Place, purpose, and the path to economic mobility

0:00You're seeing a big movement towards skills-based hiring. How do we think about that to really broaden who we can bring into the workforce and into what roles? Things like paid training, apprenticeships, things that will be able to help people to, again, take on opportunities that might not otherwise immediately seem available to them.

0:19Roberta Fusaro: That's McKinsey senior partner, Diana Ellsworth. She's talking about how business leaders can redesign their policies and their programs to draw fresh talent to their organizations. She joins me and McKinsey partner, JP Julian, to talk about a recent survey conducted by McKinsey's Institute for Economic Mobility. That survey provides a really interesting snapshot of what a better life could look like for most Americans. This is the McKinsey Podcast, where we help you make sense out of the world's toughest business challenges. I'm Roberta Fasaro, your host for today. JP, thanks so much for joining the podcast today.

1:00Roberta Fusaro: Thanks for having me. And Diana, it's great to see you, and I'm glad you could join as well. Thanks for joining. Absolutely. Delighted to be here. Americans have more in common than today's public discourse would suggest. Here's what Miguel, 35, from Michigan, says would matter most for improving his quality of life. A better life for me and my family would look like being able to buy a home and being able to afford all the basic necessities, rent, utilities, car, food, health care, as well as being able to have enough left over to save for the future, for retirement, as well as vacations. It turns out most Americans are looking for a lot of the same things based on research from McKinsey's Institute for Economic Mobility.

1:49Roberta Fusaro: JP, would you say that Miguel's comments pretty much capture the common goals that all Americans share, regardless of race, income, geography? What do you think about that? It really does. What was fascinating is that while Miguel's story is deeply personal, many of the themes that he shared resonated widely. So one of the things that we did was we asked 30 ,000 Americans to describe in their own words, what would a better life look like for you and your family over the next three to five years? and some people wrote paragraphs and some people wrote sentences and we coded every single response.

2:25And what you find is that for two thirds of Americans, greater financial security is the top aspiration that they're striving for. And that held to your point, Roberta, across income, across race, across place in a way that I think was really interesting.

2:40Roberta Fusaro: Yeah, no, another interesting point, JP, from the research, something that struck me is that stage of life plays a role in these priorities. Diana, can you talk a little bit to that point? Yeah, absolutely. Our research found that how Americans experience economic mobility is really shaped by life stage. And so we focus in particular on our research on sort of three sort of key life stages. One is young adults who are entering the workforce. One was parents raising a family. And then the third one was those who are sort of preparing for retirement. For young adults, that means they were much more likely to be sort of career and income focused and worried about the uncertainty in sort of our labor market today.

3:26They were also more likely to cite mental health as a real barrier to their progress. I think twice as much as sort of other respondents on that one. Parents, on the other hand, and I will admit this one hits a little bit close to home, were particularly focused on sort of prioritizing how do they create better opportunities for their children. And as they thought about that, you know, the cost of living really was the top concern. And that was true across income demographics. And so for lower income parents, physical and mental health challenges and sort of unemployment and job security were real sort of concerns and potential barriers.

4:09Whereas for higher income parents, time was the biggest thing that they saw as sort of being a barrier to progress. So within life stage, you know, we saw some variance, but the biggest thing really was driven by that life stage. And then I think for that third group, that sort of those nearing retirement, you know, prioritizing saving for the future was not surprisingly the thing that they saw as sort of most important and sort of most front and center as they thought about their own economic mobility.

4:42Roberta Fusaro: That all resonates so much, Diana, as the mother of two boys and also sort of getting closer to retirement age, although it seems so far away. One of the other things that we saw in the research is that the high cost of living is weighing on many Americans. So here's Joan. She's 48 and lives in Florida. I don't know if I can afford health care. That's the big unknown right now. I mean, with the ACA subsidies right now, it's like$1 ,300 a month for myself and my husband. And that's so expensive. It's a huge barrier. JP, after listening to Joan's comments here, who or which parts of the population are most concerned about health care?

5:34What was really interesting is it came up on both ends of the spectrum. It was things like, yes, I want to be able to afford my health care, like Joan mentioned. But then also, I want to be healthy enough to not be a burden to my family as I retire. I want to be healthy enough and active such that I can age in my home that I've spent my life building. And so a lot of what people were kind of pushing for and striving for was a sense of well-being to be able to live their life, particularly at the end of their life, in a way that gave them dignity and allowed them to remain the communities that they have really built.

6:08And what I loved about that undertone is we often think about health as a separate, distinct thing from economic mobility. I think what's really clear from this research and what we're hearing from people is it is fundamental infrastructure for everything we do. There is no economic mobility without health and well-being. And so just seeing how clearly people tethered those two concepts, I think, was really helpful as we think about potential solutions to move this work forward.

6:35Roberta Fusaro: Drilling down just a little bit further because you guys had so much great data and great detail in the report, which specific household expenses did Americans identify as creating the greatest financial strain? Well, this one was also, I think, really interesting. So we asked folks two questions. The first was, what is the greatest barrier getting away of progress? And far and away, the cost of living was the number one thing that people cited. So 60 % of Americans said that is the thing getting in the way of me achieving my dreams. But we then asked people, within cost of living, which cost?

7:12And what we heard quite clearly was nine out of 10 folks said the cost of food and groceries is the thing that is really pressuring my household at this moment. More than my housing costs, more than gas, more than health care, more than education. And what I think what's interesting is that, and research kind of supports this, is we're much more aware of prices that we interact with frequently, even relative to some of these bigger household items. I will say as the father of two boys, I spend a lot of time at the grocery store. And so I intimately know the price of oat milk, apples, and oatmeal, because that is staples in my house.

7:52Roberta Fusaro: Oh, that makes perfect sense. You know, Diana, you talked a little bit about mental health. I want to sort of make a, maybe it's a tenuous connection. I don't think it is, and we'll talk through it. But the research also notes that the rising cost of living is not just a financial issue, right? It's a social and psychological issue as well. In what ways is this affecting how people think about the future? Absolutely. I don't think it's a tenuous connection at all. I think the reality is like affordability pressures do change how people imagine their future. And that came out time and again in the stories that we heard from people.

8:28When sort of the basic cost of living is rising faster than people's own sense of security, then people get nervous about the future. And instead of feeling sort of excited and planning for it, they feel like they have to, like, defend against what could go wrong. And that psychological consequence is real and translates to people making major decisions about how they're going to live their life. It's things like delaying having children in some cases. It makes them nervous about changing jobs. It makes them nervous about pursuing education and things that are maybe longer term sort of investments that they may want to make.

9:09but get afraid to because of their monthly budget and sort of the here and now pressure of affordability. And so that means people feel like they lose agency. If they're, you know, whatever it is, one medical bill, sort of, you know, one rent increase, one job disruption away from feeling like everything could be destabilized, they're much less likely to actually take the steps that could help them create upward mobility for themselves and their families. So, Diana, how could, say, employers, educators, policymakers, what are some of the steps that they can take?

9:49Roberta Fusaro: Or how can they respond if career pathways become less predictable than they have been for previous generations? So if we think about educators first, and so that means how do you create a combination of strengthening real foundational skills, building, you know, what are presumed to be quite durable human skills that are going to be needed now and in the future? And then, you know, how do they think about what we call sort of, you know, earn and learn pathways that really connect the classroom learning to what will be sort of real career opportunities over time? So now how should business leaders perhaps think differently about how they design their policies and programs?

10:31Yes. So I think for business leaders or employers, a lot of it is around how do they think about making career pathways more transparent, more flexible, more supportive to the broader set of their employees or potential employees. And so this means things like promotion criteria that are clear. How do you help people understand how am I going to move up in this place? Um, you're seeing a big movement towards skills-based hiring. How do we think about that to really broaden who we can bring into the workforce and into what roles? Um, things like paid training, apprenticeships, uh, things that will be able to help people to, again, take on opportunities that might not otherwise immediately seem available to them.

11:14And then the last thing that I think we, you know, heard from our sort of research and from the stories we heard was about the real benefits that employers can provide that address just like the realities of workers' lives. So you think about things like child care, about health care, about scheduling flexibility, and then this mental health threat as well, mental health supports.

11:39Roberta Fusaro: JP, did you have anything to add there? or? The one thing I wanted to pile on there, Diane, is when we talk to folks about why they're, what else their employer offers them, there was this other sense of like, there's actually real value in community of my coworkers. I get mentorship at my job. I feel like my life has purpose and I wake up every day excited to go do a thing. There's these non-financial benefits that people really value that I think employers uniquely offer that I think is really important to The people that McKinsey interviewed who say they feel connected to their community also say they feel like they have more agency over their lives and their future.

12:19Roberta Fusaro: Here's one of them. It's Jasmine, who is 40 and she's from Texas. I feel very connected because I work for the schools. We live in a really small community. I know parents. I know kids. I go to the grocery store and little kids run up to me and give me a hug. But only a third of survey respondents say they feel this way. Diana, why is feeling part of the community important? Absolutely. And I have to say, Jasmine's quote resonates with me so much. So 25 years ago this month, I started as a public school teacher in Atlanta. My experience of community connection in that role was overwhelming. And it's been central to me ever since.

13:05I mean, it is such an important thing. And the research found that people who feel strongly connected to their communities are, I think this is really interesting, they're twice as likely to feel that they have a say in the direction of their lives. They're three times as likely to say that they feel in control of their future. And they're four times as likely to feel that their life has momentum. And that's even after you control for demographic characteristics. It puts them in a different position to access information, to find support, and to just be able to express agency in taking steps forward towards whatever it is that they're aspiring to.

13:47Roberta Fusaro: JP, what steps can community leaders and other stakeholders, what can they do to increase this sense of community? I think it takes to actually build community three things. Place, purpose, and proximity. And there's really good research around this, right? So people need places to go, both be able to live in their community, so housing's a big topic there, but then also third spaces to actually congregate. Parks, community centers, bowling alleys, whatever you call it. They then need a purpose. They need a reason to congregate and be in community together, whether that's to play a game, to play a sport, to worship, whatever it might be.

14:28And then the best versions of that are when you're able to put people who are different from each other in proximity. So across racial lines, across lines of income, even across different parts of a geography. That is where you get the secret sauce of people feel a sense of deep community to the place in which they are living. And so I think there's very tactical things that policymakers, governments, private sector leaders can do. You can support civic spaces. We can make real commitments to our libraries, our museums, our parks that allow people these opportunities to be in community with one another.

15:07We can support community organizations like bowling leagues and recreational sports and houses of worship to ensure that people have a purpose to get together. And then I think finding ways to ensure that those interactions are happening across lines of difference.

15:23Roberta Fusaro: So we've established that many factors contribute to folks determining their economic opportunity. Place is foundational, right? But it's not the whole story. Here's Reg. He's 49 and he lives in Philadelphia, probably right somewhere nearby to JP. And he has a whole other issue on his mind. I think money, knowing how to manage your money and handling it is a big deal. It's something they don't teach you a lot in school, especially in the inner city. And that's something I think is a downfall for people like me. I wish I would have known about how to plan with money. JP, how does place affect educational opportunity?

16:07I think Reg's point is really spot on, right? So what he learned in school was a distillation of his local school district, the local government, and their decisions on what is taught. to what extent his school had the resources to teach things like financial education, what exposure he had to the financial markets, whether it's through private sector organizations or social sector organizations. And so in a lot of ways, what he is expressing is he experienced something deeply in place. And this is one of the ways in which place through very direct and indirect ways really does shape people's experiences.

16:45So take that educational opportunity as one example, but we also know that place shapes probably where Reg is able to work because the employers in his local economy are such and they're pretty fixed. It shapes to what extent Reg has access to clean water and green space, to what extent he is able to access food and financial services accessibly. And so place, I think, really does shape to what extent people have the environment and the conditions needed to succeed. And Reg's example is, I think, a really prime one in which that comes to the fore. It's fundamental. Like, if you think about your address, it impacts the local labor market you're in.

17:29It impacts what jobs you have access to, what school your kids go to, whether or not you have a grocery store or a bank or access to transportation. In many cases, it changes whether or not you're exposed to violence, whether or not you have clean air, clean water, green spaces, all of these things that really matter for one's economic opportunity and their success. It also shapes your civic and political context, as we started talking about Roberta. So I think what's important to remember in this is if economic mobility is fundamentally about, yes, people have more income and wealth to support themselves, but also, to Diana's point, the sense of control and autonomy about what happens in their lives and a sense of dignity and belonging in the places which they live.

18:18If all three of those things are what we define as economic mobility, place plays a role across each of them. It is shaping to what extent I have economic opportunity. It is shaping to what extent I have power over my life. And it's shaping how much I'm actually belonging and connected to the place where I live. And so to me, place continues to be fundamental to economic mobility.

18:39Roberta Fusaro: Has the American dream fundamentally changed given our world right now? I don't think at the core, the American dream has fundamentally changed, right? People want to build a better life. They want to support their families. They want to work with dignity, own a home, save for the future. People are much more concerned about whether that's a reality, whether it ever has been, but certainly whether in this moment today, whether it's real. That's exactly spot on, Diana. I feel like it's the context that is actually shifting. And people, I think, are reasonable and rational to be worried about to what extent the conditions we're currently facing enable more people to experience economic mobility.

19:27Roberta Fusaro: If you could recommend just one action based on this report that, you know, educator, policymaker, business person, what action could they take that could most improve economic mobility over the next decade? What would have the greatest impact? I've got one and a half, Roberta, if that's all right. Sure. Please. I think first and foremost is finding ways to make life more affordable. And that to me is both how do we reduce the cost of housing, food, childcare, things that people actually fundamentally need, but also ensuring that families earn more income so they're able to support themselves.

20:08For far too long, the productivity of the average worker has not translated to increased wages. And I think that pressure continues to be a real challenge that we need to solve. My half is actually in the way that we did this research was by listening to actual people in real time. I would love to find ways for leaders, whether you're in the private sector, elected official, in philanthropy, to do more real time listening of what are people asking for.

20:37Roberta Fusaro: I love that. I love that. Diana, what would you recommend? Yeah, I don't know if JP is one and a half means I only have to come in with a half year to close us out. But I would say, you know, and maybe it's the former educator in me. But to me, I just I think there's really something about how do we build more reliable pathways for people to get into good jobs and then be able to progress sort of through those jobs, especially as we think about these sort of key life stages. And especially as we think about sort of young adults who are so focused and so committed on trying to enter into the labor force in an effective way and to set themselves up to sort of be able to advance.

21:22Roberta Fusaro: I really appreciate you guys taking the time to chat through it. We'll put a link to the report in our show notes. Appreciate you guys taking the time. Thanks so much for joining today. Thanks for having us. Thanks for having us.

21:38Thank you.