Stark black-white divide in wages is widening further

Elise Gould

Elise Gould Senior Economist, EPI

One of the most striking features of US racial inequality is just how stubborn the wage gap between black and white workers has remained over the last four decades.

That trend was evident in EPI’s new State of Working America (SWA) Wagesreport, which highlights trends in wages across the wage distribution, by education, as well as by gender, race, and ethnicity.

Overall, the findings indicate wages are slowly improving with the growing economy, but wage inequality has grown and wage gaps have persisted, and in some cases, worsened. In this post, I will highlight one particular worsening wage gap and look at it from multiple dimensions. Since 2000, by any way it’s measured, the wage gap between black and white workers has grown significantly.

The findings here support the important research by Valerie Wilson and William M. Rodgers III, which shows that black-white wage gaps expanded with rising wage inequality from 1979 to 2015. Where their report is incredibly comprehensive, the trends outlined here are rudimentary, but reinforce the same basic truths.

In the figure below, I’ve collected some of the main findings on the black-white wage gap found both in the latest SWA report as well as the SWA data library. Using various measures, I compare wages for black and white workers over the last 18 years, highlighting the gaps in wages in 2000, the last time the economy was closest to full employment, 2007, the last business cycle peak before the Great Recession, and 2018, the latest data available.

Against these benchmarks, I illustrated the growth in the average gap, the gap for low, middle, and high wage workers, the gap for workers with a high school diploma, a college degree and an advanced degree, and as well as a regression-adjusted wage gap (controlling for age, gender, education, and region).

As always, it’s important to remember the historical and social contexts for differences in black and white labor market experiences and labor market outcomes. We know from a host of economic research that a person’s wages are not a simple function of individual ability. Instead, workers’ ability to claim higher wages rests on a host of social, political, and institutional factors outside their control.

Against that backdrop, and given a long history of excluding black Americans from social and political institutions that boost wage growth, the stubbornness of racial wage gaps is less surprising. Connie Razza provides a powerful framework for examining the systematic social deprivation and economic disadvantage maintained and reinforced by those with economic and political power.

As shown in the figure above, the black-white wage gap is smallest at the bottom of the wage distribution, where a wage floor, otherwise known as the minimum wage, keeps the lowest wage black workers from even lower wages. Raising the federal minimum wage would also disproportionately benefit black workers because they are overrepresented among low wage workers and are less likely to live in states or localities that have passed a minimum wage that is higher than the current federal minimum.


Black-white wage gaps widen across multiple measures

Black-white wages gaps at different points in the wage distribution, by education, and regression-based, 2000, 2007, and 2018

Average 21.8% 23.5% 27.5%
10th percentile 6.2% 8.7% 9.2%
Median 20.8% 22.3% 26.7%
95th percentile 28.0% 28.3% 33.4%
 High school 15.3% 17.4% 21.2%
 College 17.2% 19.2% 21.0%
 Advanced degree 12.5% 16.7% 18.5%
Regression-based 10.2% 12.2% 16.2%

Notes: Sample based on all workers ages 16 and older. The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more. Educational attainment is based on mutually exclusive categories: e.g. high school is high school only, etc. Similar results are found for those with less than high school or some college. The regression-adjusted black–white wage gap controls for education, age, gender, and region.

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata from the U.S. Census Bureau

The largest black-white wage gaps are found at the top of the wage distribution. The 33.4 percent wage gap for the highest wage workers is explained in part by occupational segregation, the disproportionate likelihood for white workers to occupy positions in the highest wage professions, and the pulling away of the top more generally.

Occupational segregation is particularly devastating for black women who face a history of deep seated racial and gender discrimination. Any number of fields would provide examples, but in my own, Rhonda Sharpe has documented the lack of representation in economics and the American Economic Association’s Summer Program along with the recently formed Sadie Collective are working to diversify the field.

Education is not a panacea for closing these wage gaps.  Again, this should not be shocking, as increased equality of educational access—as laudable a goal as it is—has been shown to have only small effects on class-based wage inequality, and racial wealth gaps have been almost entirely unmoved by a narrowing of the black-white college attainment gap, as demonstrated by William Darity Jr. and others here.

The figure below shows that across various levels of education, a significant black-white wage gap remains. Black workers can’t simply educate their way out of the gap. Even black workers with an advanced degree experience a significant wage gap compared to their white counterparts. And after controlling for age, gender, education and region, black workers are paid 16.2 percent less than white workers.

While the wage gaps differ depending on measure, what is obvious from the trends displayed is that the gaps widened in the full business cycle 2000-2007 and continued to grow in the Great Recession and its aftermath. Even though the black unemployment rate has fallen precipitously over the last several years, wage growth has remained particularly weak for black workers.

In a recent paper, Josh Bivens and Ben Zipperer present evidence in support of hopes that a high pressure labor market can improve relative labor market outcomes for black workers, particularly when it comes to labor force participation and work hours. The data here suggest that wage growth continues to lag progress in employment.

While black workers continue to increase their educational attainment, occupational segregation persists, and employers continue to wield considerable leverage to dictate wage contracts, including ones that perpetuate discriminatory practices. Unfortunately, in lieu of stronger labor standards and worker bargaining power, it takes tighter and tighter labor markets for all workers to reap the rewards of a strong and growing economy.

I’m optimistic that as the economy continues to move towards genuine full employment, black workers will see their wages rise. But, it will take more than a couple of years of a full employment economy to close racial wage gaps and compensate for years of lower wages, lower incomes and lower wealth.


Reposted from EPI