizations embedded in the community, schools with programs that support students in a path to college, and organizations that advocate for statewide education finance reforms. 

2. Formalize Equity Benchmarking across Private Sector 

An understanding of how a company ranks against peers on equity metrics can drive better performance and outcomes related to equity. Given the Bay Area’s large number of major employers, a racial equity index that provides employers with an equity score on metrics such as hiring, promotions, corporate philanthropy, workplace inclusion, and supply chain sourcing could spur more equitable corporate practices in the region. 

3. Equity-Focused Community Investment Fund 

With so many different businesses engaged in an array of diversity, equity, and inclusion activities, creating better coordination within the private sector itself has become necessary to bring solutions to scale. A centralized fund or community development public-private partnership could solve this issue and bring additional businesses and investment to equity initiatives.

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Read the Report (PDF)