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Black Americans Earn 30% Less Than White Americans, While Black Households Have Just One-Eighth Wealth Of White Households

This article is more than 2 years old.
Updated Dec 10, 2021, 09:41am EST

Topline

The economic status of Black Americans remains far behind their white counterparts in terms of income, net worth, home ownership, stock ownership, business entrepreneurship and other metrics, according to a new report from research and consulting firm, McKinsey Global Institute.

Key Facts

Black workers in the U.S. earn on average, 30%, or $10,000, less than white workers, McKinsey found.

Nearly half of Black workers are employed in the healthcare, retail, accommodation and food service industries with the “vast majority” in lower-paying service roles instead of professional or managerial roles.

The annual median wage of all U.S. workers is about $42,000, 43% of Black workers earn less than $30,000 per year, highlighting how they are overrepresented in low-paying jobs.

While Black Americans are underrepresented in high-paying professions; only 5% of physicians are Black, and just 4.5% of software developers are Black.

Black entrepreneurs, on average, launch their businesses with $35,000 in startup capital and loans, versus an average of $107,000 for White entrepreneurs.

The median Black household has a net worth of about $24,000, or about one-eighth the figure of $188,000 for white households.

Key Background

McKinsey’s report highlighted that Blacks are overrepresented in low-wage vocations often without benefits and few chances for moving up the ladder. For example, more than 35% of all nursing assistants are Black, earning a median wage of $23,000 — but many are hired as independent contractors, without employee benefits. In addition, about one-third of all security guards and school bus drivers are Black, earning median wages of $26,000 and $26,500, respectively, but with few pathways for career advancement. More worryingly, many of the low-paying types of jobs held by Blacks, including cashiers, janitors, cooks and retail salespeople, could be disrupted by automation and digital tech advancements in the next few years. McKinsey estimates about 6.7 million Black workers (or 42% of the Black labor force) now hold jobs that could be subject to disruption by 2030. These people will quickly need to learn new skills.

Big Number.

$220 billion. That’s how much McKinsey estimates Black workers could gain in annual wages if Blacks achieved parity in higher-income careers consistent with their representation in the population and if racial pay gaps were eliminated within similar occupations.

What To Watch For

McKinsey recommends that some of the pay gap and the impact historical discrimination could be alleviated by, among other things, companies eliminating biases in hiring, diversifying promotion and offering young Blacks more paid apprenticeships and internships. As for young Blacks gravitating towards higher-paying careers in the near future, particularly in jobs related to science, technology, engineering and mathematics (STEM), McKinsey noted only 6% of computer science and engineering students are Black. McKinsey suggests corporations could encourage more Black students to enter STEM curriculum in schools through sponsorship programs.

Tangent

The economic plight of Blacks is reflected by other metrics: at the end of 2020, the home ownership rate for Blacks was at 44% (roughly the same as in 1970), versus 74% for whites. And while 18.6% of white households own stocks, only 6.7% of Black households do. Both these factors dampen the ability of Blacks to grow wealth. Also, The U.S. Census Bureau identified about 124,000 Black-owned businesses with more than one employee, meaning they account for only 2% of the nation’s total, well below the 13% Black proportion of the U.S. population. Black-owned businesses are especially lacking in such industries as information technology, mining, oil and gas; utilities; agriculture; and manufacturing. 

Crucial Quote

“Shockingly, the percentage of Black American homeownership is lower today in America than when the Fair Housing Act was passed more than 50 years ago,” stated President Joe Biden at speech commemorating the 100th anniversary of the massacre of Blacks in Tulsa, Okla. 

Further Reading

The Key To Closing The Racial Wealth Gap: Black Entrepreneurship (Forbes)

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