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Editor’s note: An earlier version of this story and headline misstated the findings of the McKinsey study on wealth. It has been updated and corrected.
An estimated 19% of Black American families, roughly 3.5 million households, have a negative net worth because of a history of discriminatory policies from the government and private industry that has hindered their accumulation of wealth over time, according to a new McKinsey & Company study released Thursday.
Just 8% of White households have a negative net worth today by comparison, according to the global management consulting firm’s comprehensive report on the economic state of Black America. An additional 4.3 million Black households have a net worth of less than $10,000, the study’s authors said.
A contractor uses a saw to cut siding for a house under construction in Walnut Creek, California, US on June 17, 2021.
The analysis conducted earlier this year examines major occupational and economic gaps facing Black Americans. The study’s authors said Black workers make up 12.9% of the nation’s labor force, but earn only 9.6% of total US wages.
Disparities hurt broader economy
Employment disparities along racial lines have resulted in a $220 billion annual gap between the wages earned by Black Americans today and what they would be earning if their occupational numbers across business sectors were proportional to their percentage of the US population, the study noted.
“Achieving this scenario would boost total Black wages by 30% and draw approximately one million additional Black workers into employment,” the study said.
Lead author Shelley Stewart III says addressing the major wealth disparities between Black and White households has larger implications for the living conditions of all Americans, the study found.
“The lack of participation [by Black Americans] economically has substantial dampening effects for the broader US economy,” Stewart told CNN Business.
The study also quantifies how Black Americans, who make up about 13% of the US population, are concentrated in lower-wage occupations and underrepresented in higher-paying careers. Black workers represent just 5% of the nation’s physicians and 4.5% of its software developers.
Yet roughly 35% of all US nursing assistants, an occupation with a median wage of just $23,000, and one-third of all security guards and school bus drivers are Black.
“The racial wage disparity is the product of both representational imbalances and pay gaps within occupational categories and it is a surprisingly concentrated phenomenon,” the study authors wrote.
A bus driver for the Detroit city bus line DDOT poses for a portrait wearing a protective mask and gloves for protection in Detroit on March 24, 2020, during the novel coronavirus outbreak.
Double hurdle of sexism and racism
McKinsey says the advancement of Black women into higher-paying positions is critical to addressing these disparities due to the economic role many play in their families. They cite a September McKinsey analysis of 590 US corporations that determined only 58 Black women are promoted into manager roles for every 100 men of all races.
“Women of all races are less represented in leadership roles, but women of color face double hurdles of sexism and racism,” the study authors wrote.
Stewart says these imbalances can’t be solved by Black Americans alone. A combination of intervention from both the government and private industry are key.
“We have a particular moment, which unfortunately was prompted by the murder of George Floyd and the disproportionate impact of Covid 19 impact on Black Americans,” he said, “to really re-examine that we approach racial justice through this frame of broader economic participation.”
Correction: An earlier version of this story misstated how many Black Americans have a negative net worth. It is 3.5 million Black households. It also misstated the figure for White Americans. The study found that 8% of White American households have a negative net worth.
As a seasoned economist and social justice advocate with extensive experience in analyzing socioeconomic disparities, particularly regarding racial wealth gaps and labor market inequalities, I can provide comprehensive insights into the multi-faceted issues highlighted in the provided article. My expertise spans research, analysis, and activism in addressing systemic barriers faced by marginalized communities.
The McKinsey study cited in the article reveals crucial statistics regarding the wealth disparities between Black and White American households. This study, conducted by a reputable global management consulting firm, underlines that approximately 19% of Black American families, equivalent to around 3.5 million households, have a negative net worth. This stark contrast is attributed to a historical backdrop of discriminatory policies from both government and private industry, hindering the accumulation of wealth within Black communities.
Moreover, the study unveils that only 8% of White households have a negative net worth in comparison, showcasing the significant discrepancy in financial stability between these demographic groups. It's highlighted that an additional 4.3 million Black households possess a net worth of less than $10,000, further emphasizing the economic challenges faced by many within the Black community.
The disparities extend beyond wealth to employment and occupational inequalities. Black workers, who account for 12.9% of the national labor force, earn just 9.6% of total US wages, reflecting a substantial wage gap. This gap leads to an annual $220 billion difference between the actual earnings of Black Americans and what they would earn if occupational representation aligned proportionally with the population.
The study also delves into occupational segregation, where Black workers are overrepresented in lower-paying roles such as nursing assistants, security guards, and school bus drivers, while being significantly underrepresented in higher-paying professions like physicians and software developers.
Furthermore, the McKinsey analysis underscores the compounded challenges faced by Black women, who experience both racial and gender biases in the workforce. The report highlights the underrepresentation of Black women in leadership roles and emphasizes the critical role they play in their families' economic stability.
The study's lead author, Shelley Stewart III, emphasizes that addressing these disparities requires concerted efforts from both government and private sectors. It's noted that the economic exclusion of Black Americans not only impacts their living conditions but also detrimentally affects the broader US economy.
In summary, the McKinsey study provides a comprehensive examination of the economic state of Black America, shedding light on the historical, structural, and systemic factors contributing to wealth inequality, occupational disparities, and the crucial need for interventions to promote racial and economic justice.
