Money
How COVID-19 Has Impacted Black-White Financial Inequality
How COVID-19 Impacted Black-White Financial Inequality
COVID-19 has disrupted everything from economic markets to personal finances, but not everyone feels its effects equally. When compared with White Americans, Black Americans’ financial situations have been disproportionately affected by the pandemic.
In this infographic from McKinsey & Co., we outline the financial vulnerabilities of Black Americans, their increased usage of financial services since the onset of the pandemic, and their lower satisfaction levels with those services.
Financial Vulnerabilities of Black Americans
Compared to White Americans, more Black Americans say their job and income have been negatively impacted by COVID-19.
| My job has been negatively impacted by COVID-19 | My income has been negatively impacted by COVID-19 | |
|---|---|---|
| White Americans | 29% | 24% |
| Black Americans | 36% | 31% |
Looking forward, Black Americans also report greater job security concerns and have less savings to protect themselves financially. In the event of a job loss, 57% of Black Americans report their savings would last four months or less, compared with 44% of White Americans.
With less of a cash buffer on hand, Black consumers are also more likely to have missed a recent bill payment.
| Skipped at least 1 payment | Partially paid at least 1 bill | Paid in full | |
|---|---|---|---|
| White Americans | 16% | 22% | 62% |
| Black Americans | 51% | 22% | 27% |
This includes being unable to pay for basic items such as utilities, telephone and internet, and mortgage payments.
How do they begin to manage these challenges?
Use of Financial Services
Black Americans increased their use of financial services more than White Americans.
Banking activities in the past two weeks, per March-June 2020 surveys
| Withdrew cash | Deposited cash | Deposited checks | Contacted bank for service on account | Opened new accounts | Received advice on digital tool usage | |
|---|---|---|---|---|---|---|
| White Americans | 35% | 20% | 40% | 9% | 3% | 4% |
| Black Americans | 47% | 31% | 30% | 15% | 7% | 7% |
For example, Black Americans were about twice as likely to request account service, open an account, or receive advice on digital tools. In addition, Black families were more likely to leverage a fintech platform and have been more active in opening fintech accounts since the start of the COVID-19 crisis.
However, as Black Americans seek out more financial help, some are not happy with the service they receive.
Satisfaction with Financial Services
Overall, Black families are less satisfied than White families across all types of financial activities. These differences were most pronounced for digital tool advice, where 38% of Black Americans were dissatisfied or very dissatisfied, compared with just 12% of White Americans.
Even though Black people were less satisfied with banking services, they were more likely to say that bank performance was above their expectations. This may suggest that expectations are lower for Black families than they are for White families.
Black Americans were also much less likely to trust their financial advisor.
| Do not trust/losing trust | Indifferent | Gaining trust/trust | |
|---|---|---|---|
| White Americans | 10% | 9% | 81% |
| Black Americans | 32% | 9% | 59% |
From March-June 2020, the percentage of Black people distrusting their advisors rose from 12% to 32%. Over the same time period, White people’s distrust of financial advisors remained stable at 10%.
A notable exception: White and Black Americans were both satisfied with fintech providers. Only 5% of White Americans and 8% of Black Americans expressed some level of dissatisfaction with fintech companies.
Time to Examine the Financial System?
COVID-19 has perpetuated Black-White financial inequality. Data shows that Black families are more likely to be financially vulnerable, and increase their use of financial services during the COVID-19 crisis. However, they are less likely to feel satisfied with these services.
Financial institutions can urgently review their remote and in-person customer service procedures to ensure the needs of all families are being met.
GDP
Visualizing U.S. GDP by Industry in 2023
Services-producing industries account for the majority of U.S. GDP in 2023, followed by other private industries and the government.
Visualizing U.S. GDP by Industry
The U.S. economy is like a giant machine driven by many different industries, each one akin to an essential cog that moves the whole.
Understanding the breakdown of national gross domestic product (GDP) by industry shows where commercial activity is bustling and how diverse the economy truly is.
The above infographic uses data from the Bureau of Economic Analysis to visualize a breakdown of U.S. GDP by industry in 2023. To show this, we use value added by industry, which reflects the difference between gross output and the cost of intermediate inputs.
The Top 10 U.S. Industries by GDP
As of Q1 2023, the annualized GDP of the U.S. sits at $26.5 trillion.
Of this, 88% or $23.5 trillion comes from private industries. The remaining $3 trillion is government spending at the federal, state, and local levels.
Here’s a look at the largest private industries by economic contribution in the United States:
| Industry | Annualized Nominal GDP (as of Q1 2023) | % of U.S. GDP |
|---|---|---|
| Professional and business services | $3.5T | 13% |
| Real estate, rental, and leasing | $3.3T | 12% |
| Manufacturing | $2.9T | 11% |
| Educational services, health care, and social assistance | $2.3T | 9% |
| Finance and insurance | $2.0T | 8% |
| Wholesale trade | $1.7T | 6% |
| Retail trade | $1.5T | 6% |
| Information | $1.5T | 6% |
| Arts, entertainment, recreation, accommodation, and food services | $1.2T | 4% |
| Construction | $1.1T | 4% |
| Other private industries | $2.6T | 10% |
| Total | $23.5T | 88% |
Like most other developed nations, the U.S. economy is largely based on services.
Service-based industries, including professional and business services, real estate, finance, and health care, make up the bulk (70%) of U.S. GDP. In comparison, goods-producing industries like agriculture, manufacturing, mining, and construction play a smaller role.
Professional and business services is the largest industry with $3.5 trillion in value added. It comprises establishments providing legal, consulting, design, administration, and other services. This is followed by real estate at $3.3 trillion, which has consistently been an integral part of the economy.
Due to outsourcing and other factors, the manufacturing industry’s share of GDP has been declining for decades, but it still remains a significant part of the economy. Manufacturing of durable goods (metals, machines, computers) accounts for $1.6 trillion in value added, alongside nondurable goods (food, petroleum, chemicals) at $1.3 trillion.
The Government’s Contribution to GDP
Just like private industries, the government’s value added to GDP consists of compensation of employees, taxes collected (less subsidies), and gross operating surplus.
| Government | Annualized Nominal GDP (as of Q1 2023) | % of U.S. GDP |
|---|---|---|
| State and Local | $2.1T | 8% |
| Federal | $0.9T | 4% |
| Total | $3.1T | 12% |
Figures may not add up to the total due to rounding.
State and local government spending, largely focused on the education and public welfare sectors, accounts for the bulk of value added. The Federal contribution to GDP amounts to roughly $948 billion, with 52% of it attributed to national defense.
The Fastest Growing Industries (2022–2032P)
In the next 10 years, services-producing industries are projected to see the fastest growth in output.
The table below shows the five fastest-growing industries in the U.S. from 2022–2032 in terms of total output, based on data from the Bureau of Labor Statistics:
| Industry | Sector | Compound Annual Rate of Output Growth (2022–2032P) |
|---|---|---|
| Software publishers | Information | 5.2% |
| Computing infrastructure providers, data processing, and related services | Information | 3.9% |
| Wireless telecommunications carriers (except satellite) | Information | 3.6% |
| Home health care services | Health care and social assistance | 3.6% |
| Oil and gas extraction | Mining | 3.5% |
Three of the fastest-growing industries are in the information sector, underscoring the growing role of technology and digital infrastructure. Meanwhile, the projected growth of the oil and gas extraction industry highlights the enduring demand for traditional energy sources, despite the energy transition.
Overall, the development of these industries suggests that the U.S. will continue its shift toward a services-oriented economy. But today, it’s also worth noticing how services- and goods-producing industries are increasingly tied together. For example, it’s now common for tech companies to produce devices, and for manufacturers to use software in their operations.
Therefore, the oncoming tide of growth in service-based industries could potentially lift other interconnected sectors of the diverse U.S. economy.
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