Cognitive Skill and Economic Inequality: Findings from the National Adult Literacy Survey

Abstract

Few would deny that the civil rights and women's movements have substantially changed U.S. society. Yet ethnic and gender inequality in employment and earnings remain large. Even when comparisons are confined to persons of similar educational attainment, African Americans and Hispanic Americans earn less than European Americans, women earn less than men, and African Americans suffer a substantially elevated risk of unemployment. One prominent explanation for ethnic differences in earnings and employment is that, holding constant access to schooling, differences in economic outcomes reflect differences in cognitive skills that have become decisive in the modern labor market. A prominent explanation for the gender gap emphasizes gender differences in occupational preference, with women choosing occupations that are lower paying. Based on an intensive analysis of data from the U.S. National Adult Literacy Survey, the authors find that these two explanations are only partly successful in illuminating ethnic and gender inequality in employment and earnings. Alternative explanations emphasizing labor market discrimination and residential segregation cannot be ignored. In this article, Stephen Raudenbush and Rafa Kasim consider the implications of this new evidence for current debates about affirmative action and educational reform.