Americans are pessimistic about their access to economic opportunity, as concerns about accelerating inflation,1 rising gas prices,2 and the conflict in Ukraine seem to mask signs of recovery such as rising wages,3 a glut of available jobs, and an unemployment rate that is close to a 50-year low.4
This pessimism is one of the key findings of the third edition of McKinsey’s American Opportunity Survey, which explores in depth Americans’ perceptions of the current and future state of the US economy—and their place within it. McKinsey worked alongside the market-research and opinion-polling firm Ipsos to query 25,000 Americans in spring 2022. The data allowed for a better understanding of how outcomes and perceptions are affected by people’s access to resources, as well as by factors such as their identity, health, education, and level of caregiving responsibility. The breadth and depth of our sample gave timely insights across demographic categories and geographic cuts (see sidebar, “About the survey”).
This article, part of a series, presents the survey’s findings on access to opportunity, the recent spike in prices, and the prevalence of physical- and mental-health problems that are either keeping people out of the workforce or limiting their ability to do their job.
Access to economic opportunity
The survey found that the cornerstone of the American dream—access to opportunity—is perceived by many to be increasingly out of reach. Across almost every demographic group and metric, Americans are more pessimistic than they were in two surveys conducted in 2021. The McKinsey Economic Opportunity Index—a scale that gauges Americans’ perceptions of past, present, and future economic opportunity—showed a 5 percent decrease in optimism in March–April 2022 compared with a smaller survey six months ago and a 3 percent drop from a survey a year ago.
In both rural areas and cities, and across almost every demographic, income level, and age group, more respondents than last year believe America is doing a poor job of providing opportunities for all people. More people also say they have fewer economic opportunities than they did a year ago. And they expect that there will be even fewer economic opportunities for themselves and the country in a year and five years from now. Women are generally more pessimistic than men. Transgender and nonbinary respondents show one of the steepest declines in optimism about the long term, both for themselves and the country. Respondents of color are less pessimistic than White respondents, though all groups posted an overall decrease in optimism.
There are bright spots, however. People aged 25–34 are the most positive age cohort and the only one to report being more optimistic about their opportunities than a year ago. Among these respondents, optimism is higher across all racial and ethnic groups and is highest among those with college degrees, people at the upper end of the income scale, and those who live in urban areas. Asian Americans are the only racial group to report an increase in optimism about near-term opportunities, though they are pessimistic about the longer term (Exhibit 1).
A tale of two economies
The survey insights show the chasm between the lived experience of most Americans and what, by many metrics, appears to be a strong economy.5 The US unemployment rate hovered at 3.6 percent in April,6 as the economy regained most of the jobs lost during the COVID-19 pandemic.7 With almost twice as many jobs available as there are jobless people, employers are hiring at a rapid clip and struggling to fill open positions. Many are raising wages to attract and retain workers. And people are spending more: retail sales in March were up 6.9 percent for the year.8
But Americans appear to be focused on a different, and starkly more negative, set of economic numbers. The Consumer Price Index, the most watched indicator of inflation, rose 8.3 percent year over year in April,9 the fastest pace since 1981 and far outpacing the strong wage growth of 5.5 percent.10 The price increases follow the injection of trillions of dollars into the economy in response to the pandemic, a shift in consumption toward durable goods and away from services, severe disruptions in the supply chain, and, most visibly, a surge in gasoline prices.
Spending more on groceries
Accelerating inflation is affecting every demographic group in the survey, as most respondents say their spending on groceries increased, and many report greater outlays for utilities, including internet service and electricity, in the past few months.
Some essential services, including childcare, housing, healthcare, and education, are more insulated from the agriculture and energy-price shock caused, in part, by the war in Ukraine. Even so, many respondents report marked increases in their expenditures in those areas.
Although inflation undoubtedly plays the largest role, some of the increased expenditures could be the result of a greater willingness of Americans to finance their spending, especially with credit cards. The Federal Reserve reported this month that total consumer credit rose by $52.4 billion in March, equal to a seasonally adjusted annual increase of 14 percent,11 the steepest gain since November 2001.
Spending less on entertainment
When it comes to discretionary goods and services, however, higher prices often mean less spending. One-third of respondents report reduced outlays for entertainment, including dining, and many report reduced spending on clothing and debt payments.
While these patterns—increased spending on essentials and decreased spending on discretionary items—generally hold true across the board (Exhibit 2), some groups say they cut spending more than others. The unemployed, those who haven’t completed high school, those earning less than $25,000, and Hispanic and Latino respondents report cutting back the most. Among these three groups, about one-fifth of respondents say they have slashed spending on essentials such as groceries and transportation.
At the same time, diminishing affordability, which was a problem before the inflation surge,12 became an even bigger issue with surging prices. The youngest Americans, those with the least education, and those at the lower end of the income distribution report being hardest hit. In the 18–24 age group, only 48 percent say they are able to afford health insurance, down from 52 percent in 2021. And only 46 percent of those without a high-school diploma say they could afford necessary transportation, down from 54 percent in 2021.
Still, there is one area in which the financial situation of many Americans remains stable: 50 percent of respondents, the same proportion as last year, report being able to cover living expenses for more than two months in the event of a job loss.
Despite recent data showing that there are about two job openings for every unemployed American,13 many of those searching have a bleak view of the labor market. Thirty-four percent of jobless respondents who are looking for a position say the limited availability of jobs was a barrier to employment. Only 5 percent of unemployed people not seeking a job14 say limited availability is the reason they aren’t looking. When it comes to the perception of limited availability of work, those who are unemployed and looking for a job and those who are unemployed and not looking adds up to the rough equivalent of 2.2 million people.
The disconnect between the official data showing more jobs than job seekers and the perception among unemployed respondents that there are limited jobs available can be largely attributed to three issues reported by respondents: a lack of skills, geographic mismatch, and a lack of flexibility on the part of employers in offering remote work and other arrangements. The misalignment of a job seekers’ qualifications and those required by employers is the second-most cited barrier for unemployed people seeking a job: 27 percent say a lack of experience, relevant skills, credentials, or education is keeping them out of the workforce (Exhibit 3). And only 33 percent of unemployed respondents looking for a job say they would be willing to move, though 67 percent report being willing to work fully remotely, suggesting that greater flexibility on the part of employers could bring many people back to work.
About a quarter (23 percent) of jobless respondents, amounting to about 1.6 million people, cite physical health as the reason they aren’t employed. And about half (49 percent) of respondents without jobs who aren’t looking for a position (but do not self-identify as either students, homemakers, or retirees) say their physical health is the reason they aren’t currently in the labor market.
Physical health as a cause of unemployment is linked with age: only 6 percent of unemployed respondents aged 18–24 cite it as a cause, compared with 32 percent of those aged 55–65 and 37 percent of those aged 65 or older. Among all jobless respondents, the percentage of those citing physical health as the cause of their unemployment reached 24 percent for White respondents and 23 percent for Black respondents (compared with 20 percent for Hispanic and Latino respondents and 22 percent for Asian Americans).
Physical health is also having a profound impact among those who do have jobs. Forty-nine percent of respondents report that physical health limits their performance at work. The numbers are particularly high for parents aged 25–34 (69 percent). Access to affordable healthcare and health insurance are the most cited barriers to well-being, as they were last year.
Mental health is another major factor affecting employment. Seventeen percent of all jobless respondents (equivalent to about 1.2 million Americans) cite it as a reason they are unemployed, up from 13 percent in 2021. Younger people are more likely than their elders to say mental health was the reason they are unemployed. The leading group is those aged 18–24 (28 percent), followed by those aged 25–34 (20 percent).
More than half of full-time employees (52 percent, or the equivalent of 68.5 million people) report that their mental health has had an impact on their ability to perform their work effectively. That number is up from 38 percent in 2021. Of respondents with children at home, 58 percent reported that their mental health affected their ability to perform their work effectively (compared with 36 percent of respondents without children at home). Nine percent of respondents say such problems are the reason they are working part time.
Forty-one percent of workers in the survey report that a hostile work environment is hampering their ability to perform their jobs effectively. Sixty-one percent of transgender and nonbinary people say the same.
Given the significant shortage of labor, addressing people’s challenges with both physical and mental health could help many more unemployed Americans get back into the workforce, shift from part-time to full-time work, and engage more effectively in the workplace (Exhibit 4).
For too many Americans, the economy doesn’t seem to be to living up to its promise of opportunity and well-being. This survey points to many important questions that should be addressed to foster sustainable, inclusive economic growth for everyone.
Jobs are available, but many unemployed people in the survey cite a limited number of positions and a lack of skills and experience as their top barriers to being hired. What are the roles of further education and reskilling, and how might employers and policy makers bring people back into the labor force?
Parents and caregivers say they are struggling with mental-health challenges and other barriers to effective performance at work. What barriers do working parents face, what are their specific concerns, and what solutions are they most hoping their employers will provide?
Differences between the youngest and oldest Americans are major factors in how they perceive economic opportunities, their experience at work, and their approach to employment. What distinct challenges do different age cohorts face, what sets these age groups apart, and how can governments and employers best respond?
Physical and mental health are frequently named among the top causes of unemployment, as the reason for working part time, or as impediments to effective performance at work. Who is disproportionately affected, and how can we provide more targeted support?
These topics will be addressed in forthcoming articles in this series, which will focus on subjects including labor market dynamics, barriers to economic opportunity, and the evolving future of work.