A Dynamic Framework for Earnings Inequality between Black and White Men

Abstract

Abstract The present study conceptualizes earnings inequality between black and white men as a three-stage dynamic process: the pre-market human capital acquisition, the labor-market entry, and the longitudinal career progression. Based on the Panel Study of Income Dynamics (PSID), this framework is put to an empirical test that leads to two major conclusions. First, overall patterns of black-white earnings inequality are shaped primarily at labor-market entry as opposed to developing within the labor market. Second, the longitudinal progression of earnings inequality exhibits distinctive trajectories across different pre-market groups. Less-educated black men face a wider earnings gap at labor-market entry, but the gap stays relatively stable over time. Highly educated black men face a narrower earnings gap at labor-market entry, but the gap widens over time. I attribute these patterns to the temporal-specific interplays between race and a series of labor-market mechanisms.