Location, location,

location: The impact of

place on racial equity
There is a dramatic difference in health, economic, and social
outcomes for Black US residents compared with their White
neighbors. What can investors, companies, philanthropies, and
public sector leaders do to help close the gap?

February 2024
At the current pace of awareness, investment,
and development, it could take more than three
centuries to achieve racial parity between Black
and White residents in different parts of the United
States, according to McKinsey’s recently published
report on the state of Black residents.
On this episode of The McKinsey Podcast, JP Julien,
a McKinsey partner and leader in the McKinsey
Institute for Black Economic Mobility, joins editorial
director Roberta Fusaro to outline the realities for
Black residents in four geographic categories—the
urban core, the suburbs and exurbs, the mixed
middle, and low growth and rural areas—and what
can be done now to ameliorate the racial disparity
found in these locations.
This transcript has been edited for clarity and length.
The McKinsey Podcast is hosted by Roberta Fusaro
and Lucia Rahilly.
The need to thrive, not just survive
Roberta Fusaro: How has the report defined
acceptable levels of prosperity and well-being?
JP Julien: The report focuses on trying to answer
a fundamental question: “To what extent do Black
residents have what they need to thrive?” We
anchored the research on a few core aspirations
that we believe all families, regardless of race, need
to reach their full potential.
That’s everything from a basic standard of
living, and not having to live in poverty, to job
opportunities—particularly ones with real
opportunities for career advancement—to health,
including physical and mental well-being, to stable
and secure housing and the choice to affordably
own or rent, and more.
Then we looked at the extent to which Black
residents are able to achieve those aspirations, both
in absolute and relative terms. We looked at these
outcomes for Black residents to see to what extent
Black residents in different community archetypes
are able [or not able] to achieve those outcomes.
Location, location, location: The impact of place on racial equity
We also examined how Black residents are doing
compared with their White neighbors. What’s
interesting about this research is that, rather than
looking at this at an aggregate national level, we
answered this question for over 3,000 counties in
the US. What we found helps us understand how
different places correlate with different outcomes.
Suburbia offers more stability
Roberta Fusaro: I thought that one of the most
interesting pieces of the research is that America’s
suburbs have the best balance of overall positive
outcomes and parity for Black residents. What
factors allow for such a positive net gain for the
Black population in these suburban communities?
JP Julien: I think the reasons for this are twofold.
The first is proximity. More than half of these
suburbs [and exurbs] are located outside of
megacities and high-growth hubs. These are the
places in the US that produce the nation’s highest
GDP. Black residents living in these areas benefit
from access to that growing economy. Those
economies often have diverse and resilient sectors
and greater job and career prospects, while also
providing residents with access to social and
relational capital, institutions, ideas, and more.
Now, while they have that proximity, Black residents
in these suburbs also avoid some of the challenges
that are inherent in city living: high housing costs
and a higher cost of living—and the challenges of
stretched [city] fiscal budgets.
The second reason is history. It’s no secret that the
American suburbs [and exurbs] are where and how
we, as a nation, have historically made investments
to build the middle class.
The reality is that, historically, many of these
suburbs have been unavailable to Black residents.
But the attributes that the suburbs contain—better
quality schools, neighborhood amenities, access
to affordable home ownership—have helped
Black families, in recent years, do better than their
counterparts in other areas. While Black residents
are doing better in the suburbs, their outcomes are
2
‘Some of the most challenging
outcomes are in more rural counties.
Much of this is attributed to many
of these communities having
difficult economic environments.’
only 64 percent of the outcomes of White residents
in the suburbs.
The suburbs are also home to only about
12 percent of Black residents, compared with
about 19 percent of White residents, and 17 percent
of all US residents. So in the suburbs, Black
residents are doing better, but not nearly as well
as they could, and with some meaningful levels
of underrepresentation.
Roberta Fusaro: Let’s look at the other end of
the spectrum. Where do we see some of the more
challenging outcomes in the United States?
JP Julien: Some of the most challenging
outcomes are in more rural counties. Much of
this is attributed to many of these communities
having difficult economic environments. Their
fundamental economies make job prospects,
career opportunities, and entrepreneurship
and innovation tough. This creates a really hard
headwind for Black residents [and all residents] to
achieve economic success.
Closing the economic gap
Roberta Fusaro: The report found that it would
take “Three centuries to get the places with the
worst outcomes for Black residents on par with the
best outcomes for White residents today.” Where
do we start to help shrink this time frame?
Location, location, location: The impact of place on racial equity
JP Julien: It was a sobering finding. Before jumping
into how to close that gap, I want to take a moment
to share some good news. We have seen progress.
In 73 percent of the US counties we examined,
Black residents saw outcomes improve on an
absolute basis over the past decade.
Now what’s challenging, and ultimately driving
that kind of 300-year difference, is less than
half saw reductions in racial disparities. Gaps are
increasing. It’s not that we aren’t making progress
on Black resident outcomes, it’s that we aren’t
doing so fast enough.
And fundamentally that points to unequal starting
points. Whether it’s in wealth, opportunity, social
capital, exposure—where you start has real
implications for what the future might hold. In our
country, advantages and disadvantages really do
compound. In order to close that gap, we should ask
ourselves: What are the ways in which we can shrink
gaps that put residents on a more equal footing?
Where you live influences how you live
Roberta Fusaro: How does targeting improvements
in affordable housing help close this gap?
JP Julien: Housing is fundamental for two reasons.
The first is purely economic. Housing is the single
largest expense for families. Too often, families are
simply paying too much just to have a home. Nearly
half of Americans spend more than 30 percent of
their income on rent, and a quarter are spending
3
‘Whether it’s in wealth, opportunity,
social capital, exposure—where
you start has real implications for
what the future might hold.’
more than half on rent. When you look at Black
residents, about 60 percent are spending more
than 30 percent of their income, while 30 percent
are spending more than half.
The second important reason is geographic. Where
you live shapes what you have access to with
regards to your job, your school system, exposure
to violence, pollutants, etcetera. I have personally
seen the kind of impact that an address can have in
real terms. Perhaps listeners have experienced this,
too. Maybe I’ll share just a bit of my own background.
I grew up the middle of five kids in Essex County,
New Jersey. My parents immigrated here from
Trinidad. They came here in hopes of having more for
themselves and their family. For the first nine years
of my life, we lived in some challenging economic
environments, neighborhoods where the poverty
rate was two to three times the state average.
Business investment was nonexistent. Food access
wasn’t great. When I was nine, we moved maybe a
ten-mile drive down the Garden State Parkway to a
middle-class suburb. And overnight the quality of
my school improved. My mom’s commute to work
dropped by an hour. We had a grocery store and a
bank just minutes away.
That was all made possible by my parents and my
aunt and uncle pooling their funds and purchasing
a two-family home in the suburbs. As a nine-
year-old, I immediately saw the difference that
an address could make. It had a huge impact. We
often say, “Place matters in economic mobility.” But
Location, location, location: The impact of place on racial equity
fundamentally, housing is the key ingredient. And so,
if we think about solutions, housing must be on the
table in terms of changing outcomes.
Prosperity starts with schools
Roberta Fusaro: It reminds me of the related
research on the negative impact of climate in
certain parts of the Southeast states where so
many Black residents live.
Going back to the Black residents report, how do
interventions in early childhood education help
close the gap?
JP Julien: We know that high-quality early-
childhood education improves the likelihood of
high school and college attainment, results in
lower rates of substance use and incarceration,
and just generally results in higher rates of
economic well-being.
Second, early-childhood education is a big
economic factor for families. About half of families
opt to pay for childcare. For Black families, that
ends up accounting for about 23 percent of their
income, and for White families, that accounts for
about 15 percent of their income—a significant
portion of what a household might be dealing with.
The other important downstream implication of
that is what it means for who can work outside of
the home. And too often the hard choice between
paying an exorbitant amount for childcare and going
to work, or staying home and providing unpaid care,
results in women exiting the labor market.
4
The impact of COVID-19
Roberta Fusaro: Post-COVID, a lot of daycare
centers closed. Are the economic effects of COVID
factored into this report? And are there any specific
data points that you’ve seen around that?
JP Julien: One data point that stands out is the
life expectancy gap between Black and White
residents increased by more than two years, such
that today, a Black resident lives, on average,
5.6 years less than a White resident. A big driver
of that was the disproportionate impact of the
pandemic on Black people.
As you mentioned, childcare centers are closing
or can’t expand capacity, and this affects families’
decisions around who will participate in the
labor market. The stressed childcare system has
squeezed to what extent families are able to find
paid options to manage both responsibilities at
home and at work.
I think the other illuminating thing we all probably
felt—and I have two young kids of my own—is just
how hard it is to try to do both of those things. To
care for children and work simultaneously, even
if it’s remotely, is impossible. In some ways I think
the one possible bright spot is that the pandemic
has shed a light on just how fractured our childcare
system is.
In some ways it’s been a bright spot for folks to
really think about: What are the big investments we
can make to support families as they navigate the
important job of raising a family while also being a
part of the labor market in a sustainable and long-
term way?
Public and private sector solutions
Roberta Fusaro: Can you cite examples of places
or organizations that may already be taking steps to
eliminate gaps in the outcomes between Black and
White residents?
JP Julien: On the public sector side is a place
like Fresno, California. Five years ago or so, the
Central Valley Community Foundation led an effort
in partnership with large employers, government,
Location, location, location: The impact of place on racial equity
and community activists to build what they call
the Fresno DRIVE Initiative: Developing the
Region’s Inclusive & Vibrant Economy. And they
basically asked the community, “What is it that
we need to experience economic mobility and
to really support our economy?” The response
was everything from cradle to career education,
affordable housing, and investments to reinvent
their traditional agricultural economy.
What I love about that example is it was a self-
organized process in which the community said,
“Things aren’t working well here. How do we do
it better? How do we do it with the voice, and
aspirations, and solutions of all residents, not just
a few?” And they’ve been able to use that planning
process to really catalyze large-scale investment
from the state.
The second example I’ll give you is Discover
Financial [Discover Card]. They recently
demonstrated a real commitment to “place.”
When considering where they should open a new
customer-care center, rather than thinking about
closing racial disparities as the nice thing to do, they
really thought about it as: How do we make this
a strategic advantage for our business? So they
invested and opened a new location on the south
side of Chicago, which opened in August 2022.
They aim to employ about 1,000 people, with
over 80 percent of those people living within
five miles of the center. That means reduced
commute times, allowing families to spend time
with their kids at home, and making actual physical
investments in a place that often doesn’t get
those kinds of investments. What’s been powerful
is that not only does the call center do well on
customer satisfaction, but they do even better on
employee retention.
Different perspectives on wealth
Roberta Fusaro: The findings suggest that overall
quality of life has improved for Black residents, and
yet this racial gap remains. We’ve talked about the
incredibly long time frame that we believe would
be required to close the gap. What’s happening
5
‘In no county in America do Black
residents on average perform as
well as their White neighbors.’
in White communities that’s causing a continued
economic rise?
JP Julien: To the point I had mentioned earlier, I think
it really is the case that advantages compound. An
example of this is, the Federal Reserve recently
released its latest wealth survey, which they do
every three years. And what the survey found is that
Black wealth actually increased—to about $45,000,
from $27,000—which is a great thing.
But what also happened is that White wealth
increased. And it did so much faster than Black
wealth. So median wealth for White families went
to about $285,000, from $218,000. And part of
that distinction is just the exposure to which assets,
White families versus Black families, have access to.
So nearly 30 percent of White wealth, but only 4
percent of Black wealth, was in corporate stocks
and equity. This is a case where really advantage
begets advantage. And we’re not saying, in any of
this, do we want White residents to do worse? No.
Their continued rising is a good thing. But it begs
the question of: How do we make investments such
that Black residents are able to overcome what we
know is a more challenged starting point?
Slow progress
Roberta Fusaro: Overall, is the economic state of
Black residents trending in the right direction?
JP Julien: I’d say yes and no. In one sense, yes.
We’ve seen real progress. Seventy-three percent
of US counties saw absolute improvements. Taking
another data point, in 1990, almost a third of Black
Location, location, location: The impact of place on racial equity
families lived below the poverty line. Today that
number is less than 20 percent, which, again, is
material for what it means for people’s quality of life,
and something to be celebrated.
At the same time I’d say no, because less than half
the counties that we looked at saw reductions in
racial disparities. We’re seeing other concerning
backsliding. Life expectancy is where a gap
has widened. Also, in 1980, 58 percent of Black
residents owned their home. Today, just about
44 percent do. If we think about that as a mechanism
for wealth building, there are some areas where
not only is there no progress, there’s actually some
reverse movement that I do find challenging.
A stark reality about race and place
Roberta Fusaro: Was there anything else that
surprised you about the findings in the report, some
particular data point that stood out?
JP Julien: The one that really stood out was that,
essentially, in no county in America do Black
residents on average perform as well as their
White neighbors. Only a tenth of 1 percent of
Black residents live in a county where outcomes
are 90 percent or better than those of their
White counterparts.
That was surprising, just given the absolute
nature of that analysis. This is not with any gloom
or pessimism for the future, but more so as an
important reminder, and it underscores, for me, the
point that race and place still matter. And if we really
want to change this reality, we need to confront
both head-on.
6
 Roberta Fusaro: How should key stakeholders,
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communities, use this report? What should they do
with these findings?
JP Julien: I think at the very basic level, we want
folks to appreciate the reality. I think there are
times when we [as a country] collectively fool
ourselves into thinking that we live in this post-
racial America, where disparities aren’t a real thing,
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a figment of our imagination.
I think part of what has been illuminating for us in
this work is that race and place still matter. And it’s
not to hark back on the past, but it is to use that as
insight into what we might do moving forward.
Second, when we look at the examples of where
we’ve seen real economic progress, it often
comes with at-scale, sustained public and private
investment, whether that’s in our housing markets,
in post-secondary education, in how we support
innovation and entrepreneurship as a country.
I hope this research provides a bit of a sense-check
on the reality, and that it is a catalyst for finding
specific ways that public, private, and social sectors
can work together to change this reality.

JP Julien is a partner in the Philadelphia office. Roberta Fusaro is an editorial director in the Boston office. Lucia Rahilly is the
global editorial director and deputy publisher of McKinsey Global Publishing and is based in the New York office.

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Location, location, location: The impact of place on racial equity 7