Making Progress Amid Economic Recovery

A look at Black unemployment rates of the past few years might suggest that Black people have made great strides in breaking down systemic barriers that have long limited opportunity for economic advancement along racial lines.

In 2020, at the height of the pandemic, millions of Black workers lost jobs as the Black unemployment rate soared to 16.8%. Since then, as the U.S. economy experienced one of its fastest recoveries from a recession—a recovery that has benefitted people of all races—Black workers have experienced the fastest wage growth of any racial group. In April 2023, the Black unemployment rate hit a record low of 4.7% and had only risen to 5.8% by October of that year.

Black workers—women in particular—have benefited from a tight labor market that has created significant opportunities for career changes. And while Black workers are often overrepresented in frontline jobs, some have found higher-wage positions in industries that offer better long-term stability, such as professional and business services, finance, and construction. For example, the proportion of Black people in professional and business services increased from 9.6% in 2019 to 11.4% in the first quarter of 2023.

According to 2022 McKinsey & Company research, Black workers facing a lack of career development and advancement potential in frontline jobs are looking for new opportunities at other organizations. Increases in the minimum wage in some states have also contributed to income growth for workers at the lower end of the earnings spectrum. In 2022, the median raise for Black workers employed full time was 11.3%.

Moreover, another McKinsey report says that in recent years, changes in recruiting and hiring practices among employers that want to accelerate progress on diversity, equity, and inclusion (DEI) goals appear to have had lasting positive impacts on career advancement opportunities for Black workers. However, many employers are beginning to curb DEI efforts or at least reconsider their DEI policies in the face of anti-DEI criticism and lawsuits against corporate DEI initiatives that have come in the wake of the U.S. Supreme Court decision to strike down the use of affirmative action in college admissions.

But Still Facing Systemic Barriers

Despite recent improvements in employment opportunities, many Black workers still face systemic obstacles in the labor market and their recent workplace gains are at risk of eroding.  

Rising inflation has undercut some of the wage growth, and much of the pandemic relief aid that cushioned the blow of lost earnings for millions of U.S. households is set to expire.  

Challenges facing Black workers include persistently high unemployment rates, vulnerability to displacement due to automation and AI technology, and a likelihood of being disproportionately affected by layoffs or hiring slowdowns. Disparities in access to the supports that enable people to focus on their jobs and achieve career success—such as quality child care and reliable transportation—also significantly affect the career prospects of Black workers. 

By the Numbers 

Statistics sharply illustrate why and how employer-provided wraparound supports could benefit Black workers. 

• Black women spend 56% of their median household income on child care for a two-child family, a larger share of total income than that of any other group. 
• More than 20% of Black adults say they struggle to afford medical care or prescription drugs.  
• 29% of Black people report that they don’t have high-speed internet service in their homes. 
• Only 36% of Black adults in the United States report having an emergency or rainy day fund to cover three months of expenses, compared to 54% of all U.S. adults. 

Supporting Black Workers Makes Business Sense

Employers can’t afford to overlook Black talent.   

Research shows that eliminating barriers that limit employment and economic advancement opportunities for Black people would have a substantial positive impact on the U.S. economy. 

According to a 2020 Citi Global Perspectives and Solutions report, closing the Black-white wage gap two decades ago would have added an estimated $2.7 trillion to the economy. And in 2019, McKinsey predicted that the racial wealth gap would cost the U.S. economy between $1 trillion and $1.5 trillion between 2019 and 2028.  

High rates of turnover among Black workers who find working environments inequitable and unwelcoming also have a negative impact on employers’ bottom line. According to a 2022 report from global consultancy Russell Reynolds Associates and Valence, a networking platform for Black professionals, 47% of Black technology professionals responding to a survey said they strongly agree that they must frequently switch between companies to advance in their careers, compared to 28% of non-Black respondents. The report also says the Kapor Center for Social Impact found that turnover among Black workers who experience unfairness in the workplace costs the tech industry about $1.2 billion a year.  

Providing workers with wraparound supports can be an effective way to build a welcoming environment, and it’s a strategy that’s been shown to deliver significant returns on investment across a number of metrics for employers due to improvements in employee retention and productivity rates.   

The importance of providing wraparound supports became clear at the height of the COVID-19 pandemic when challenges facing workers who lacked access to important services like health care and child care were amplified. In response, employers expanded their benefits packages to include wraparound supports, with many adopting technology-based solutions designed to help people with these work-life challenges.  

DEI initiatives can also help create a welcoming environment for employees of all backgrounds. Similar to efforts to offer wraparound supports, they can yield business benefits, including improvements in corporate culture and individual mobility. 

Employers can position themselves for sustained success by offering programs and services that enable employees to manage the circumstances and challenges that limit their ability to succeed at work. A good way to get started is to join the forward-thinking organizations that have embraced the principles outlined in JFF’s Impact Employer Talent Framework. Measuring the ROI of wraparound supports may take time, but employers will see real results from improvements in worker contributions and innovation.  

The Market Today

The market research we conducted for this scan included reviews of human resources (HR) technology systems, employee benefits plans, and programs and services designed to help people build professional social capital. Collectively, the organizations, products, and services we studied cover a broad range of HR functions and other aspects of working environments that contribute to employee well-being, including talent acquisition and talent development strategies, design of total rewards plans, and overall company culture. 

We found that employers increasingly seek automated, data-driven, and employee-facing systems, programs, and services that can be integrated with other platforms. The shift to remote and hybrid work models, fierce competition for talent, and changes in employee expectations of the types of benefits and working conditions employers should offer are key factors fueling increased spending and growth in this area.  

Spending on HR technology, which includes smart recruitment and employee feedback systems, has grown significantly—in terms of both employer purchases of new systems and investments in companies developing systems. We found that initial growth was driven by a favorable investment climate that supported the development of new tools and by the urgent need among employers to improve the way they hire, manage, and support employees.  

Today, the average large company has more than 80 employee-facing systems, and this number has increased by more than 40% over five years. There has also been an increase in the number of startups in this field, reflecting strong employer demand for innovative solutions. According to Gartner, more than 80% of HR leaders have explored or implemented AI-driven systems to streamline talent management processes.   

In this environment, innovators have opportunities to develop tools and technologies that offer personalized solutions tailored to individual workers, deliver measurable results, and can be deployed at scale to serve large populations of workers. 

It’s also worth noting that startups are leveraging technological advances to develop platforms that support coaching and mentoring programs to help people build professional social capital. This is particularly important for Black workers, who have long lacked access to opportunities to build the networks of connections that open doors to employment and economic advancement opportunities.  

HR Tech Spending Trends

• Employers spend an average of $2,524 per employee on HR functions, with recruiting and HR technology as the top spending areas.  
• More than $15 billion in venture capital and private equity was invested in HR technology companies over the past few years.  
• Globally, the HR technology market is projected to grow at a compound annual rate of 5.7% from 2022 to 2030, reaching $38.36 billion. 
• Companies spend an average of $300 to $500 per employee per year on coaching programs.  
• The number of employers offering mentorship programs is increasing: 92% of Fortune 500 companies had mentoring programs in 2023.  
• Top investment targets include talent marketplace and career pathway solutions, employee experience and employee listening systems, and employee well-being and rewards platforms.