King's College London

It is a trope among one side of the US culture war that if you “go woke”, you “go broke”. This saying has been deployed to explain the financial failure of The Marvels film, or the consequences of right-wing boycotts of businesses that sought to empower marginalised groups.

As a political slogan, it should be of no surprise that the assertion is not based on sound empirical evidence. A simple eyeballing of the revenue figures for 2023’s Barbie movie is hardly scientific, but does suggest a compelling counterpoint to the slogan. The more rigorous evidence we do have, however, suggests that implied causation actually flows in the opposite direction – with potential economic benefits to so-called "wokeness”.

In a research paper published last week, US academics produced some of the first credible quantitative evidence of economic outcomes for trans people in the United States (identified as those who changed their gender identity and name across multiple US data sources). They found substantial negative effects of being trans on earnings. This is driven by a mix of lower labour market participation and lower pay for trans people in work. Because not every trans person changes their name and gender with these data sources, the effects they identify are likely to be underestimates – and the effects exist for both trans men and trans women. The implication here is pretty stark: if we can make our workplaces less discriminatory and more inclusive of our trans siblings, we can boost labour market activity and earnings, with consequent effects for the rest of the economy and for the government’s tax take.

There is also good evidence that more diverse teams – both in terms of race and gender – are more creative and more productive. This is in spite of the fact that people’s intuition is that they will be less productive. This intuition also probably drives at least part of some organisations’ continued focus on “fit”, which leads to more homogenous, consensual teams while driving tacit discrimination and driving down the quality of the work produced. Once again, a more inclusive approach, and changing recruitment practices to make better use of existing insights about how to diversify recruitment – like shrouding – would yield positive benefits.

On a macroeconomic scale, the level of education of the population is associated with more economic growth. The rise in university participation over the last several decades has been a positive thing, but has arguably reached its zenith, with the vast majority of those with sufficient grades to attend university now doing so.

Future gains will need to come by increasing attainment at earlier stages of people’s education. High-quality studies show a clear relationship between experiences of poverty and worse school attainment, with even marginal changes in families’ financial situation making an appreciable difference. If poverty holds back attainment, then reducing it can unlock potential at the individual level as well as in the economy more generally. Ending childhood poverty – perhaps starting with the two-child benefit cap – would be good not just for those directly affected, but for the economy as a whole and for public services.

Of course, there is a strong moral argument for increasing inclusion, reducing discrimination, and alleviating poverty. However, even if the plight of disadvantaged and discriminated against groups doesn’t move you, the potential economic benefits of embracing inclusion might.

Michael Sanders is Professor of Public Policy and Director of the Experimental Government Team at the Policy Institute, King’s College London.

Vanessa Hirneis is a Research Associate at the Policy Institute, King’s College London.