Inclusion, the active process of incorporating people into the organization and society and giving them a sense of belonging, has taken center stage as a primary means of implementing Diversity, Equity, and Inclusion (DEI) in society and business. Analysis in support for inclusion abound. Before the pandemic, The World Bank estimates that nations leave $160 trillion on the table by keeping women from fully participating in national economies. According to a McKinsey & Company report, “Companies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability.” Staffing organizations stress the importance and benefits of bringing diversity and inclusion initiatives into the workplace. Individuals benefit from inclusion from better jobs, improved social status, self-confidence, acceptance, and personal well-being.
Exclusion
The benefits of inclusion are impressive. However, in many cases, actual progress has been slow and even further retarded by the pandemic. To comprehend the context, motivate action, and illuminate the true value of inclusion, it’s helpful to understand better the other side of the coin, the costs of exclusion. If someone is excluded, it means that they are deliberately and painfully left out. Exclusion has costs at many levels – Social, Economic, Business, and Human. This story deals with exclusion at the individual level and upward. It’s not an upbeat story.
Individual
At the individual level, the pain of exclusion can mean death. Excluded Black Americans are dying at prodigious rates. According to Harvard Professor David R. Williams, researchers have coined the term “excess deaths “to explain the sad fact that if blacks and whites had the same mortality rate, nearly 100,000 fewer black people would die each year in the United States. Even educated African Americans are sicker and die younger than their educated white peers. A black person will live on average three fewer years than a white person with the same income, according to Paula Braveman, a leading researcher on health inequalities at the University of California, San Francisco. Indeed, the affluent white neighborhood of Bethesda, Maryland is associated on average with an additional ten years of life compared to people who are born only 10 miles away in primarily poor, black Southeast Washington, D.C. COVID provided incontrovertible validation of the costs – Black Americans died at twice the rate of Whites.
The health disparities between blacks and whites are stark and run deep, no matter the age or ailment. Adult obesity rates for African Americans are higher than those for whites in nearly every state. They have higher rates of diabetes, hypertension, and heart disease than other groups. Black children have a 500 percent higher death rate from asthma compared to white children. African American adults with cancer are less likely to survive prostate, breast, and lung cancer than white adults. Exclusion from where people live can determine opportunities to access high-quality education, employment, housing, fresh foods, or outdoor space – all contributors to health.
Exclusion is not just a race thing; gender matters also. This March International Women’s Day celebrated women’s achievements and raised awareness of the continuing mission towards gender equality. While gender equity has made the most progress in education and labor force participation, health inequality between men and women continues to plague many societies today. Female equity in U.S. society is better than in societies worldwide; however, U.S. women do suffer gender exclusion’s consequences when it comes to their health. Some reasons are the female wage gap, lack of sex-disaggregated research and data, barriers to accessing mental healthcare.
Business
Exclusion in business is extremely costly. One of those costs is a lack of innovation. Companies that don’t innovate die. Without diversity of background and points of view, there are no diverse ideas. Without diverse ideas, there is no innovation. U.S. companies are leaving $1.05 trillion on the table by not being more inclusive, according to global professional services company Accenture. That missed financial opportunity comes down to not enough companies prioritizing inclusion.
Dramatic progress in moving toward gender equality was made between 1970 and 2018; however, in recent decades, change has slowed and, on some indicators, stalled entirely. According to a report from the National Women’s Law Center, women in the U.S. who work full-time, year-round are typically paid only 82 cents for every dollar paid to their male counterparts. This gap in earnings translates into $10,157 less per year in median earnings, leaving women and their families shortchanged. Worse off are Black women, who earned 63 cents, while Latinas earned 55 cents and Native American women earned 60 cents. Going forward, a woman starting her career today loses an average of $406,280 to the wage gap in their lifetime.
Credit Suisse Research Institute’s landmark report showed that corporate performance was better with greater gender diversity in return on equity and net income growth. More recently, McKinsey’s 2020 analysis found that companies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than companies in the bottom quartile—up from 21 percent in 2017 and 15 percent in 2014. In the case of ethnic and cultural diversity, their findings are equally compelling: in 2019, top-quartile companies outperformed those in the bottom quartile by 36 percent in profitability. Despite this, executive team exclusion remains high.
Despite major DEI efforts and extensive efforts to hire a diverse workforce, executive teams remain white enclaves. For example, McKinsey found that female representation on executive teams is only 20% and more than a third of companies studied have no women on their executive teams. Why? Because exclusion from the pathways to promotion trumps diversity. See more on why and how in our interview with Mercer’s Haig R. Nalbantian; Career Equity is essential to eliminate the Gender Pay Gap. In the article, Nalbantian speaks to what businesses can do to ensure that women and people of color are positioned to succeed at work, that they’re in the right roles, they’re reporting to the right people, and, among other things, they’re in the right part of the business.
Business exclusion remains in compensation, especially for African Americans. The compensation firm, PayScale reported that while black or African American men may climb the corporate ladder, they still make less than equally qualified white men. They are the only racial/ethnic group that does not achieve pay parity with white men at some level. On average, black men earned 87 cents for every dollar a white man earned. Hispanic workers had the next largest gap, making 91 cents for every dollar earned by white men. On the other side of the earnings spectrum, Asian men typically earned $1.15 for every dollar earned by a white male worker.
Economy
Nationwide protests have cast a spotlight on racism and inequality in the United States. There are significant economic reasons for dealing with this form of exclusion. A 2020 Citibank study put a price tag of $16 trillion on how much the economy has lost over the last two decades due to discrimination against African Americans. The bulk of the loss is based on a lack of fair and equitable lending to Black entrepreneurs that might have created an additional $13 trillion in business revenue and potentially created 6.1 million jobs. The study also found that if racial exclusion were addressed today, $5 trillion could be added to the economy over the next five years. This is not an insignificant number: By comparison, U.S. GDP totaled $19.5 trillion last year.
A different study by McKinsey found that advancing women’s equality could add up to $3 trillion to US GDP over a business-as-usual scenario. It appears that everyone stands to gain if women and minorities are paid fairly and wealth creation opportunities are distributed more equitably. Not doing so means even the rich are losing out.
Society
Exclusion erodes societies and creates excess societal costs. Families of a particular color or racial group live in poverty and poor conditions, unable to rise out of their disadvantaged state through exclusion from high-paying positions. We see large numbers of excluded ethnic and racial groups pursued by the justice system and given harsher sentences for their crimes or convictions for crimes they did not commit. Dealing with marginalized groups raises the justice system’s costs (police, courts, jails), often only curtailing society’s problems, not curing them. We see discrimination in the education system, with those from marginalized segments unable to access quality education and qualifications that they need to advance and progress into quality or even basic jobs – sentencing them to become burdens on society instead of productive contributors.
The global societal impact of gender bias and exclusion alone is significant. The World Bank found that globally, women account for only 38 percent of human capital wealth versus 62 percent for men. In low- and lower-middle-income countries, women account for a third or less of human capital wealth. On a per-capita basis, gender inequality in earnings could lead to losses in wealth of $23,620 per person globally. Indeed, these losses are greater in the more developed OECD countries.
Some Good News
Exclusion of all types and at all levels is being exposed. Individuals equipped with digital cell phones can document and circulate actions of exclusion as they happen. For example, a 9-minute video of the murder of George Floyd taken by a bystander and posted on social media powered a worldwide anti-racism movement and, eventually, justice.
Businesses’ Diversity, Equity, and Inclusion are being monitored by activist organizations like As You Sow, which publish scorecards and benchmarks on the internet with key performance indicators on workplace diversity, equity, and inclusion (DEI) disclosure for Fortune 500 corporations. As You Sow scores each company against its peers and allows any three companies to be overlaid for competitive comparison. Companies are measuring and monitoring their internal DEI performance with DEI ‘dashboards’, allowing them to break down their workforces by organization, department, and job level and answer questions like “Which areas of my organization are not diverse?” or “How exclusionary is my leadership distribution?”
Similarly, organizations like the National Equity Atlas expose the economic impact of exclusion. Their indicators track how communities are doing on key measures of inclusive prosperity where all residents, regardless of their race, nativity, gender, or zip code — are fully able to participate in the community’s economic vitality, contribute to its readiness for the future, and connect to its assets and resources. Their indicators track change over time, are comparable across geographies and are dis-aggregated by race and other demographics as much as possible.
Stimulated by the wave of violence against Asian Americans, the U.S. Congress passed, in this fractured political climate, a bipartisan sponsored bill to actively monitor and deal with hate crimes of all kinds. A week earlier, the U.S. House of Representatives passed legislation to help close the gap between what men and women are paid in the workplace. Unfortunately, the measure faced strong opposition in the Senate. Progress against exclusion is being made – albeit in fits in starts.
More Good News – Technology
Today, digital technology and communications enable individuals and communities to have a stronger voice against exclusion. Even in oppressive countries, cell phones, videos, social media provides power to the people to show and speak truths exposing exclusion. Communities of like-minded individuals are organizing and communicating messages about many forms of exclusion.
Insightful research and applied information technology enable analysis and modeling that highlights exclusion/inclusion and supports diversity. Digital-based analytic models and studies like McKinsey’s and Mercer’s, referenced above, provide important business cases and well-researched demonstration of positive results from inclusion in businesses. One of the most illuminating uses of digital technology, making the business case that inclusion drives diversity and performance, comes from Aleria. Their interactive simulations capture the causal links that drive overall company behavior.
Conclusion
Using exclusion to frame the issue, we briefly illuminated programs and technology dealing with and supporting inclusion at social, economic, business, and human levels. This paper serves as a context for our team’s recent article “Without Inclusion, Diversity is Unsustainable” and exemplifies Prometheus Endeavor’s research into workforce issues with special attention on the convergence of human capital and digital technology.
