Census data projects that by the year 2050, there will no longer be a clear racial and ethnic majority in the U.S. This demographic shift will surely have economic implications as it changes the makeup of market place consumers and the labor force. Right now there is a severe lack of diversity across many business industries—from finance to tech—as they are overwhelmingly white and male.
Having diversity in the workplace should be seen as less of a PR ‘trend’ and more of an inevitable reality. Businesses should reflect real-world demographics. Those that cling to their exclusive ways are ignoring an emerging reality that demands diversity be acknowledged and included in everyday life. Not only is it fair, diversity is also a business imperative to drive innovation, productivity, and ultimately, help the bottom line.
Below are some reasons why businesses should advocate for diversity.
Considering that a third of the labor force consists of people of color, adopting a diverse recruiting strategy means tapping into a larger pool of talent and increasing the chances of finding highly-qualified candidates. Recruitment is a vital part of any business enterprise, as bringing on new and highly-skilled talent can increase productivity and revenue.
While some companies hesitate from implementing diversity due to concerns of conflict reducing productivity, diverse teams have been proven to help businesses perform better financially. Research from McKinsey shows that companies with the most racial and ethnic diversity are 35% more likely to gain financial returns above industry averages. A recent study published in Journal of Economics and Management Strategy concludes that a gender-balanced team can increase revenue by roughly 41%.
Inclusivity fosters acceptance and tolerance, leading to a decrease in discrimination that in turn decreases the cost of turnover rates. These costs can range from $5,000 to $10,000 per departing hourly worker and $75,000 to $211,000 for departing executives, according to the Center for American Progress. Not only do inclusive companies retain diverse and highly skilled workers for longer, they avoid unnecessary financial costs and are more likely to be recommended as good employers in the future.
Diverse companies are 45% more likely to increase their market share, according to a Harvard Business Review study. 70% are also more likely to report capturing a new market. Having employees who come from a range of different backgrounds allows companies to appeal to minority groups as they are more aware and understanding of their needs and wants as consumers.
Increased diversity in the workplace translates into growth for the overall economy, adding as much as $12 trillion dollars to global GDP, according to a study on women in the workforce done by McKinsey. This is a prime example of how providing equal opportunities for marginalized minorities elevates the entire group as a whole.
In purely business terms, diversity in the workplace is imperative to increasing a company’s financial gains. By focusing on the economic benefits of a diverse workforce, we also strengthen the cultural fabric of the nation to further the development of society.