Investigating the Black/White Earnings Gap
Investigating the Black/White Earnings Gap
Blacks experienced blatant labor market discrimination during much of the twentieth century. Until the passage of the Civil Rights Act of 1964, it was legal in many states to refuse to hire a black worker, regardless of the credentials or experience of that worker. Moreover, blacks were often denied access to educational opportunities, which in turn meant that they had lower levels of qualifications for many jobs. At least one economic study has shown that the 1964 law is partially responsible for the narrowing of the gap in black–white earnings in the late 1960s and into the 1970s; for example, the ratio of total earnings of black male workers to white male workers rose from 62% in 1964 to 75.3% in 2013, according to the Bureau of Labor Statistics.
However, the earnings gap between black and white workers has not changed as much as the earnings gap between men and women has in the last half century. The remaining racial gap seems related both to continuing differences in education levels and to the presence of discrimination. This table shows that the percentage of blacks who complete a four-year university degree remains substantially lower than the percentage of whites who complete university. According to the U.S. Census, both whites and blacks have higher levels of educational attainment than Hispanics and lower levels than Asians. The lower average levels of education for black workers surely explain part of the earnings gap. In fact, black women who have the same levels of education and experience as white women receive, on average, about the same level of pay. One study shows that white and black university graduates have identical salaries immediately after university; however, the racial wage gap widens over time, an outcome that suggests the possibility of continuing discrimination. Another study conducted a field experiment by responding to job advertisements with fictitious resumes with either very African American sounding names or very white sounding names and found out that white names received 50 percent more callbacks for interviews. This is suggestive of discrimination in job opportunities. Further, as the following Clear It Up feature explains, there is evidence to support that discrimination in the housing market is connected to employment discrimination.
Educational Attainment by Race and Ethnicity in 2012 (Source: http://www.census.gov/hhes/socdemo/education/data/cps/2014/tables.html)
| White | Hispanic | Black | Asian | |
|---|---|---|---|---|
| Completed four years of high school or more | 89.0% | 65.0% | 84.2% | 88.9% |
| Completed four years of university or more | 29.0% | 14.0% | 17.0% | 52.0% |
How is discrimination in the housing market connected to employment discrimination?
In a recent study by the Housing and Urban Development (HUD) department, black homebuyers who ask to look at homes for sale are shown 18 percent fewer homes compared to white homebuyers. Asians are shown 19 percent fewer properties. Additionally, Hispanics experience more discrimination in renting apartments and undergo stiffer credit checks than white renters. In a 2012 study conducted by the U.S. Department of Housing and Urban Development and the nonprofit Urban Institute, Hispanic testers who contacted agents about advertised rental units were given information about 12 percent fewer units available and were shown seven percent fewer units than white renters. The $9 million study, based on research in 28 metropolitan areas, concluded that blatant “door slamming” forms of discrimination are on the decline but that the discrimination that does exist is harder to detect, and as a result, more difficult to remedy. According to the Chicago Tribune, HUD Secretary Shaun Donovan told reporters, “Just because it’s taken on a hidden form doesn’t make it any less harmful. You might not be able to move into that community with the good schools.”
The lower levels of education for black workers can also be a result of discrimination—although it may be pre-labor market discrimination, rather than direct discrimination by employers in the labor market. For example, if discrimination in housing markets causes black families to live clustered together in certain poorer neighborhoods, then the black children will continue to have lower educational attainment then their white counterparts and, consequently, not be able to obtain the higher paying jobs that require higher levels of education. Another element to consider is that in the past, when blacks were effectively barred from many high-paying jobs, getting additional education could have seemed somewhat pointless, because the educational degrees would not pay off. Even though labor market discrimination has been legally abolished, it can take some time to establish a culture and a tradition of valuing education highly. Additionally, a legacy of past discrimination may contribute to an attitude that blacks will have a difficult time succeeding in academic subjects. In any case, the impact of social discrimination in labor markets is more complicated than seeking to punish a few bigoted employers.
This lesson is part of:
Issues in Labour Markets