Factors associated with wage differentials between caucasian and african-american vocational rehabilitation clientele

Abstract

Using a nationally representative sample of Vocational Rehabilitation (VR) cases from 2005 - 2010 in the U.S., this study investigates individual and service-specific factors contributing to observed disparities in wages between Caucasian and African American VR clients at the time of separation from the VR system. The structure of the VR case management system allows one to observe only wages of rehabilitated clients; a group comprises about half of all the individuals receiving VR services. The study shows that the censoring nature of wages leads to overestimation of the impact of unexplained factors including employer discrimination on the wage differential between the two groups of VR clientele. Specifically, after addressing the censoring issue using a Heckman selection framework, the unexplained part of the wage differential drops from 18 to 0 percent. The existing disparities in wages between two racial groups are explained mainly by differences in observed individual characteristics including education, disability, services and geographic location.