Even though the LGBT community is relatively small, the economic costs from unequal treatment can add up quickly
What’s the secret to convincing the world to back a movement? Figure out how it could impact the global bottom line.
Economic reasoning is part of what propelled the modern women’s empowerment movement. And now, it’s informing an emerging argument for LGBT inclusion: Unequal treatment of LGBT people, as it turns out, can cause economic harm, leading to lower economic output for individuals, businesses, and even countries. And on the flip side, inclusive policies can boost a country’s GDP.
This argument is taking shape as treatment for LGBT people is deteriorating or stagnating in many places around the world. In Egypt last month, eight men were sentenced to three years in jail after showing up in a video of what looked like a “gay marriage” to Egyptian officials.
Over the last year or so, countries as diverse as Russia, Uganda, Nigeria, and Brunei have implemented new laws that increase penalties for homosexuality or for supporting rights for lesbian, gay, bisexual, and transgender (LGBT) people. Anti-LGBT arrests, discrimination, harassment, and violence are pervasive – cropping up in schools, workplaces, health care facilities, and within families.
So how does this translate into economic loss? The link between discrimination and the economy can be direct. Those eight men sitting in an Egyptian jail, for example, will not be contributing to the economy for three years and instead create an avoidable cost for the government. Their skills and knowledge might be less valuable when they get out, and if future employers are likely to discriminate against people assumed to be gay, their options might be limited to work in less productive jobs. In other cases, links are indirect, though still strong: Injuries from physical violence or the mental health effects of stigma will mean poorer health for LGBT workers, in turn reducing their productivity at work.
More broadly, disadvantaged workers can be bad for business. Absenteeism, low productivity, inadequate training and high turnover make for higher labor costs and lower profits.
Multinational companies know they’ll have trouble convincing an openly gay executive to accept a transfer to a country that is LGBT intolerant. Tour operators steer LGBT tourists away from hotels and attractions in unfriendly countries.
The numbers back up these contentions. Even though the LGBT community is a relatively small percentage of any country’s population, the economic costs from unequal treatment can add up quickly. A recent World Bank case study of the cost of stigma and LGBT exclusion in India shows how the losses could be calculated. Similar studies of gender inequality and other forms of discrimination have shown the billions of dollars lost by national economies from discrimination.
Unfortunately, data on LGBT people in India are not available to estimate the effects as precisely in that study. But my own back-of-the-envelope calculation using what we do know about the costs of discrimination and big health disparities for LGBT Indians gives us a good idea of how large the effect could be. Even with conservative assumptions that make costs low, the estimated losses to the Indian economy range from 0.1 percent to 1.4 percent of national output, a meaningful loss that no country–rich or poor–would want to bear. The bottom line: India could be throwing away more than $26 billion a year by stigmatizing LGBT people.
Luckily, there’s a way to recoup those costs: A study that I co-authored, just released by USAID and the Williams Institute at UCLA, finds that countries that treat LGBT people equally also have better-performing economies. In our study of 39 countries, we compared a measure of rights granted by each nation related to homosexuality—decriminalization, nondiscrimination laws, and family rights—to GDP per capita and other measures of economic performance.
The positive link between rights and development is clear: countries that come closer to full equality for LGBT people have higher levels of GDP per capita over the 22 years we studied.
Even after we take into account other differences across countries that matter for GDP growth, like capital stock and international trade, we still find a strong positive effect of gay rights. Each additional right is associated with a $320 increase in per capita GDP, or about 3 percent of the average output produced by an economy.A better environment for LGBT individuals can be an attractive bargaining chip for countries seeking multi-national investments or even more tourists. On a recent trip to Peru, I talked with people in businesses, universities, and government ministries who expressed concern that because their country lags behind many other South American countries on LGBT rights, they fear they could be less competitive globally. They are right to be worried. A conservative climate that keeps LGBT people in the closet and policymakers from recognizing the human rights of LGBT people will hold their economy back from its full potential.
Of course, passing a non discrimination law may not lead to an immediate boost in economic output (although less discrimination should eventually lead to more output). Another explanation for our findings is that countries may become more concerned about minority rights as the country gets richer and less worried about economic subsistence. The 39 growing countries we studied averaged one right for LGBT people in 1990, but the average was more than three rights by 2011.
Still, considering the economic perspective on human rights is valuable because it challenges us to think about these issues in a different way – to think about how much we all lose when any group is denied full and equal participation in society. Discrimination and violence against LGBT people who could contribute more to a country’s economy has put many of the world’s economies in a kind of permanent recession. The road to recovery is clear.
V. Lee Badgett is a professor of economics and director of the Center for Public Policy and Administration at the University of Massachusetts Amherst. She is also a Williams Distinguished Scholar and former research director of the Williams Institute at UCLA. This piece was originally published in New America’s digital magazine, The Weekly Wonk. Sign up to get it delivered to your inbox each Thursday here, and follow @New America on Twitter.
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