Racism in Northeast Ohio: The Economic Impact

From workshop held on Tuesday, September 29, 2015, 11:30am-1:30pm

by Heather Steranka-Petit, Director of “It’s Time to Talk” Programs & Services, YWCA Greater Cleveland

We all know racism hurts people. It hurts to be discriminated against. It hurts to be denied opportunities because of how you look or the color of your skin. But what is the bigger picture? How does racism impact our society?  Recently the YWCA Greater Cleveland delivered training on the Economic Impact of Racism in Northeast Ohio. This ground-breaking program allowed participants to take a deeper dive into how racism impacts our community. Whether it’s institutional racism in housing and employment or racially charged sports mascots, there is an impact on our community. This program covered topics including institutional/structural racism as well as some direct costs and hidden costs of racism.

Any discussion about a potentially controversial like racism needs to begin with a definition. We define race as a social construct that artificially divides people into distinct groups based on characteristics such as: physical appearance (particularly color), ancestral heritage, cultural affiliation, or ethnic classification. A common pushback to this definition is the question of genetic diversity among races. According to the 2003 PBS documentary Race – the Power of an Illusion, there is more genetic diversity in fruit flies than there is in humans. Humans are actually one of the most genetically similar species on the planet.

So when did race become a dividing factor?  In his 2006 book, Privilege, Power and Difference, Dr. Allen G. Johnson talks about the link between the rise of capitalism and the need for racial separation. In the United States, the direct connection between capitalism and racism can be found in the rise of slavery in the late 1700s up to the Civil War. There is a disconnect between the institution of slavery and the ideals of freedom, dignity, and democracy. Citizens of the newly formed United States needed to find a way to justify the despicable treatment of millions of African slaves. By creating a racial distinction based on color and ancestry, whereby those who were not white were somehow a lesser race of people, citizens could justify the heinous practice of slavery as well as the oppression of Native Americans. While we no longer use race as a justification for slavery and oppression, the long-term effects and implications of our history remain with us today.

Today, it is illegal to discriminate against a person or group of people based on the color of their skin or national origin. However, this does not mean that it is not still happening. According to the EEOC (Equal Employment Opportunity Commission www.eeoc.gov), every year thousands of companies are sued for discrimination based on race. Here in Northeast Ohio, between 2009-present, there have been several lawsuits for discrimination based on race resulting in costs of more than $3 million dollars to Northeast Ohio Businesses. These lawsuits illustrate some of the direct costs of racism in our communities. Here is a sample from the website www.eeoc.gov of these cases:

  • 2009 – Bahama Breeze paid $1.26 Million to settle a suit for racial harassment of black workers. In this case, restaurant managers repeatedly used racist slurs, including the N-word, against 37 workers at the company’s Beachwood, Ohio location.
  • 2010 – Mineral Met, Inc., Cleveland, Ohio, (a division of Chemalloy Company) paid $440,000 to settle race discrimination and retaliation suit. This case found that black employees were subjected to disparate treatment and harassment, including a noose display on a piece of machinery.
  • 2015 – Mel-K Management Company, Chagrin Falls, Ohio agreed to pay $80,000 to settle race and sexual harassment and retaliation suit. This case found that black employees were subjected to egregious racial harassment, such as name calling, including the N-word and “Black b—-h”, by a general manager.
  • 2010 – Area Temps, Cleveland, Ohio paid $650,000 for profiling applicants by race, sex, Hispanic national origin, and age. The findings of this case stated that the temporary employment agency complied with discriminatory placement requests from customers, and fired employees who opposed unlawful practices.
  • 2014 – City of Lakewood agreed to pay $507,500 to settle a racial discrimination lawsuit brought by the owners of Hidden Village Apts. who claimed that their black tenants were the subject of racial harassment by the city of Lakewood.

In addition to these lawsuits, there are more direct costs of racism.  According to a 2013 report by the Altarum Institute, August 2013, there is a 30% earnings gap between whites and people of color. According to their research, if we were to raise the average income of minorities, US earnings would increase by 12%, which would lead to increased corporate profits, increased federal tax revenue, and a potential reduction in the federal deficit.

In Cuyahoga County, this wage gap was highlighted in the Cuyahoga County Workforce Indicator Report, 2014 by the Center for Community Solutions. They found that in 2011, the median incomes for whites was $30,222, while for African-Americans it was only $20,696. The same report found that in 2011, median incomes for Hispanics were $19,818. Those who were defined as other or multi-race had median incomes of $18,342.

Cuyahoga County Media Income 2011 by Race Chart

Another form of institutional racism which has a direct impact on the bottom line comes with our hometown Cleveland Indians.  In 2014, professors at Emory University studied the financial performance of professional sports teams with Native American Mascots over a period of 12 years. They found that having these mascots was costing approximately $2.6 million per year in Major League Baseball. In addition, the report shows that Native American mascots like Chief Wahoo produced a dramatic decline in their teams’ brand equity. Finally, according to Forbes magazine, since 2000, the Cleveland Indians’ value growth is the 2nd lowest in Major League Baseball.

Racist and discriminatory attitudes towards immigrants in the US can also negatively contribute to the economic performance of our region.  In his book Immigrant Inc., local author and attorney Richard Herman talks about how immigration can be a driving force for our economy, and how not supporting progressive immigration policies is like leaving money on the table. Herman’s research shows that:

  • Immigrants are twice as likely as native-born citizens to start a business.
  • Immigrants founded more than 50% of the high-tech companies in Silicon Valley.
  • Immigrants are more likely to earn an advanced degree, invent something, or be awarded a U.S. patent.
  • Finally, for every 100 international students who stay in the US after earning an advanced degree in science, technology, engineering, or math: 262 JOBS ARE CREATED.

In addition to the many direct costs of racism in our region, it is also important to consider some less obvious or hidden costs. Recently, the Kirwan Institute at Ohio State University prepared a comprehensive report for the Cuyahoga County Place Matters Team which provides a historical context for understanding today’s economic landscape in our region.    Their reports shows how policies and practices such as red-lining, zoning, and urban renewal have been and continue to be drivers of racial segregation and opportunity isolation for people of color in our community.

Racial Segregation and Opportunity Isolation

Source: http://kirwaninstitute.osu.edu/

Even more disturbing are statistics found in a 2011 Brown University Census Brief entitled:  Persistence of Segregation in the Metropolis.  This report shows that the Cleveland Ohio region ranks eighth highest in the US for levels of segregation, and sixth highest in terms of racial isolation.
Segregation and Isolation Charts

Source:  Persistence of Segregation in the Metropolis, 2011  Census Brief Prepared for Project US2010  www.s4.brown.edu/us2010

Finally, as we try to put all of this information together we consider a fictional case study of two World War II veterans.  These gentlemen are composites of the many stories of our brave servicemen and women.  This case study shows possible impacts of the many policies and practices on the lives and economic status of two individuals.

GI Bill Example Photo 1GI Bill Example Photo 2

•       White – PFC – age 22

•       1945 honorable discharge

•       GI Bill to attend local college

•       1949 Graduated from college in 4 years with BS Engineering

•       1949 Married and bought 1st house at age 26

•       1954 – 3 kids, wife stay-at-home mom

•       1955 Sold starter house and bought bigger house in suburbs, 4-bedroom

•       1965 property values on house in suburbs increased by 20%

•       1966 schools de-segregated (busing), used home equity loan to send kids to private school

•       1968-75 kids in college, parents paid, kids don’t have to work while in school

•       1980’s Grandkids

•       1988 retires at 65, sells home in suburbs to move to upscale retirement community apartment

•       Increase in value of property and estate passed to children (wealth)

•       African American – PFC age 22

•       1945 honorable discharge

•       GI Bill eligible, but was not able to get admission to local college

•       1949 Married and renting apartment at age 26

•       1954 – 3 kids, wife working to help support family

•       1955 – Attended night school while working full-time – 10 years to graduate with BS Engineering

•       1960 bought first house,  3-bedroom in city

•       1965 property value of home decreased 30% due to white flight

•       1966 schools de-segregated (busing), kids have 45 min bus ride to new school (denied for home equity loan due to home value)

•       1968 kids going to college, parents paid some, kids working through school

•       1980’s Grandkids

•       1988 retire at 65 – Stays in home – property values stagnant – retirement income less due to wage gap & less time employed as engineer

•       Value of property and estate passed to children is significantly less than white family

Racism has direct and hidden costs that impact our region today.  Contact YWCA Greater Cleveland to learn more about the Economic Impact of Racism in Northeast Ohio, and many other topics.

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