Black Americans face longstanding economic challenges. The COVID-19 crisis could make these challenges worse. McKinsey partner Jason Wright discusses ways to support the health and wealth of Black businesses and households.
The wealth gap between white and Black families in America not only persists. It has grown wider in recent years. As the median wealth of white families rose (from $115,000 in 1992 to $170,000 in 2016), the wealth of Black families wealth stagnated. By 2016, the median wealth of Black families stood at around $17,000: roughly the same level as in 1992, and just one-tenth of the wealth held by a median white family.
Just as the racial wealth gap harms the well-being and health of Black Americans, it also reduces overall economic growth, which affects the prosperity of all Americans. McKinsey analysis suggests that closing the wealth gap could increase US GDP by between 4 percent and 6 percent by 2028, adding up to $1.5 trillion in output.
As McKinsey partner Jason Wright explains in this July 8 webinar, closing the wealth gap won’t be easy. The COVID-19 crisis has made things even harder. Black Americans are more vulnerable to COVID-19: their risk of contracting the disease is higher, they have lower access to testing, and they face a heightened risk of complications and secondary effects. Compared with white Americans, Black Americans are more likely to hold jobs that are threatened by reductions in hours or pay, temporary furloughs, or permanent layoffs. They are also more likely than white Americans to live in places where COVID-19 would cause outsize disruption.
To help shield Black Americans from the economic consequences of COVID-19 and enable them to build wealth, Wright identifies actions that stakeholders can take in the following four areas:
Community context. Black families are 4.6 times more likely than white families to live in areas of concentrated poverty. The downturn ensuing from the COVID-19 crisis could exacerbate the inequities they face, such as reliance on public services, and widen the educational achievement gap. Potential solutions include supporting social-service programs, investing in community assets such as public health and digital infrastructure, and assisting Black-led community organizations that provide supplementary social services like financial education and relief programs.
Family income. On average, Black workers earn $1 million less over their lifetimes than white workers do. As noted, they are also more likely to hold jobs that are vulnerable because of the COVID-19 crisis. Sustaining the income of Black families begins with assisting frontline workers (with forms of support such as health insurance, paid sick leave, and hazard pay) and workers who hold vulnerable jobs (who might benefit from job-matching or reskilling programs, or from incentives given to employers to maintain equity when downsizing).
Family wealth. The COVID-19 crisis poses a serious threat to the holdings of Black Americans. For example, the proportion of businesses in the most vulnerable sectors is higher for Black Americans than it is for white Americans. Protecting Black families from bankruptcies, evictions, and insolvencies is one way to help preserve their assets and resources. Other measures include granting Black businesses a proportionate share of federal relief funds, increasing access to financing for community financial institutions that have strong ties to Black businesses, and concentrating procurement on Black-owned businesses.
Family savings and support. In McKinsey surveys, more than half of Black respondents said that the COVID-19 outbreak presents a major threat to their personal financial situation. Just 43 percent of white respondents said the same. Direct and in-kind liquidity—cash assistance, extensions for repaying financial obligations, loan forgiveness—can aid Black families right away. Mortgage assistance and rent support can help protect Black families from foreclosures and property devaluation.
To learn more about this topic, please watch the webinar recording and read the McKinsey article “COVID-19: Investing in Black lives and livelihoods.” For more information about McKinsey’s commitments to support racial justice and equity, with a focus on the Black community in the United States, visit our Diversity webpage.