Black-white wage differential: The relative importance of human capital and labor market structure

This article uses the decomposition analysis developed by Neumark and the 1987 CPS data to investigate the relative importance of human capital and labor market structure in explaining the observed wage differential between white males and blacks (both male and female). We find that labor market structure, as opposed to differences in human capital, explains a relatively large portion of the wage gap between white males and blacks. In addition to blacks and whites being paid different wages for the same work, they are also given unequal opportunities. This means that narrowing the human capital gap between the races will not be enough to close the wage gap, as argued by human capital theorists. It is equally important to pursue policies that provide access to higher paying jobs and industries for blacks.     

Export Activity,Firm Size and Wage Structure: Evidence from Taiwanese Manufacturing Firms*

This study adopts a semiparametric smooth coefficient model to evaluate the export–wage premiums, firm size–wage premiums, and the wage gap between skilled and unskilled labor. Particular focus is placed upon widespread evidence indicating that pay levels in ‘large’ and ‘export‐oriented’ firms are higher than in their ‘small’ and ‘domestic‐oriented’ counterparts. Applying the firm‐level data for Taiwanese manufacturing firms, we find a positive export–wage premium for skilled workers and a negative export–wage premium for unskilled workers. The hypothesis of a constant export premium across firm size is rejected. While most of the export–wage premiums for skilled labor can be attributed to the small and medium firms, the large exporting firms have a significant adverse effect on wages for unskilled labor. Moreover, our results suggest that the firm size–wage premiums for skilled workers are larger than those for unskilled workers. The wage gap between the two skill groups is also sensitive to size categories.     

Employment and Earnings: A Case Study of Urban Detroit

This paper investigates the roles of manufacturing employment, neighborhood poverty, and family structure in determining wages among Detroit, MI workers, just prior to the current economic crisis. Employment in manufacturing has been crucial for blacks and whites: 39% of black and of white men in the Detroit metropolitan area worked in manufacturing in 2000. Regression analysis in this paper estimates employment in manufacturing raised wages 15.8% for all workers in the metropolitan area, 24.4% for blacks and 13.8% for whites. It finds a higher wage penalty (4.7%) for blacks in non-manufacturing industries than is found when manufacturing sector jobs are included (2.6%). Wage returns to education were greater in the non-manufacturing employment sector, especially for blacks. Residence in the poorest central city neighborhoods reduced wages significantly for white manufacturing and non-manufacturing workers. Its coefficient was insignificant for black workers. Gender and marital status effects on wages differed between blacks and whites in magnitude: White women suffered a larger penalty for their sex than black women (22.6 versus 9.6%) yet black men enjoyed a greater return to marriage than white men (27.5 versus 25.0%). Controlling for manufacturing reduced the gender wage gap and the returns to marriage for men. These findings suggest greater accessibility for women; and lower returns to marriage in non-manufacturing sectors. Among employed blacks access to manufacturing jobs has been their main source of decent wages. The adverse effects of the industry??s job loss in the 1980s and 1990s impacted all Detroit residents. Other high wage industries have employed relatively few blacks, have not paid them well; and have suffered job loss and slow growth over the period. Education could have raised wages for non-manufacturing workers, but not as much as access to manufacturing jobs. Today as in 2000, Detroit??s residents desperately need job creation or relocation to the central city; and job training and anti-discrimination policy enforcement throughout the metro-area. All of these would be necessary to offset job loss and reduce inequality and poverty in Detroit. The extent to which blacks will benefit from 2010?C11 improvements in manufacturing employment in Detroit depends upon whether private companies and the state provide equal access to the jobs and the training new technologies require.     

Patterns and Sources of Changing Wage Inequality in Chile and Costa Rica During Structural Adjustment

During their respective periods of structural adjustment, inequality increased more rapidly in Chile than in Costa Rica. Using a new technique which measures the effects of changes in the quantities and prices of individual dimension of human capital on overall wage inequality, we identify changes in wage premiums associated with more education as an important cause of the different inequality outcomes. We present evidence that the different education price effects were due to different rates of growth in the demand for more-educated workers. Furthermore, inequality increased in Chile despite a large equalizing education quantity effect.     

Race,amenities, and psychic income

Even when there are no racial wage differences between black and white faculty in institutions of higher learning in the Deep South, there are significant racial differences in amenities such that the psychic income of blacks is lower than that of whites. It is demonstrated that black faculty will tend to have higher turnover rates than whites if racial discrepancies in amenities exist. The maintenance of old traditions that affect job satisfaction of blacks acts as a margin to neutralize integration efforts. The assumption that equal pay is equivalent to equal opportunity is challenged.     

Incentive schemes and racial wage discrimination

We use a major micro data set to investigate the influence of incentive schemes on wage discrimination against blacks. Incentive schemes which directly link earnings and productivity appear to generally raise earnings, but they increase wages of blacks proportionately more than those of whites. This reduces the residual attributable to discrimination and suggests it is easier to discriminate when earnings are based on perceptions of input (evaluations of effort) rather than on measures of output.     

INSTITUTIONAL WAGE EFFECTS: REVISITING UNION AND BARGAINING COUNCIL WAGE PREMIA IN SOUTH AFRICA

The literature on the union wage gap in South Africa is extensive, spanning a range of data sets and methodologies. There is, however, little consensus on the appropriate method to correct for the endogeneity of union membership or the size of the union wage gap. Furthermore, there are very few studies on the bargaining council wage premium in South Africa because of lack of data on the coverage of employees under these agreements. Our study, using 2005 Labour Force Survey data, firstly reconsiders the union wage gap controlling for both firm‐level and job characteristics. When correcting for the endogeneity of union status through a two‐stage selection model and including firm size, type of employment, and non‐wage benefits, we find a much lower union wage premium for African workers in the formal sector than premiums reported in some previous studies. Secondly, our study estimates bargaining council wage premiums for the private and public sectors. We find that extension procedures are present in both private and public bargaining council systems but that unions negotiate for additional gains for their members at the plant level. Furthermore, there is some evidence that unions negotiate for awards for their members in the private sector irrespective of bargaining council coverage.     

Accumulation and discrimination in the postbellum South

Economic inequality between blacks and whites in the postbellum South can be attributed to two factors: racial discrimination and the absence of any redistribution of tangible wealth to accompany emancipation. This paper shows that the freedmen's initial lack of property was the most important cause of race-related income differences. The initial wealth gap between the freedmen and the whites was large enough to guarantee that a great deal of income inequality would have persisted long after emancipation, even if all markets had functioned perfectly. In addition, the actual rate at which the economic distance between blacks and whites was being reduced suggests the existence of forces which lengthened the time required to eradicate the effects of the initial wealth inequality.     

The Impact of Racial Discrimination on the Early Career Outcomes of Young Men

The NLSY dataset is utilized to measure the extent of employer wage discrimination between white and black males during their first 5 years of post-school employment. We look at the respondent’s first job and the jobs 1 and 5 years after school completion. Oaxaca wage decompositions are employed to gauge the effect of discrimination. Consistent with our hypothesis, we find that the discrimination component of the wage gap falls over time. For the first job out of school the unexplained wage gap between blacks and whites is 35%. By year 5, the unexplained component falls to about 13%. Thus, while discrimination continues to play a role in explaining the white–black wage gap over time, its impact decreases as time in the labor market increases.

Trade liberalisation and manufacturing wage premiums: Evidence from Thailand

This paper investigates trade related industrial wage premiums. The procedure involves (1) estimating industrial wage premiums and (2) linking those estimated wage premiums to trade related variables. Results reveal that (1) in addition to workers’ characteristics, industry characteristics where workers are employed were important in determining the wages for workers, (2) falling output tariffs resulted in increased wage premiums, and (3) an increase in intermediate imports exerted a strong positive influence on wage premiums. Linked employer and employee micro data may provide further insights which are currently not available.     

Assessing black progress: voting and citizenship rights,residency and housing,education

Farley discusses progress US blacks have made in the areas of voting and citizenship rights, residency and housing, and education. A major goal of the civil rights movement was to permit blacks to influence the electoral process in the same manner as whites. Most important in this regard was the Voting Rights Act of 1965; the proportion of southern blacks casting ballots increased sharply since the early 1960s. The Civil Rights Act of 1875 outlawed racial segregation in public accommodations, but by the turn of the century, Jim Crow laws in southern states called for segregation in most public places. Common customs and government policy in the North resulted in similar segregation of blacks from whites. The Montgomery bus boycott and similar protests in dozens of other cities led to enactment of Title II of the Civil Rights Act of 1964, which proscribed such racial practices. By the late 1960s, blacks in all regions could use the same public accommodations as whites. In most metropolitan areas, de facto racial segregation persisted long after the laws were changed. Supreme Court decisions and local open-housing ordinances supported the right of blacks to live where they could afford. However the major change was the Fair Housing Act of 1968, which outlawed racial discrimination in the sale or rental of most housing units. The separation of blacks from whites did not end in the 1970s. Today, in areas which have large black populations, there are many central city neighborhoods and a few in the suburbs which are either all-black or are becoming exclusively black enclaves. Most other neighborhoods have no more than token black populations. Another major effort of civil rights organizations has been the upgrading of housing quality for blacks. By 1980, only 6% of the homes and apartments occupied by blacks lacked complete plumbing facilities (down from 50% in 1940). Unlike the modest changes in residential segregation, racial differences in housing quality have been greatly reduced. By 1960, black students approached parity with whites in terms of measurable aspects of school facilities. In 1940, young blacks averaged about 3 fewer years of educational attainment than whites; the time is nearing when the years of schooling completed by blacks and whites will be the same. In small and medium-sized cities throughout the country, public schools are generally integrated. However, the situation in the largest metropolitan areas is very different. Today, large public schools are segregated, in large part, because blacks and whites live in separate school districts.     

The Impact of Medical Education Reform on the Racial Health Status Gap, 1920–1930: A Difference-in-Differences Analysis

The racial impact of a quantity–quality tradeoff in physician supply (implemented through medical education reform) made during an era of racial segregation is assessed. The reform produced differential impacts across race and region. The health status of northern blacks improved the most; that of southern blacks the least. Accordingly, the health status gap between northern whites and blacks diminished, but the gap between southern blacks and every other demographic group increased. The path of northern blacks suggests that access to and high quality of health care are both necessary to close the racial gap in health status that persists today.     

The vintage schooling hypothesis and racial differences in earnings and on-the-job training: A longitudinal analysis

Why do younger black males earn more relative to whites than do older black males? The literature offers two competing explanations. Smith and Welch suggest this pattern is evidence that employers are rewarding the improved skills of more recently, better-educated blacks. Lazear, and Duncan and Hoffman suggest that the pattern is the result of employer discrimination that prevents blacks from entering occupations that offer on-the-job training (OJT) and wage growth with experience. The competing views are tested by using the National Longitudinal Survey of Labor Market Experience of Young Men to compare black and white earnings and regression estimates in two periods. Regression results for 1968 and 1978 indicate that, as the NLS cohort aged, only white males had an age-earnings profile exhibiting the positive effect of OJT. Over the period, education coefficients decreased for both groups with the reduction greatest in black coefficients. This suggests that the earnings effect of education is not as stable for blacks as it is for whites over the life cycle. Black-white earnings ratios were approximately the same in both periods. The results reported here support the explanations offered by Lazear and by Duncan and Hoffman, implying that policies focusing on eliminating racial differences in educational quality may be insufficient in improving the relative position of blacks over the life cycle.     

Wage inequality and establishment heterogeneity

We analyze wage dispersion within and across establishments in Korea between 2007 and 2013. We find that foreign owned establishments and those operating in global markets have higher within-establishment wage dispersion. The effect is over and above the establishment size effect. Furthermore, wages are higher in larger establishments and internationally oriented ones. Our findings are consistent with theories explaining management pay and the scope of control. Our results also provide evidence that can explain the rise in wage inequality due to the emergence of ‘super star’ firms and global supply chains.     

Trade,FDI, migration,and the place premium: Mexico and the United States

Large wage differences between countries (“place premiums”) are well documented. Theory suggests that factor price convergence should follow increased migration, capital flows, and commercial integration. All three have increased between the United States and Mexico over the last 25 years. This paper evaluates the degree of wage convergence between these countries during the period 1988 and 2011. We match survey and census data from Mexico and the United States to estimate the change in wage differentials for observationally identical workers over time. We find very little evidence of convergence. What evidence we do find is most likely due to factors unrelated to US–Mexico integration. While migration, trade, and FDI may reduce the US–Mexico wage differential, these effects are small when compared to the overall wage gap.     

Analysis of wage differentials by gender and ethnicity in the public sector

This study investigates the source of wage differentials between blacks, Hispanics, and whites, and between women and men, in metropolitan Dade County (Florida) government, and draws out the implications of this analysis for affirmative action planning. Our distinctive finding is that the primary factor causing observed wage differentials by ethnicity is the sorting of people across occupational categories. Wage decompositions reveal that for males, 70 percent, 88 percent, and 47 percent of the wage gaps between white and black, white and Hispanic, and Hispanic and black, respectively, are attributable to occupation. For females, the corresponding figures are 56 percent, 58 percent, and 51 percent. When comparing men and women of the same ethnic group, occupational employment patterns are found to be an important factor accounting for lower average female wages, yet within major occupational groups women seem to be receiving higher wages (on average) than men.     

The Glass Ceiling and Relative Arrest Rates of Blacks Compared to Whites

A simple theoretical model is presented in which higher relative arrest rates for blacks compared to whites lead to higher relative absenteeism (including tardiness) and ultimately a lower likelihood of placement in occupations where absenteeism is more costly, such as supervisory positions. Though the data do not allow for a direct test of the model, partial correlations provide some suggestive evidence. Controlling for city fixed effects and using an occupation prestige index to proxy for occupations with more costly absenteeism, higher relative arrest rates for blacks compared to whites are associated with relatively worse occupation placement compared to whites. The model and suggestive evidence make a case for further research into the spillover effect of criminal justice outcomes and for consideration of spillover effects in the costs and benefits of enforcement mechanisms which disproportionately affect blacks.     

Geography, insolation, and vitamin D in nineteenth century US African-American and white statures

Using a new source of nineteenth century US state prison records I contrast the biological living conditions of comparable African-Americans and whites. Although blacks and whites today in the US reach similar terminal statures, nineteenth century African-American statures were consistently shorter than those of whites. Greater insolation (vitamin D production) is shown to be associated with taller black and white statures and a considerable share of the stature difference between US blacks and whites was attributable to insolation and vitamin D production. Black statures increased during the antebellum period, while white statures declined. Black and white statures both decreased after the Civil War. Farmers were taller than workers in other occupations, and an alternative explanation for stature variation by social class is considered.     

“Cautiously Optimistic” Comments on “Black Americans in the 21st Century: Should we be Optimistic or Concerned?”

This is a commentary on Angel Harris’ examination of the current state and challenges facing the black community. Harris provides a comprehensive overview of the socio-economic status of the black Americans and questions America’s ability to achieve the American “creed of opportunity”. My response to Harris’ question, “Should we be pessimistic or optimistic”, is that I am cautiously optimistic. My optimism is rooted in postsecondary progress of black despite challenges to affirmative action and the lingering test score gap between blacks and whites. However, I am “cautious” about the willingness of policy makers to use “race targeted” or “wealth-based-tested” programs to arrest practices which hinder employment, income and wealth opportunity.     

A note on the apparent constancy of the racial wage gap in New Jersey manufacturing, 1902 to 1979

Conclusion This discussion around the black-white wage gap will continue. Inadequate data alone will make it difficult to distinguish recent fluctuations and once-only changes from long-term trends. For those who believe the racial wage gap is narrowing, the 1902 New Jersey survey of blacks in manufacturing presents a puzzle. Why at the outset of black entry into this sector of the economy do we find a racial wage gap as narrow as the one observed for New Jersey manufacturing in 1969, a year at the top of the post-World War II business cycle? Michael Reich argues that “in every region but the South the relative income of non-white males shows substantial cyclical fluctuations… but shows no upward trend over time.” The baseline established by the 1902 New Jersey survey is compatible with Reich’s conclusion.