Today, Black Americans face stubborn gaps between their economic position and that of white people. Research estimates a $220 billion annual wage disparity versus a parity scenario, with Black workers currently concentrated in low-wage jobs, underrepresented in higher-paying occupations, and paid less than white workers on average within the same occupational categories, especially in managerial and leadership roles. Two initiatives could make a big difference: unblocking pipelines into higher-paying professions and creating pathways to better careers from lower-paying occupations. The authors describe how business leaders can do this to promote Black economic mobility.
In 1966 the Reverend Doctor Martin Luther King Jr. highlighted the link between economic security and racial equality. By making a crucial distinction between mere jobs — often seasonal, temporary, or cyclical — and the economic security necessary to participate in American society as equals, King drew attention to the relative inferiority of opportunities generally available to Black workers at the time.
More than a generation later, Black Americans still face stubborn gaps between their economic position and that of white people. We estimate a $220 billion annual wage disparity with Black workers currently concentrated in lower-wage jobs, underrepresented in higher-paying occupations, and paid less, on average, than white workers in the same occupational categories, especially in managerial and leadership roles.
And it’s not just the labor market. In our latest research, “The Economic State of Black America: What Is and What Could Be,” we find critical gaps Black Americans face not only as workers but as business owners, savers and investors, consumers, and residents that prevent full participation in the U.S. economy and significantly limit economic mobility.
Yet while the gaps are substantial, our research leaves us with the strong conviction that they can be closed, unlocking a wave of growth, dynamism, and productivity. Two initiatives could make a big difference: unblocking pipelines into higher-paying professions and creating pathways to better careers from lower-paying occupations.
We find that a surprisingly small number of occupations — about 20 in all, representing less than 4% of all occupations — account for more than 60% of the aggregate wage gap. They fall into five broad categories: managers of frontline workers, other managers and executives, professions (such as law and medicine) that require postgraduate training, professions (such as teaching and accounting) that require undergraduate degrees and accreditation, and technology specialists (such as software developers and computer and information systems managers). What’s more, just five sectors — professional services, manufacturing, construction, trade/transportation/utilities, and financial services — account for almost 85% of the gap.
We analyzed pipelines into three professions that have traditionally been important cornerstones of upward mobility — law, teaching, and medicine — and found multiple obstacles along the way. (Previous McKinsey analysis has examined pipelines into managerial and executive ranks.)
Looking at the pipeline for lawyers, we see that it narrows at every stage, with the largest declines between applying to law school and enrolling in it. More work needs to be done to discover why the pipeline narrows so much at this point. But we estimate that if the share of Black Americans working as lawyers were the same as the share of Black individuals in the overall population, the country would have 110,000 more Black lawyers. And if the attrition rates for Black students and candidates at each stage could be lowered to match those of their white peers, thousands more Black lawyers would enter the profession each year.
The pipeline for teachers is particularly important. Studies have shown that Black representation in the teaching profession improves long-term educational achievement for Black students. We find the pipeline narrowing significantly at the point of undertaking dedicated education training and certification. U.S. Department of Education data indicates that just 4% of the recent graduates who are certified to teach are Black.
For physicians, the biggest decline comes in the choice of a college major, with relatively few Black students choosing a course of study that would naturally set them on a path to becoming a doctor.
These findings highlight a core issue: the poor quality of schools serving Black students. The U.S. average for instructional spending in Black-concentrated public school districts (ones in which 75% or more of students are Black) is $1,800 less per pupil than in white-concentrated school districts. Nationwide, that amounts to a $14 billion annual gap that affects 7.7 million Black students. Closing the gap will be critical to preparing pipelines for Black Americans into professions such as law, teaching, and medicine.
Business leaders have a role to play in unblocking pipelines in these professions even before an employee is hired — for example, by working with universities and colleges to ensure that students are informed about post-graduation opportunities when they are selecting their majors. Businesses can also create apprenticeships and experiential learning opportunities via internships for college and even high school students, thus establishing clear pathways to higher-paying careers.
Business leaders can have the most direct influence on managerial roles, which often result from internal promotions. They should collect data on workplace diversity; set meaningful goals with regard to training, mentorship, and sponsorship; monitor for bias in promotion decisions; and create an inclusive environment.
What about lower-paying occupations?
First, many lower-wage occupations in which Black workers are overrepresented were deemed essential during the Covid-19 pandemic. Companies should increase the wages and benefits provided for this essential work. They should also improve other aspects of these jobs — for example, by giving workers more control over their schedules. Companies should also map pathways from lower-wage jobs into higher-paying ones on the basis of overlaps in skills and activities. With the right training and opportunities, more Black workers could advance.
A licensed nurse, for example, could feasibly add the skills needed to move into higher-paying nursing fields or even become an occupational health and safety specialist. A customer service rep could become an administrative supervisor and eventually an operations manager. Helping workers better understand potential pathways to higher-paying jobs, and then providing access to training and job opportunities, can help them climb the income ladder.
We believe that it is imperative to do just that to help the roughly 6.7 million Black workers (42% of the Black labor force) who currently hold jobs that could be subject to disruption by 2030. McKinsey Global Institute’s scenarios for post-pandemic changes, including increasing automation and business model disruptions, show demand falling for four of the top 10 occupations with the greatest absolute numbers of Black workers today: cashiers, janitors, cooks, and retail salespeople.
How can business leaders help create pathways to higher-paying occupations?
Companies employing workers in lower-wage occupations where Black workers are overrepresented can become “high-road” employers by paying family-sustaining wages, providing good benefits, and improving the quality of jobs — for instance, by bolstering safety. Such steps can help attract and retain top talent and improve a company’s reputation, including with customers.
Another key aspect of being a high-road employer is making pathways to higher-earning occupations real for employees, including providing transparency into possibilities and sponsoring training and accreditation for employees seeking to travel these pathways.
Our research indicates that if we continue on our current trajectory, it will take about 95 years for Black employees to reach talent parity across all levels in the private sector. By preparing pipelines and paving pathways for success, we can close the wage gap faster and unlock enormous economic potential.