The State of Economic Empowerment

According to the McKinsey Global Institute (MGI), as of 2020, approximately 61% of the global population struggled to meet their basic daily needs and save for the future. To better analyze progression toward universal access to essentials, MGI introduced the concept of the “empowerment line.”

Defining the Empowerment Line

This empowerment line is characterized as higher than the conventional international poverty threshold and varies significantly by country. For instance, in low-income economies, it is set at a minimum of $12 per day (purchasing power parity) while for wealthier nations like the United States or Switzerland, it ranges from $55 to $70 per individual daily.

Challenges to Economic Empowerment

The methods for fostering economic empowerment depend heavily on a country’s income level. In lower- and middle-income countries (LMICs), economic growth stands out as a potent driver of progress. However, mere increases in GDP do not suffice; many individuals in high-income nations also fall short of economic empowerment due to rising costs outpacing inflation for essential goods and services.

Identifying Barriers Across Different Economies

MGI’s ongoing work has highlighted significant barriers to economic empowerment in 120 countries. Notably, even amongst nations with similar GDP levels, the proportion of people living below the empowerment line varies greatly, as do the economic challenges faced. For example, in Germany, the cost of housing, in the United States, healthcare expenses, and in Japan, food prices each present unique hurdles to local populations.

Strategic Approaches for Businesses

As major employers globally, businesses are crucial in pushing for economic empowerment among their employees, customers, suppliers, and surrounding communities. MGI’s research on 100 large corporations reveals around 70 distinct empowerment initiatives, ranging from food bank contributions to affordable housing projects.

Effective Empowerment Initiatives

Effective strategies often overlap in three main areas: connections, contexts, and capabilities:

• Connections: Target assistance to individuals in genuine need. Understanding the network of employees, suppliers, and customers helps tailor support efforts. For instance, a budget retail store might focus on improving conditions for its hourly workers, whereas a luxury brand may prioritize its supply chain communities.
• Contexts: Address specific barriers in different locales. For example, in Vietnam, high food prices could be a focal point for empowerment projects.
• Capabilities: Align corporate strengths with community needs. Banks might provide specialized loans, while technology companies could facilitate skills training.

Measuring Impact for Enhanced Efficiency

Businesses that implement targeted initiatives can assess their effectiveness using a unified metric evaluating social impact. This allows for comparison of cost efficiency—how many individuals achieve economic empowerment per investment dollar. For example, if two initiatives have respective impact costs of 1.0 and 0.1, attaining the same results would require ten times the investment for the first initiative.

The Importance of Economic Inclusion

Enhancing cost-efficiency in social initiatives amplifies the impact on empowerment, extending benefits to individuals and community structures while supporting broader societal goals. Companies play a pivotal role in fostering economic inclusion, and optimized initiatives can lead to more substantial and lasting benefits.