Economic inequity in the US: Sources and solutions

Inequality: A persisting challenge and its implications

 
Income inequality is hardly new, though it has reemerged as a social and political flash point in recent years, signaling growing public discontent. But what the term actually encompasses, how it’s evolving, and especially how to address it can be harder to articulate. “Inequality: A persisting challenge and its implications,” a new paper from the McKinsey Global Institute (MGI), is a good start.

The good news is that the world has become more equal at the macro level. Middle-income economies, such as Indonesia and Mexico, have attained greater shares of global wealth. But in many advanced countries, such as the United States, wealth and income inequality have been steadily rising since the 1980s. Put another way: poor countries are getting richer, and rich countries are becoming more unequal.

Of course, for huge segments of the US population, such as black Americans, the phenomena of wealth and income disparity have long been problems. New research estimates that the racial wealth gap’s dampening effect on consumption and investment will cost the US economy between $1 trillion and $1.5 trillion between 2019 and 2028.

Factors other than race are also at play in the widening chasm between haves and have-nots in the United States. Take geography. By most metrics, the state of Georgia is thriving economically. It’s the country’s ninth-largest economy, seventh for its share of woman-owned companies, and third for its share of black-owned companies. While much of this vibrancy originates from Atlanta, which now generates 65 percent of state GDP, the benefits stay in the city too. Economic growth in the rest of the state is constrained by low workforce participation and a lack of access to opportunities in high-growth sectors. A new report, Expanding the economic pie in the Peach State, looks at the sustained, long-term efforts and investments necessary to bridge this divide.

And within cities, inequality is becoming increasingly, distressingly evident. Homelessness in the San Francisco Bay Area has reached crisis proportions. The region has the third-largest homeless population in the country, behind New York City and Los Angeles. Long an engine of growth and prosperity, San Francisco has become marked by unaffordability and abject conditions for its most vulnerable residents.

The problem is not intractable. The Bay Area is home to intellect, innovation, and substantial resources—as evidenced by the wealth generated there. And it can be home to a solution for this crisis, one that takes a regional, multi-stakeholder approach and holistically supports homeless families across the full journey—from housing insecure to homeless to housed—and integrates resources across the government, not-for-profit, and private sectors.

The United States can improve outcomes nationwide by connecting displaced workers with new opportunities, equipping people with the skills they need to succeed, revitalizing distressed areas, and supporting workers in transition. Returning to more inclusive growth will require the combined energy and ingenuity of business leaders, policy makers, educators, and not for profits across the country. Check out The future of work in America: People and places, today and tomorrow, another recent MGI report, to learn more.