Section 7 concludes with an overview of the major themes and policy recommendations. At the root of these economic challenges is the near stagnation of hourly wage growth for the vast majority of American workers over the last three-and-a-half decades.
Race and Gender in Modern Western Warfare
The salience of these issues is evidenced by the fact that terms like economic inequality, stagnant wages, and rebuilding the middle class are frequently used in national discourse on the state of the American economy, as well as by people in both political parties. The fingerprints of several policy decisions and business practices, including eroded labor standards, weakened labor market institutions, and excessive executive pay growth, can be found in the history of wage growth in the past generation Bivens et al.
A key measure of the potential for pay increases is productivity growth, and since wages have grown more slowly than productivity for everyone except the top 5 percent of workers, while wage growth for the top 1 percent has significantly exceeded the rate of productivity growth. The disconnect between wage and productivity growth means that the majority of workers have reaped few of the economic rewards they helped to produce over the last 36 years because most of the benefits have gone to those at the very top of the wage scale.
While this experience has not been limited to any single group of workers, African Americans have been disproportionately affected by the growing gap between pay and productivity.
Figure A shows that since median hourly real wage growth has fallen short of productivity growth for all groups of workers, regardless of race or gender. At the same time, wages for African American men and women have grown more slowly than those of their white counterparts. As a result, pay disparities by race and ethnicity have remained unchanged or have expanded. Table 1 further demonstrates the intersection of class and racial inequality, presenting trends in real wages and wage growth at the 10th, 50th, and 95th percentiles, as well as at the mean, of the wage distribution by race.
We present these data for the business cycle peak years of , , , and , as well as for the point during the s business cycle after which wages grew dramatically and for the last year for which data are available. One of the reasons that the average black-white wage gap has continued to expand is the fact that very few African Americans earn wages that place them among the top 5 percent of all wage earners, where most growth has been concentrated.
Only 3 percent of all chief executives are African American, and a disproportionate number of them are employed in the public or private nonprofit sectors, where salaries are lower and more likely to be capped than they are in the private for-profit sector.
Race, gender significant drivers of inequality in SA
At the 50th percentile median , blacks earn In addition to these racial differences in pay, Table 1 also makes clear that, over the last 36 years, strong wage growth has eluded most workers, regardless of race, and, to the extent that wages have grown at all, most of the growth happened in a single episode between and In almost every economic cycle preceding and following the late s boom, wage growth of black and white low- to middle-wage earners was either flat or negative.
Between and , wages declined 8. At the median, the wages of blacks grew a meager 1. This compares with growth of These patterns suggest that addressing the problems of stagnant wages and racial wage inequality has now become a dual imperative. While wage inequality is largely understood as a class issue, it is also important to understand how the stagnation of wages for the vast majority of all workers has contributed to measured racial wage inequality.
At the same time, any effort to fully remedy racial wage gaps in a way that boosts wages and improves living standards for African American families must end the decades of broad-based wage stagnation that has had the most damaging effects on African American workers. This report focuses on trends in black-white wage gaps since , including an analysis of the role that growing overall wage inequality has played.
The literature on estimating and explaining black-white wage inequality has two distinct focuses. Rodgers However, we will show otherwise. This debate raged for several years, but seems to have quieted down. This study revisits the trend analysis that dominated the literature from the s through the s, and we update and extend previous studies by examining what has happened to the black-white wage gap since the late s. Our analysis affirms that the black-white wage gap among men expanded during the s and narrowed significantly during the s.
Our contribution is a detailed assessment of what has been the pattern or trend for men since the late s and women since the late s. For the latter period, some assert that higher black incarceration rates disproportionally pulled the less skilled out of the labor force, thus truncating the wage distribution at the low end and raising the average wage Neal and Rick Although much has happened in the macroeconomy e.
Trends in educational attainment yield mixed messages as to the impact on the wage gap. Since , college completion rates by black and white men have increased by 4. For black and white women, the increases were 7. However, the trends in high school completion suggest that educational attainment will contribute to a slight narrowing in the overall wage gap and a narrowing in the wage gap among high school graduate blacks and whites.
The percentage of white men with at least a high school diploma has increased by 4. Patterns in imprisonment might put pressure on the wage gaps among the young and less educated to narrow, or at best remain the same. According to the U. Department of Justice, although the ratio of the imprisonment rate of white men and black men sat at 5. The ratios among white women and black women fell from 6. For both, much of the drop was from to because the white imprisonment rate rose while the African American imprisonment rate fell.
Because the ratio remains so large, imprisonment and its labor market scarring effects will definitely contribute to wage gaps in a given year, but their pattern over time since should assist in narrowing the wage gap. Changes in the macroeconomy will surely have an impact on the wage gaps since The U. Economic growth returned but it was not sustainable. From to , the jobless rate was slow to fall, wages continued to stagnate, and household debt expanded to record levels. After the Great Recession of — job growth, instead of rebounding quickly as it did after the s recession, took over 40 months to reemerge.
Since February , the economy has grown and private-sector job creation has spanned over 78 months.
As of July , the unemployment rate had fallen to 4. Further, the labor force participation rate of prime-age adults has not returned to pre-recession levels. Unionization has historically provided a wage advantage to black workers, since union members receive higher wages than otherwise similar non-union workers and union membership rates are highest among black workers.
Bound and Freeman documented the effect of declining unionization on wage losses among black men during the s. Since then, the share of workers with union representation has continued to decline, falling 11 percentage points among blacks and 8 percentage points among whites between and Historically, the relationship between macroeconomic growth and black-white inequality has been such that, as the economy expands, black-white inequality typically narrows, and, when the economy worsens, inequality expands.
However, given the generally slower economic growth that has been the norm since , what have been the patterns of black-white earnings inequality during the recovery of —, the Great Recession of —, and now the current recovery? We suspect that, after tremendous gains during the s, since racial inequality has followed general patterns of inequality—either stagnated or expanded, but not in a dramatic style as during the s.
Black-white wage gaps expand with rising wage inequality | Economic Policy Institute
Collectively, tepid and unsustainable economic growth, plus the Great Recession, have led to expansion in the black-white wage gap. We estimate log hourly wage gaps between black and white workers, adjusted for years of potential experience, education, region of residence, and metro status. The specification for the variables used to estimate adjusted wage gaps comes from Bound and Freeman Years of potential experience are measured as age minus years of schooling minus six. Dummy variables for each of the nine Census divisions and the metropolitan statistical area indicator are used to control for region of residence and metro status.
Much of the work on racial inequality has focused on the new-entrant wage gap because this demographic is most sensitive to macroeconomic and structural change. We divide the sample of workers into two experience categories—new entrants and more experienced workers—and perform a separate analysis for each group. We examine the more experienced workers because they were new entrants during the s when the wage gap began expanding.
Doing this allows us to see whether early labor market disadvantages persist over time.
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Experienced workers are those with 11 to 20 years of potential experience. High school graduates in this experience category are between the ages of 29 and Figure B plots the trend in log hourly wage gaps the percentage disadvantage between black and white workers by gender since The graph includes four series, an adjusted and unadjusted series each for men and women. The unadjusted wage gaps are simply the average differences reported in the survey, while the adjusted series present wage gaps among full-time workers after controlling for racial differences in education, potential experience, region of residence, and metro status.
Note: The adjusted wage gaps are for full-time workers and control for racial difference in education, potential experience, region of residence, and metro status. Looking first at the unadjusted series, we see the familiar pattern of expansion of black-white wage gaps during the s. For men, this expansion occurred primarily in the first half of that decade, when unemployment was high and union density and the number of manufacturing jobs, especially in the Midwest, were drastically declining. For women, the expansion in the unadjusted black-white wage gap that began in the s continued through the mids.
This is notable because, with an average hourly wage gap of 6 percent, black women were near parity with white women in By , this gap had grown to 8 percent, then nearly doubled to 15 percent by While the adjusted and unadjusted series follow similar patterns, the adjusted estimates provide additional information that helps us to better understand these wage gaps.
For example, part of the reason for the difference in average pay between white and black workers is that the composition of workers in each group is not the same. The difference between the adjusted and unadjusted series in Figure B shows how much of the average racial differences in pay among full-time workers only can be explained by racial differences in education, potential experience, region of the country, and metro status.
For men, these differences reduce the estimated gap by roughly the same amount 5 to 8 percentage points throughout most of the period we observe. For women, however, these characteristics go from having a very negligible effect on the gap in 1. These results suggest that, while the impact of workforce composition on average black-white wage gaps among men has been fairly constant over time, the impact among women has increased as the characteristics of black and white working women have grown more distinct.
An important thing to note here is that these adjusted series do not account for workforce composition factors such as racial and gender differences in incarceration.
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The adjusted estimates also help us to more clearly identify periods of wage convergence that are less obvious from observing trends in the average unadjusted gaps. The adjusted series for men and women in Figure B both show a brief period of progress toward racial pay equity between and During this period, the adjusted black-white wage gap falls from 23 percent to 20 percent among men and from 10 percent to 7 percent among women.
During the late s, macroeconomic growth was sustained and broad-based, and public policy became more favorable for reducing racial wage inequality. For example, the Bureau of Labor Statistics unemployment rate fell and remained below 5. Also, the number of states that set their minimum wage in excess of the federal minimum wage increased. The convergence of the wage gap during this period ended with the start of the short and shallow recession of Figure B also shows that racial differences in pay are smaller among women than among men, regardless of whether the estimates are adjusted or unadjusted.
However, we have to be careful in how we interpret this finding. It does not mean black women face fewer challenges in the labor market than black men. It just means that potentially more of the disadvantage is associated with gender differences in pay e.
Figure C shows adjusted hourly wage gaps for white and black women and black men relative to white men. Since black women were near parity with white women in , their wage gap relative to white men was comparable. In , for instance, white women were at a Black women earned The gender wage gap narrowed considerably during the s and early s, resulting by in a gap of These adjusted gender wage gaps have remained virtually unchanged since the s, so the economic boom did not narrow gender wage disparities in the same way that it narrowed racial wage gaps.
Davis and Gould estimate that 40 percent of the narrowing of the gender wage gap between and was due to falling wages for men. Note: The adjusted wage gaps are for full-time workers and control for racial differences in education, potential experience, region of residence, and metro status. Just as there are clear differences in the racial wage gaps by gender, young men and women face different wage gaps than older men and women.