Black-white wage gaps larger since 1979 due primarily to discrimination

Valerie Rawlston Wilson of the Economic Policy Institute

Valerie Rawlston Wilson of the Economic Policy Institute

A new paper authored by director of Economic Policy Institute’s Program on Race, Ethnicity, and the Economy Valerie Wilson and Rutgers University economist William M. Rodgers III, finds that racial wage gaps in 2015 were larger than they were in 1979. The impact of growing racial wage gaps during this period has been especially detrimental to the economic well-being of African Americans since this was also a period of weak wage growth for the vast majority of workers.

Wilson and Rodgers compare black and white workers’ average hourly wages, adjusting for education, experience, region of residence, and metro status. Even after adjusting for these factors, they found sizeable wage gaps between black and white workers. And that the black-white wage gap has expanded the most for college graduates.

In 2015, black men’s average hourly wages were 22.0 percent less than those of comparable white men, whereas in 1979, the wage gap was only 16.9 percent. Similarly, with an adjusted average hourly wage gap of only 4.5 percent, black and white women were near parity in 1979. In 2015, however, black women experienced an 11.7 percent wage gap relative to white women, while the wage gap between black women and white men was 34.2 percent.

william_m_rodgers_iii_phd

William M. Rodgers III, Ph.D. of Rutgers University

Wilson and Rodgers tie the growth of racial wage gaps beginning in the early 1980s to factors like high unemployment, declining unionization, and lax enforcement of anti-discrimination laws.

“While racial wage gaps are worse today than in 1979, the deterioration has not appeared along a straight line,” said Wilson. “During the late 1990s, the gaps shrank due partially to tight labor markets, which made discrimination more costly, and policy decisions like raising the minimum wage. Since 2000, the gaps have grown again.”

New entrants into the labor market (who tend to be younger workers) face smaller, though still significant, wage gaps than those with more experience. However, these early labor market disadvantages persist and even grow as black workers pursue their careers.

In order to address racial wage gaps, Wilson and Rodgers recommend various policies to eliminate workplace discrimination and create greater transparency, including: consistently enforcing antidiscrimination laws, urging the Equal Employment Opportunity Commission to develop metropolitan area measures of discrimination, and encouraging the Bureau of Labor Statistics to identify currently “unobservable measures” that impact racial wage gaps.

Additionally, they recommend broader economic policies, such as raising the federal minimum wage, strengthening workers’ ability to collectively bargain, and monetary policy that targets full employment with wage growth that matches productivity gains.

“We’ve found that racial wage gaps are growing primarily due to discrimination—and other unmeasured and unobserved characteristics—along with rising inequality in general,” said Rodgers. “In order to fully address racial wage gaps, direct action must be taken to decrease discrimination and address the problem of stagnant wages across the board.”


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