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In this issue, we look at affordable housing, student debt, and women in venture capital—as well as the concentration of Black Americans in southern states.
Focus on finances
Dealing with debt. Total postsecondary-student debt is now higher than credit-card debt in the United States, and McKinsey research shows that each graduating class has more debt than the class before did. Women hold about two-thirds of US student-loan debt, and Black women hold the most student debt of any group. Black women are also less able to pay down that debt because their work is undervalued based on both their gender and race—what economist Michelle Holder calls the “double gap.” Educational debt in the United States is weighing on Black families' wealth and contributing to the country's persistent racial wealth gap. Student-loan reform could boost Black Americans' financial inclusion and help the United States advance racial equity.
Changing the system. Come May 2021, two Black women will lead Fortune 100 companies. One of them will be Thasunda Brown Duckett, who will take the reins at TIAA following the retirement of Roger W. Ferguson Jr., himself one of only a handful of Black Fortune 500 CEOs. Duckett has long spoken out about the need to accelerate financial inclusion in Black communities. She wrote in a Black History Month blog post that “financial health is a human right. Yet it has been out of reach for far too many people, particularly Black Americans.” Duckett noted that ongoing financial exclusion is contributing to distrust in the financial system, and McKinsey research has shown that Black Americans' trust in their financial advisers dropped even further during the COVID-19 pandemic. As Duckett emphasized, a lack of access to financial services is not just a symptom of the racial wealth gap but also a cause. “The bridge to racial equity,” she wrote, “starts with financial health.”
Geography matters
Nearly 60 percent of the Black American labor force is concentrated in the South, according to our latest research on race in the workplace. In fact, four states—Florida, Georgia, North Carolina, and Texas—account for nearly one-third of the Black workers in the United States. Those states include some important growth areas, such as the megacity of Atlanta and nearby Clayton County. But on the whole, the states with larger-than-average populations of Black Americans trail far behind other states in employment and economic opportunity. Organizations across the United States can help boost the employment of Black workers by expanding their outreach in key southern states. Among other strategies, companies should increase their recruitment efforts at historically Black colleges and universities, which are also concentrated in the South. It's time for bold, nationwide action, especially given that the COVID-19 crisis has negated the progress made toward racial parity in labor-force participation.
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“You either fundamentally believe that somehow men are just so much naturally better at running companies and raising money that they take up 90 percent-plus of all venture funding, or you think that there is some inequity and there's a problem to be solved there.”
- Sarah Kunst
Sarah Kunst, the founder and managing director of the early-stage venture capital fund Cleo Capital, recently told Marketplace that bias is to blame for the lack of funding for female founders. As Kunst explained, “When you don't have enough diversity on the investing side of the table, you're very unlikely to see that diversity take place on the founder side.” The gender gap in private markets remains wide: only one in five employees at venture capital firms are women, and the same holds for other private-market firms. Female representation among investing partners is even lower: remarkably, about three-quarters of US venture capital firms have no female investing partner. Bridging the gender gap could boost such firms' earnings. As Kunst put it, if you aren't funding women, “you're not going to make as much money as you should.”
Economist Dr. Ngozi Okonjo-Iweala
The economic fallout of the COVID-19 pandemic has made affordable housing more important than ever. In addition to building new units, cities across the United States need to take steps to protect the largest existing supply of affordable housing: rental properties that are affordable without a subsidy. The tenants who live in such units are mostly low-income people of color—which makes preserving those properties all the more critical.
— Edited by Julia Arnous, an editor in McKinsey's Boston office
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