Sheffield Haworth logo


Exploring America’s Racial Wage Gap

This year’s theme for Black History Month is growth.

By Josephine Christian, Associate – Global Services Practice, Sheffield Haworth

This year’s theme for Black History Month is growth. Research – and lived experience – tells us that there are several underlying issues holding African Americans back from experiencing growth when compared to their White counterparts. In this blog, we want to explore one of those key issues and highlight some ideas to support the African American community going forward.

The racial wage gap is bigger than most countries’ annual GDP

Last month, McKinsey projected an annual disparity of $220 billion between Black wages today and what they would be “in a scenario of full parity”. $220 billion is almost too much to comprehend. For reference, it is roughly the annual gross domestic product of Greece in 2022. In fact, it is more than the GDP of all but the top 55 global economies. And that’s just the gap in financial compensation for Blacks in the United States today.

If there is a more powerful fiscal representation of racial inequality, I can’t think of it. Any ally must surely ask themselves what can be done to close this gap.

As the report says: “Today the median annual wage for Black workers is approximately 30 percent, or $10,000, lower than that of white workers—a figure with enormous implications for household economic security, consumption, and the ability to build wealth. Black workers make up 12.9 percent of the US labor force today but earn only 9.6 percent of total US wages.”

Why does this gap exist?

This financial disparity must be addressed for the sake of social progress. Why is it that Black workers get paid so much less on average? Is it because employers are taking advantage? Is it because of the kinds of work being done – that Black employees are working more of the kind of jobs that pay less? Is it that Black folks get promoted less often?

Closing the gap

It’s a problem we need to understand – and fast. Here are some ideas that could help.

  1. Employers should make sure that they’re not paying Black employees less for the same role as any of their White employees. If they are, they need to increase those wages until they match.
  2. Employers can offer bonuses to workers on an equal basis, for example by sharing bonuses equally between a team as recognition of the importance of teamwork. That way, Black team members in roles that might not typically earn bonuses or commissions will get to share in the success of the team and get some financial recognition for their efforts.
  3. Companies can offer certifications or schooling scholarships to Black workers to help them level up their skills, making them more likely to be considered for promotions.
  4. Offering a personal development path tailored to individual needs can be a great way to address any specific wishes Black employees may happen to have, and to do so confidentially and without judgement.
  5. Companies should make a habit of publicizing the successes of their Black employees both internally and externally. This will help to motivate Black employees, make clear that people of all backgrounds can succeed – and are rewarded for that – and offer public proof of that firm’s commitment to equality and equity.
  6. Investing in education more broadly at a public and private level, so more young African Americans can qualify for the kinds of jobs that pay better. As was said on this podcast: “Investing to educate people to a very high bar, regardless of family wealth and income, will pay off for us in the future, in terms of our workforce. If we can find ways to foster the formation of more diverse businesses, that will strengthen our domestic supply chains and make our economy more resilient.”

Wage gaps are not simple divides to cross because they usually have many causes, some of them are subtle and hard to define. However, an attitude of bridge building – literally and metaphorically – will go a long way towards understanding the root causes of inequality. That, in turn, will help us to address those root causes.