The Widening Racial Gap on Jobs and Wealth

Black Americans don’t just need more jobs. They need better paying ones.

The unprecedented diversity of the 2020 Democratic presidential field has already accomplished something significant: it has shone a much-needed spotlight on the stunning disparities in black and white household wealth in America. The median white household, for instance, enjoys ten times the wealth of the median black household, and as many as one in five black households holds zero or negative net wealth.

Candidates have proposed a range of remedies to close this yawning racial wealth gap. Elizabeth Warren has proposed a $7 billion “Small Business Equity Fund” to help black entrepreneurs access capital; Pete Buttigeig wants to invest $25 billion in historically black colleges and universities; Cory Booker has suggested granting every American a $1,000 “baby bond” at birth; and other candidates have expressed support for reparations, even if it’s not entirely clear how they would carry them out.

While these ideas are a good start, they don’t do enough to fix the broader systemic problem driving the racial wealth gap. It’s not merely that black Americans have more trouble getting jobs than their white counterparts. It’s that, when they do get jobs, they often don’t pay well or fairly.

Recent research makes clear that black Americans cannot catch up to whites in accumulating wealth unless the quality of the jobs they hold—and the wages they earn—catch up first.

As it stands, too many black workers start out one step behind in the labor market, either trapped in lower-wage jobs or shut out of the workforce altogether. Black workers, therefore, are more likely to face displacement from automation—an ominous sign that gaps in wages and wealth will only worsen if we don’t do something about it.

New research from Martha Ross and Nicole Bateman of the Brookings Institution finds that black workers hold a disproportionately large share of the economy’s lowest-paid jobs. Black Americans make up 15 percent of the 53 million Americans who earn less than two-thirds of the median wage (or less than $16.03 an hour). On average, these low earners earn a median of $10.22 an hour and $17,950 a year.

A recent analysis by McKinsey & Company finds that the top 10 occupations for African Americans include such relatively low-level service jobs such as cashiers, nursing assistants and laborers. On the flip side, they are severely underrepresented in higher-paid fields like education, medicine, and law.

Whites, on the other hand, are under-represented in the low-wage workforce relative to their population. Ross and Bateman find that while whites make up 70.6 percent of “mid/high wage” workers, they compose just 52.4 percent of the low-wage workforce.

Just as these discparities have been baked into the current system, whites have grabbed the lion’s share of well-paid “new economy” jobs as well.

A new report by Anthony Carnevale and colleagues from Georgetown University’s Center on Education and the Workforce finds that whites hold 77 percent of the “good” jobs in today’s economy, which the researchers defined as earning a median of $65,000 a year and were more likely to require education beyond a high school diploma. Black workers, on the other hand, held just 10 percent of these “good” jobs as of 2016, the most recent year for which data are available.

Carnevale and his team argue that decades of better access to higher education gave white workers a head start as the U.S. economy transitioned from lower-skilled manufacturing jobs to higher-skilled service jobs. White workers in the post-World War II era, in particular, benefited mightily from such benefits as the GI Bill,  while black workers had relatively few options by comparison. As Carnevale writes, “Blacks in the segregated South had access to only around 100 colleges, more than a quarter of which were two-year junior colleges.”

Yet even when black Americans have earned college-level degrees or credentials, they still earn less than their white counterparts on average. Carnevale’s research finds that 75 percent of white workers with a bachelor’s degree or more are likely to hold a “good” job, compared to 68 percent of blacks with comparable education. The Economic Policy Institute, meanwhile, finds that wages for black college graduates fell 0.3 percent from 2015 to 2019 at the same time wages for white college graduates grew by 6.6 percent over the same period.

The takeaway from that data is critical for policymakers. As much as increased access to education can help more African Americans achieve upward mobility, it can’t erase disparities in black and white earnings on its own.

Black Americans are moreover starting off at a tremendous disadvantage: They are less likely to be getting a paycheck at all. Thanks to mass incarceration, segregation, and the lack of affordable transportation around much of the country—all of which have had a disproportionate impact on African-Americans—millions of black workers don’t have access to a job, period.

In October 2019, the unemployment rate among black workers was 5.5 percent, compared to 3.0 percent for whites. This disparity, however, masks an even bigger gap in workers’ participation in the labor market, particularly among men.

While 69.8 percent of all white men older than 20 were working in October (as measured by the “employment-population ratio” calculated by the Bureau of Labor Statistics), the same was true of only 65 percent of black men. The BLS predicts further declines in workforce participation by 2028: 66.5 percent for whites and 61.8 percent for blacks.

The most disturbing aspect of the data may not be the depressing history of inequity between black and whites. It’s that the future of work for African Americans workers looks bleak as well.

McKinsey’s recent research also finds that black workers are more likely to be displaced from their jobs by automation, given their disproportionate representation in the jobs most susceptible to automation, such as truck driving, food service, and office support. McKinsey also predicts that as many as 23.1 percent of black workers could be displaced by automation by 2030, a rate that’s significantly higher than that of other groups.

Moreover, Jason Wright, a partner at McKinsey who co-authored the report, said that black workers are more likely to be living in parts of the country facing slower economic growth, resulting in a combination of geographic, economic, and demographic vulnerability that Wright has dubbed “economic intersectionality.”

All in all, the confluence of systemic disadvantages black workers face—from lower earnings and lesser-quality jobs—has led to fewer opportunities to save and accumulate wealth. That, in turn, has translated to lower rates of homeownership, higher levels of debt, and insecure retirement.

None of these problems can be solved through one-shot infusions of funding to black colleges, funneling a little more money for black entrepreneurs, or redistributive strategies that try to remedy disparities after the fact. Instead, black workers need policy solutions that not only boost their earning power but protect their upward mobility in a changing economy.

This means tackling structural inequities like residential segregation, which leads to unequal access to decent schools and, ultimately, disparities in college enrollment and completion. Segregation also often means that black workers are isolated away from areas with well-paying jobs, particularly if public transit is also substandard. Plus, discriminatory criminal justice and employment practices take their toll on the ability of black workers to access good jobs—or any jobs at all. Ultimately, what’s demanded is a massive investment in the “infrastructure of opportunity” available to black Americans—so that they, too, have a truly equal shot at success.

As bold as the current crop of Democratic presidential contenders has positioned itself to be, they need to be bolder still in tackling the roots of economic inequality.

Ending the racial job gap should be a first-order priority.

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Anne Kim

Anne Kim is a writer based in northern Virginia and the author of Abandoned: America’s Lost Youth and the Crisis of Disconnection, forthcoming in 2020. She was special projects editor at the Washington Monthly in 2013 and senior writer from 2015 to 2018.