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Why Black Workers Still Face a Promotion and Wage Gap That's Costing the Economy Trillions

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Black workers continue to face significant gaps in the labor market when it comes to promotion, pay and opportunity, costing the U.S. economy trillions of dollars.

If the Black wage, education, housing and investing gaps had been closed 20 years ago, it would have added an estimated $16 trillion to the economy, according to a report by Citi, with the Black pay gap alone accounting for $2.7 trillion.

Today, Black workers are overrepresented in low-wage entry-level jobs and underrepresented in senior leader and executive roles. In the U.S. private sector, Black workers make up 12% of the entry-level workforce and just 7% of the managerial workforce, according to McKinsey & Company.

The higher you go, the fewer Black professionals you see. At the senior manager and VP level, Black workers make up just 5% of the workforce, and at the SVP level, just 4%. At the very top, only around 1% of Fortune 500 CEO spots are held by Black leaders.

If the current trajectory continues, McKinsey & Company estimates that it could take 95 years before Black employees reach parity at all levels in the private sector.

"Black workers, on average, are not being hired, promoted or paid according to what would signal their level of productivity based on their experience or their education," Valerie Wilson, director of the Economic Policy Institute's program on race, ethnicity and the economy, tells CNBC Make It. And "it absolutely impacts everything. It impacts your family's economic security."

On average, Black men are paid just $0.71 for every dollar paid to white men, according to EPI. Black women, who face both gender and racial barriers, are paid just $0.63 for every dollar paid to white men. Over the course of a 40-year career, the National Women's Law Center estimates that Black women stand to lose close to $1 million due to this disparity.

These racial gaps in the labor market are linked to several structural inequities, according to McKinsey & Company, including Black workers' underrepresentation in regions with high job growth opportunities and overrepresentation in industries with low growth and low wages, such as entry-level healthcare jobs, retail and food services.

And in the corporate world, Black workers face ongoing challenges like bias and discrimination, a "broken rung from entry-level to manager roles," lack of support from supervisors and tokenism that continues to hold them back and can even force them out the door.

How bias and discrimination can play out

In September 2017, Ryan Walker-Hartshorn landed what she thought was her "dream position" working in New York City as an assistant to Bon Appetit's then editor-in-chief Adam Rapoport. In her role, she earned $35,300 per year and says she was told, with overtime hours, she could earn up to $50,000.

"That was a sell for me because I was like 'Hell yeah, I'm out of college. I'm just going to work my a-- off and I'll make a lot of money in overtime, and I'll be able to make ends meet," she says.

Starting out, the Stanford University graduate says she was aware that her job would include many of the standard tasks most assistants are asked to do, such as managing the editor-in-chief's calendar, answering phones, coordinating travel and running personal errands for her boss. When she was hired she says she was also told there would be potential for her to work on creative projects.

What she didn't expect was working in what she calls a "toxic" culture where she was just one of two Black people on staff. Walker-Hartshorn alleges that in addition to racially insensitive comments — such as the time her boss asked her to make his coffee the color of Rihanna — she says she experienced microaggressions and differential treatment from her white peers when it came to overtime pay, budgets for stories and investment in career growth.

During her nearly three years of working as an assistant, she alleges that she was repeatedly denied a pay raise or promotion, despite finding out from a senior employee at Conde Nast, Bon Appetit's parent company, that assistants at other publications were making more money than her. Eventually, in August 2020, the 26-year-old left Bon Appetit after being offered an interim editorial assistant role rather than the promotion she wanted.

"We are thankful to our former and current Bon Appetit employees for raising their concerns last year, which helped us begin the important work of revisiting our hiring and onboarding best practices, our team structure, and our team culture overall," a Bon Appetit spokesperson says in response to Walker-Hartshorn's allegations. "With new leadership in place, a healthy and rewarding workplace culture built on inclusivity, respect, diversity and equality continues to be our top priority."

In August 2020, Conde Nast hired award-winning publishing executive Dawn Davis to be Bon Appetit's editor-in-chief, the first Black woman to hold the position. Her appointment came just a few months after Rapoport resigned in June 2020 amid allegations of fostering a hostile work environment, which were detailed in a report by Business Insider. He did not respond to multiple requests for comment for this story.

Walker-Hartshorn, who's currently freelancing and writing on the side to make ends meet, was recently tapped to serve as a consultant for a new HBO Max comedy series about food media's toxic work environment.

Her experience follows a pattern uncovered by McKinsey & Company researchers: Black employees are leaving their jobs more often than their white peers, reducing the pipeline of Black candidates available for promotion.

This trend is likely linked to Black workers feeling a lack of trust, support, and sponsorship. According to the McKinsey report, Black employees are 23% less likely to say they receive "a lot" or "quite a bit" of support to advance at work, 41% less likely to view promotions in their workplace as fair, and 39% less likely to believe their company's diversity and inclusion efforts are effective, compared to their white counterparts working at the same company.

"I think the reason why there is a challenge for underrepresented professionals to be promoted into higher positions [is because] of the fact that they're not represented at those leadership and managerial levels," former Facebook recruiter Rhett Lindsey says. He explains that when there is a lack of diversity at the top, it's easy for bias to creep in and for companies to have a non-inclusive culture where employees of color feel like there is no room for growth or promotion.

Tommaso Boddi | Getty Images Entertainment | Getty Images
Rhett Lindsey attends the WACO Theater Foundation's "An Introduction To The Diverse Perspective" Event at WACO Theater Center on November 03, 2019 in Los Angeles, California.

Problems with diversity and inclusion efforts

Walker-Hartshorn says she's pleased that Bon Appetit "hired a really incredible Black woman to run the magazine," but she's concerned about whether the company's culture will be inclusive enough for Davis to feel supported.

"At the end of the day, it doesn't matter how many Black people you hire," she says, "if there is no actual support or infrastructure behind the diversity and inclusion initiatives at a corporate level within a company," then Black employees will continue to have a hard time thriving at work.

Lindsey, who formerly worked as a recruiter at both Facebook and Tinder, agrees. From his experience, "companies have good intentions" when it comes to diversifying their staff, but they often miss the mark when it comes to inclusion by not offering equal support and growth opportunities once employees of color are hired. As a result, many diverse candidates either leave a company or steer away from joining a company if it has a reputation for being non-inclusive.

"It's not a pipeline issue," he says. "The talent is out there. But here is where the problem falls: Companies like to identify a 'cultural fit.'"

The problem with trying to find a "cultural fit," he says, is that it eliminates the possibility of adding new and diverse talent who might not fit into the established culture that you already have where people look a certain way, dress a certain way, wear their hair a certain way, act a certain way or even come from a certain school.

"So it shouldn't be about 'cultural fit,'" he says. "It should be about cultural bonus because if you're trying to fit in, then you're trying to assimilate. And too many times, especially in my position as a Black queer man in tech and recruiting, I've always felt like I had to assimilate into the culture so that I don't stick out and so that I'm not causing disruption."

At Facebook specifically, Lindsey, along with other former and current recruiters, claims that finding a good "cultural fit" has been a big part of the company's recruiting process, leading to many qualified diverse candidates not being hired. Facebook disagrees with this.

"We're focused on diversity and inclusivity as well as advancing racial justice, both in our own workplace as well as in how we recruit candidates to work here," a Facebook spokesperson tells CNBC Make It, denying that the company looks for "culture fit" in the interviewing process. "We've added diversity and inclusion goals to senior leaders' performance reviews. We take seriously allegations of discrimination and have robust policies and processes in place for employees to report concerns, including concerns about microaggressions and policy violations."

Lindsey, who is now working on an app called Siimee to help eliminate bias in the hiring process, says in addition to moving away from the idea of a "cultural fit," companies need to avoid treating their diversity and inclusion efforts as a one-off event, where they hire one or two diverse candidates and then feel like they're done. Instead, companies should work to reach a "critical mass" of diverse employees, which by some standards means at least 20-30% of diverse workers at all levels of a company.

Luis Alvarez

Solutions for fixing the promotion and pay gap

To address the ongoing gaps Black workers face in the workplace, not only do companies need to improve their diversity and inclusion practices, but according to Lindsey, they should also conduct annual reviews where they track and compare how much employees are paid and who is being promoted.

"In my years of experience as a recruiter, I have held senior recruiter positions, and those were not because I got promoted from already being at the job," he explains. It happened because a "specific company and recruiter reached out to me based on my background and said, 'Hey, I think you're a good fit for this particular position…' So I have not ever been promoted when I was in a company, but I do know that a couple of my counterparts who are not reflective of my demographic were promoted internally."

Additionally, he believes companies need to provide greater transparency around how much an employee should earn in each role and what qualifications they need to meet in order to advance within the company. This transparency, he says, would leave less room for senior managers, who are often not from underrepresented groups, to use their own discretion when it comes to pay and promotions, and would decrease the chances of employees of color being overlooked.

In addition to increased transparency, Gbenga Ajilore, senior advisor at USDA and former senior economist at the Center for American Progress, says the government needs to step in to increase funding to agencies like the Equal Employment Opportunity Commission, which works to ensure that employees are protected from discrimination.

In 2019, the most recent year for which the Equal Employment Opportunity Commission has data, 33% of all charges filed with the agency were for racial discrimination in the workplace. Of those, roughly 80% were filed by Black workers, according to Lynn Davenport, EEOC's supervisory attorney advisor for the Office of Legal Counsel. 

But, despite the agency's mission to eliminate workplace discrimination, Ajilore says its effectiveness has weakened over the years due to a lack of funding. Between 1980 and 2018, the Center for American Progress reports that the agency's staff numbers dropped by almost half from 3,390 to 1,968.

Since stepping into office on Jan. 20, President Biden has signed more than 40 executive actions that include orders to help advance racial equity. One of those orders requires federal agencies to review equity within their ranks and come up with a plan to address any unequal barriers to opportunity that are found.

"One of the things that's kind of heartening in terms of what's happened over this past year...is there's been more of a discussion about racial equity and even mainstream people are using the word 'reparations,'" says Ajilore. "So the conversation about racial justice and gender justice is out there now."

But, he says it's on companies to go beyond the black squares they posted last summer and to develop "concrete, sustainable steps to actually create these pathways for people to experience upward mobility within their firms."

Video by: Alysha Webb

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