Opinion: Eliminating racial wage disparities could propel 2 million Black Americans to the middle class
Black Americans have faced long-standing structural disadvantages that have been exacerbated by the pandemic, including low-wage jobs, limited access to affordable housing and quality public education, and a piecemeal public health infrastructure.
Income from labor helps build long-term wealth in the form of homeownership, retirement savings and other investments. But as workers, Black Americans remain concentrated in low-wage jobs and underrepresented in high-paying professions. This reality, compounded over generations, spills over into other aspects of Black economic life, limiting consumption, entrepreneurship and homeownership. And since household wealth aggregates into community wealth, this undermines Black neighborhoods, often manifesting in underperforming schools that do not prepare the next generation to advance.
Looking closer at the labor market, we find that gaps exist across industries and geographies and on the pathways to advancement within individual firms. Black workers are concentrated in low-wage roles, like security guards, bus drivers and nursing assistants, and underrepresented in higher-paying occupations, like law and medicine. What’s more, they are paid less than White workers on average within the same occupational categories, especially in managerial and leadership roles. Adding all this up, we estimate the aggregate wage disparity in the United States amounts to about $220 billion a year.
Yet while the gaps are significant, our research leaves us with a strong conviction that they can be closed.
Addressing racial pay gaps and representational imbalances in the labor market could boost Black incomes by 30%, employ one million additional Black workers, and boost Black consumer spending by about 40%. Progress in just 20 occupational categories, such as physicians, teachers, lawyers, IT professionals and managers, could eliminate more than half of the disparity, while creating other benefits to Black education, health, access to the legal system and professional advancement. At the same time, improving access to capital, mentorship and networks could help more Black enterprises launch and grow, creating 615,000 new Black-led workplaces with parity.
In total, we find that addressing racial gaps presents an opportunity to propel two million Black Americans into the middle class for the first time, while transforming — and even extending — the lives of millions more.
While public investment is crucial to closing racial gaps, the private sector can drive rapid and dramatic progress. Companies can confront and fix wage gaps, root out bias in the workplace, ensure access to capital on fair terms, foster and nurture a diverse base of suppliers, and invest in neglected communities.
That means there is a dual opportunity for companies to add revenue and for the overall economy to grow by addressing important gaps in neglected communities and creating value for consumers. In some cases, this would involve capturing dollars already being spent elsewhere today; in others, it would involve unlocking entirely new pockets of consumption. In total, we estimate that some $700 billion in value is at stake and could be shared by companies and Black households.
Corporate initiatives like these are not only about righting historic wrongs. They are about choosing a more dynamic future and realizing the full potential of a massively underutilized source of talent.
That’s something that all Americans should get behind.