Study Finds Black American Workers On Average Earn $12K Less Than The Median Wage In The U.S.
Photo Credit: Ono Kosuki

Study Finds Black American Workers On Average Earn $12K Less Than The Median Wage In The U.S.

This new report is calling on change makers to step up to the plate after highlighting gaps in representation, participation and pay for Black workers in America.

McKinsey & Company published some eye opening findings in its recent “The Economic state of Black America: What is and what could be” report. The new study explores the racial gaps and disparities across the nation’s economy. The Economic state of Black America studies five specific economic roles: workers, business owners, savers/investors, consumers, and residents.

With this new report, McKinsey wants to provide a comprehensive review of how Black Americans participate and thrive in the economy. The management consulting firm also wants to put a spotlight on the challenges Black Americans face and help imagine what a new future looks like following the coronavirus pandemic.

“The way forward is a mix of truth and reconciliation, and it’s really important to tell the full truth,” John Paul Julien, an associate partner at McKinsey & Company, told AfroTech.

As far as methodology, McKinsey examined all existing datasets that it could including data from Census Bureau, the Bureau of Labor Statistics, Harvard University, and even its own internal assets. The firm began studying the data in September 2020 to publish the robust report that’s packed with graphs, and video interviews from Black Americans working across ten cities.

One of the most notable findings in the report is that while the median wage for all U.S. workers is around $42,000 per year, 43 percent of Black workers earn less than $30,000 per year. Black Americans on average are paid $10,000 less than white Americans. This is a stark finding since Black workers make up 12.9 percent of the nation’s labor force, but only earn 9.6 percent of total wages.

“Black Americans spend over $800 billion in the economy as consumers every year, yet they are often overlooked and not directly marketed to,” Julien said. “Thinking about Black Americans being historically underserved, there is this real market opportunity that is being left on the table from a willing and exciting demographic of customers.”

When it comes to net worth, the report found that about 3.5 million Black families have a negative net worth because of the debts they owe, while an additional 4.3 million have a net worth of less than $10,000. There are roughly 340,000 Black American families in the U.S. who have net worth above $1 million.

Here are some other high level findings from the report:

  • Roughly 8.3 million Black Americans lack easy access to fresh food, and 16 million live in areas with few healthcare providers.
  • Less than 4 percent of occupational categories account for more than 60 percent of the aggregate wage gap.
  • If disparities in income and life expectancy did not exist, Black retirees would receive $31 billion more in benefits every year.
  • COVID-19 widened the racial gap in life expectancy for Black people to five years, after previously standing at three and a half years.
  • Black households are 50 percent more likely to live in areas with limited broadband service simply because that’s what they can afford.

Black-owned businesses also account for only two percent of all U.S. private businesses with more than one worker. The report calculates a $1.6 trillion revenue gap for Black business owners and this can mostly be attributed to the limited access to venture capital. Black business owners get their start with one-third of the capital compared to what their white counterparts receive on average.

The report also identifies a $220 billion annual wage gap, which accounts for unbalanced representation across occupations and racial pay gaps within occupational categories. Despite accounting for 12.9 percent of the U.S. labor force, Black workers are still substantially underrepresented in higher-paying professions such as lawyers, doctors, and executive roles. There’s a higher concentration of Black workers in lower-paying jobs like cooks, security guards, and nursing assistants. The lack of stability in these lower paying roles is what halts Black workers from progressing in their professional careers.

“If I was an employer, ensuring that folks that may be in a lower wage occupation are able to be skilled, retrained and hired into a higher and more stable role over time, is another way that I can tangibly ensure that the workers employed by me are able to envision their future,” Julien said.

The report details more ways employers and executives can take actionable steps to help the Black American working class. If the economy could achieve parity in business ownership, the report found that this could lead to a boost of 615,000 new Black-owned businesses.

“I really hope that readers wrestle with the reality facing Black Americans, and see how much opportunity there is to do better and to do different,” Julien said. “Better serve and listen to Black consumers and meet their needs. Think about what we can do to ensure Black generational wealth. I’m really hoping that this report grounds people in this reality and inspires them to actually take action across these roles during this real window of opportunity.”

Check out the full report here.

Editorial Note: Portions of this interview have been edited for clarity.

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