A first step to racial equality? “Fundamentally improve job quality.”

September 21, 2021JP Julien was nine-years-old when he learned that place matters.

Now an associate partner, JP co-leads our Institute for Black Economic Mobility and led the research for The economic state of Black America: What it is and what it could be. In 1998, he and his Trinidadian American family of six moved from a low-income town in New Jersey to nearby Bloomfield. The 15 miles in between made a world of difference to his life.

Twenty percent of his first town's residents lived below the poverty line at the time. The grocery store was a 20-minute drive away, and there were few nearby parks or playgrounds. "My mom took two buses to commute to work in New York City every day-sometimes 90 minutes one way," he recalls.

Several years later, the family moved to Bloomfield, NJ, about a 20-minute drive away on the Garden State Parkway. "I remember the first day we moved in," he says. "We had our own backyard, a bank on the corner, a diner a block away. My mom's commuter train stop was a five-minute walk. My parents let me ride my bike throughout the neighborhood."

"In third grade," he adds, "I realized for the first time how important place was in shaping opportunity and your life. And so this research resonated with me on a very personal level."

To produce the report, JP and a team of researchers and data experts at the McKinsey Institute for Black Economic Mobility and McKinsey Global Institute (MGI) conducted extensive analyses to understand and quantify the roles that Black Americans play in the economy-as workers, business owners, consumers, savers, investors, and residents. The study reveals significant economic gaps due to racial inequity and offers a vision of what could be gained if they were closed.

Well over a third of 20 million Black American workers earn less than $30,000 per year, according to the report. To address this, JP and his co-authors outline a number of longer-term strategies, such as investing in critical community resources, like transit access, strengthening education and training pathways, and improving the workplace experience. "But the quickest win is to fundamentally improve job quality," says JP. "Blacks today tend to work in lower-paying occupations in healthcare, retail and accommodation, and food service."

Improving job quality for these essential workers, JP explains, involves moves on multiple fronts. "It means culturally competent career training and skills building, pay increases, access to employee benefits, and more flexible and predictable work schedules so folks are actually building a resilient career with an income that's sustainable."

Such investment will take real conviction on the part of employers, but it would have an immediate, meaningful effect, and a number of innovative initiatives are already taking hold in both the public and private sector.

"I'm excited about training programs that provide upfront funding to individuals and enable them to develop critical skills for their careers, and then once they are fully employed, they pay back the cost in increments," says JP.

Another promising development is in recruitment: the idea of qualifying job candidates by their tangible skills and on-the-job experience, rather than by educational credentials and networks, which can open up positions to a much wider, more diverse pool of candidates.

A number of companies have been rethinking their supply-chain spend as well: shifting dollars to support more minority-owned businesses, which can also support Black workers. "Again, this can have a relatively fast but lasting impact in helping Black entrepreneurs grow, so they can hire more workers in the communities that they support," JP points out.

But for some Black leaders, the most inspiring change is happening where boards and leadership teams are starting to think about racial equity as core to their businesses, not just as a philanthropic goal and part of corporate social responsibility programs.

"Banks are now developing mortgage or lending products that actually meet the needs of Black consumers; broadband companies are creating flexible, lower-entry product offerings," says JP. "Consumer companies are recognizing an opportunity to invest in underserved communities. They are opening locations and introducing products, brands, and services designed specifically to appeal to Black consumers and other underrepresented populations."

According to the research, Black consumers say they will pay up to 20 percent more for products tailored to their preferences. When combined with full income parity, it adds up to an opportunity of some $700 billion in potential value.

Because many of the findings are so concentrated, it also makes for solutions that are much more focused, tangible, and targeted.

If there were there any surprises in the research, it was how concentrated some of the findings are, according to JP. For example, less than four percent of all occupational categories (e.g. managers, lawyers, physicians, software developers) account for more than 60 percent of the racial wage disparity. Or the fact that 60 percent of the difference in annual wealth flows between Black and White households comes from intergenerational transfers.

"Because many of the findings are so concentrated," JP points out, "it also makes for solutions that are much more focused, tangible, and targeted. And channeling these interventions and resources to the places in need can transform lives-as my own experience has shown."