Socioeconomic background and racial earnings inequality: A propensity score analysis

Abstract

Does a racial earnings gap exist among individuals who come from similar childhood socioeconomic backgrounds? Is the racial earnings gap larger or smaller for those from higher or lower socioeconomic origins? This research addresses these questions by taking a counterfactual approach to estimating the residual racial pay gap between non-Hispanic black and white men from the 1979 National Longitudinal Survey of Youth. The findings indicate that the racial earnings gap is larger among those from lower-middle class and working class childhood backgrounds than among those from upper-middle class backgrounds, for whom the racial pay gap is indistinguishable from zero. Compared to their more advantaged counterparts, black men from lower-middle and working class backgrounds have more difficulty rising above their socioeconomic origins relative to white men from similar social class backgrounds. Racial earnings equality among those from upper-middle class backgrounds suggests that the high levels of racial inequality often observed among those with college and professional degrees may in fact reflect heterogeneous childhood socioeconomic backgrounds among the college educated—backgrounds that continue to have an effect on earnings despite individual academic achievements.