Black-white Wage Gap Research Articles

Commuting while Black: compensating differentials and Black–White wage gap in Canada

PurposeUsing the Canadian Census of 2016, the present study examines the Black and White gap in compensating differentials for their commute to work.Design/methodology/approachThe data are from the Canadian Census of 2016. The standard Mincerian wage regression, augmented by commute-related variables and their confounders, is estimated by OLS. The estimations use sample weights and heteroscedasticity robust standard errors.FindingsIn the standard Mincerian wage regressions, Black men are found to earn non-negligibly less than White men. No such gap is found among women. When the Mincerian wage equation is augmented by commute duration and its confounders, commute duration is revealed to positively predict wages of White men and negatively associate with wages of Black men. At the same time, in the specifications including commute duration and its confounders, the coefficient for the dummy variable identifying Black men is positive with a non-negligible size. The latter pattern indicates wage discrepancies among Black men by their commute duration. Again, no difference is found between Black and White women in these estimations.Research limitations/implicationsThe main caveat is that due to data limitations, causal estimates could not be produced.Practical implicationsFor the Canadian working men, the uncovered patterns indicate both between and within race gaps in the impact of commuting on wages. Particularly, Black men seem to commute longer towards relatively lower paying jobs, while the opposite holds for their White counterparts. However, Black men who reside close to their work earn substantially more than both otherwise identical White men and Black men who live far away from their jobs. The implications for research and policy are discussed.Originality/valueThis is the first paper focused on commute compensating differentials by race using Canadian data.

On the black-white gaps in labor supply and earnings over the lifecycle in the US

In the US economy, Black men, on average, receive lower wages than White men, and the difference increases over the working life. The employment rate and the number of hours worked are also lower for Blacks, but the gap is nearly constant. Together these facts suggest that on-the-job human capital accumulation might explain the diverging wages. However, the wage gap and its evolution over the lifecycle cannot be explained by differences in accumulated experience or educational attainment for the cohort we analyze. Instead, the combination of experience and test scores measured at ages 17-22 accounts for the wage gap and its growth. We propose an on-the-job human capital accumulation model with heterogeneity in the initial human capital endowment and the lifelong ability to accumulate human capital, and endogenous labor supply at the extensive and intensive margins to explain the evolution of the Black-White wage gap over the lifecycle. We discipline the distribution of the ability to accumulate human capital using the power of test scores to predict earnings growth in the data. We find that if the pre-market distributions were the same for Blacks and Whites, the racial gap in hourly earnings would be closed by 84%, with the remaining gap opening throughout life due to higher labor supply amongst White men. That is, the unequal conditions with which men in the two groups enter the labor market are likely to be the key determinant of the differences over the lifecycle.

Racial inequality in frictional labor markets: Evidence from minimum wages

We provide the first causal analysis of how state and federal minimum wage policies in the U.S. have affected labor market frictions and racial wage gaps. Using stacked event studies, binned difference-in-differences estimators, within-person analyses and classic panel methods, we find that minimum wages increased wages of black workers between 16 and 64% more than among white workers and reduced the overall black-white wage gap by 10% (and by 56% among workers most affected by the policies). Racial differences in initial wages cannot explain this differential effect. Rather, minimum wages expand job opportunities for black workers more than for white workers. We present a model with labor market frictions in which minimum wages expand the job search radius of workers who do not own automobiles and who live farther from jobs. Our causal results using the ACS show that minimum wages increase commuting via automobile among black workers but not among white workers, supporting our model. Minimum wages also reduce racial gaps in separations and hires, further suggesting the policies especially enhance job opportunities for black workers.

Job Market Signaling through Occupational Licensing

Abstract Among men, the black-white wage gap is as large today as it was in 1950. We test whether the black-white wage gap is due to asymmetric information using newly collected data on occupational licensing laws that ban workers with criminal records. We find evidence supporting this hypothesis. The licensing premiums for black men are largest in licensed occupations that restrict felons—particularly in states with Ban-the-Box laws and at small firms. In these contexts where a worker's criminal history is difficult to infer, we find that occupational licensing reduces asymmetric information and reduces the racial wage gap.

Racial Differences in Time at Work Not Working

Racial differences in effort at work, if they exist, can potentially explain race-based wage/earnings disparities in the labor market. The authors estimate specifications of time spent on non-work activities at work by Black and White males and females with data from the American Time Use Survey. Estimates reveal that trivially small differences occur between non-Hispanic Black and non-Hispanic White males in time spent not working while on the job that disappear entirely when correcting for non-response errors. The findings imply that Black–White male differences in the fraction of the workday spent not working are either not large enough to partially explain the Black–White wage gap, or simply do not exist at all.

Examining the Differential Impact of Recessions and Recovery across Race and Gender for Working- versus Professional-Class Workers

We investigate how wages and occupation sorting vary by race, gender, and class during recessions. We performed repeated Kitagawa-Blinder-Oaxaca decompositions of the Black-White wage gap from 1988 to 2020. Black professional-class workers’ wages are more unstable and take a more substantial hit during recessions. Black workers see a lower return to their labor market characteristics during recessions, and this is pronounced for the professional class. Using an occupational crowding methodology, we find that Black women are overrepresented in essential work and roles with high physical proximity to others and receive the lowest wages. White men are crowded out of riskier work but, within these categories, dominate higher-paying roles. Black workers earn less in professional riskier work than in working-class roles, while the reverse is true for White workers. We find that class status does not protect Black workers to the same extent as White workers, especially during recessions.

The Black–White wage gap among young men in 1990 versus 2011: With sample selection adjustments

AbstractThis paper uses unconditional quantile regressions to decompose changes in the black–white wage gap for young men between 1990 and 2011. Introducing a new application of reweighting methods, we control for selection into employment which tends to widen the gap. We find no changes in the gap itself between 1990 and 2011, but reversals in the roles of ability and education across the distribution. Ability loses importance at the bottom and middle but gains importance at the top, while the opposite occurs for education. This results from heterogeneous changes in returns to ability and education across the distribution alongside a widening educational achievement gap.

Task Based Discrimination

Why did the Black-White wage gap converge from 1960 to 1980 and why has it stagnated since? To answer this question, we introduce a unified model that integrates notions of both taste-based and statistical discrimination into a task-based model of occupational sorting. At the heart of our framework is the idea that discrimination varies by the task requirement of each job. We use this framework to identify and quantify the role of trends in race-specific factors and changing task prices in explaining the evolution of the Black-White wage gap since 1960. In doing so, we highlight a new task measure - Contact tasks – which measures the extent to which individuals interact with others as part of their job. We provide evidence that changes in the racial gap in Contact tasks serves as a good proxy for changes in taste-based discrimination over time. We find that taste-based discrimination has fallen and racial skill gaps have narrowed over the last sixty years in the United States. However, since the 1980s, the effect of declining racial skill gaps and discrimination on the Black-White wage gap were offset by the increasing returns to Abstract tasks which, on average, favored White workers relative to Black workers. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Partial Distributional Policy Effects Under Endogeneity

Rothe (Econometrica 80, 2269–2301 2012) introduces a new class of parameters called ‘Partial Distributional Policy Effects’ (PPE) to estimate the impact on the marginal distribution of an outcome variable due to a change in the unconditional distribution of a single covariate. Since the strict exogeneity assumption of all covariates makes this approach less applicable in empirical research, we propose the identification of the PPEs for a continuous endogenous explanatory variable using the control variable approach developed by Imbens and Newey (Econometrica 77, 1481–1512 2009). We also apply this proposed control variable PPE approach to investigate how poverty and black-white racial wage gaps contribute to the steep increase in the incarceration rate of black men over the period 1980-2010. Our control variable PPE estimates suggest that although the fall in the racial wage gap does not explain the changes in the incarceration rate of black men, changes in the poverty rate contribute about one-third of the steep increase in the incarceration rate at the upper-tail of the distribution.

Race-specific urban wage premia and the black-white wage gap

We establish a novel empirical fact about the black-white wage gap: looking both across and within metropolitan areas, increasing city size or employment density is associated with a larger black-white wage gap. The estimated effects represent between 9 and 18% of recent estimates of the black-white wage gap. Using a variety of techniques, we demonstrate that our within-city relationship is unlikely to be driven by racial differences in unobserved ability. Finally, we present evidence suggestive of a role for race-specific networks in explaining these differences in the black-white wage gap.

Dynastic Human Capital and Black-White Earnings Differentials in the United States, 1940–2000

We examine whether dynastic human capital (DHC) can explain the black-white wage gap. We fit a quantity-quality model to state-level data on fertility, mortality, and schooling but, notably, not earnings. Racial discrimination raised the cost of black schooling, thus depressing DHC not only of the current generation but of future generations via its role in producing human capital. Birth-state DHC helps explain the wage gap among stayers, while current-state DHC helps explain the gap among movers. These findings highlight the role of intergenerational transmission in the persistence of the wage gap and the role of migration in reducing it.

Extremal quantile regressions for selection models and the black–white wage gap

We consider the estimation of a semiparametric sample selection model without instrument or large support regressor. Identification relies on the independence between the covariates and selection, for arbitrarily large values of the outcome. We propose a simple estimator based on extremal quantile regression and establish its asymptotic normality by extending previous results on extremal quantile regressions to allow for selection. Finally, we apply our method to estimate the black–white wage gap among males from the NLSY79 and NLSY97. We find that premarket factors such as AFQT and family background play a key role in explaining the black–white wage gap.

Hidden Schooling: Repeated Grades and the Returns to Education and Experience

Over the past four decades, ninth grade repeating has increased four-fold. Despite its prevalence, few economists have attempted to account for grade repeating when estimating returns to education and experience. I document the rise in grade repeating and show that 10% of the increase in ninth grade repeating can be attributed to changes in compulsory schooling laws (CSLs). I show that, because CSLs affect both grade repeating and educational attainment, CSL-based instrumental variables estimates of the returns to education are biased by up to 38%. Additionally, grade repeating causes endogenous measurement error in potential labor market experience. Solely through this measurement error, I show that the residual black-white wage gap is overstated by 10%, the wage returns to a GED relative to a high school diploma are understated by 15%, and the labor supply gap between GED recipients and high school graduates is overstated by 33%.

The Measurement of Student Ability in Modern Assessment Systems

Journal of Economic Perspectives—Volume 30, Number 3—Summer 2016—Pages 85–108 The Measurement of Student Ability in Modern Assessment Systems Brian Jacob and Jesse Rothstein E conomists often use test scores to measure a student’s performance or an adult’s human capital. In the research literature on the economics of educa- tion, student test scores are often used to estimate teacher effectiveness, or “­value-added” (for example, Chetty et al. 2014a); to measure and attempt to explain the black–white achievement gap (for example, Fryer and Levitt 2004, 2006, 2013; Rothstein and Wozny 2013); or to measure the impacts of state- or ­district-level educational policy choices such as finance or accountability rules (for example, Dee and Jacob 2011; Lafortune, Rothstein, and Schanzenbach 2016). In the broader labor economics literature, test scores are often used as well as proxies for human capital, for example in examining the black–white wage gap conditional on cogni- tive ability as in Neal and Johnson (1996). In our experience, many researchers think of an individual’s score as a noisy but unbiased measure of true ability like, for example, the simple fraction of test items a student answers correctly. Unfortunately, the student achievement measures provided in modern assessment systems are rarely—if ever—so straightforward. Assessments commonly have multiple forms and are often adaptive, meaning that the questions students receive are based on their performance on previous Brian Jacob is Walter H. Annenberg Professor of Education Policy, Professor of Economics, and Professor of Education at the University of Michigan, Ann Arbor, Michigan. Jesse Roth- stein is Professor of Public Policy and Economics and Director of the Institute for Research on Labor and Employment (IRLE) at the University of California, Berkeley, California. Both authors are Research Associates, National Bureau of Economic Research, Cambridge, Massa- chusetts. Their email addresses are bajacob@umich.edu and rothstein@berkeley.edu. For supplementary materials such as appendices, datasets, and author disclosure statements, see the article page at http://dx.doi.org/10.1257/jep.30.3.85 doi=10.1257/jep.30.3.85

Network Effects and the Black-White Wage Gap

We study the impact of segregation in social networks on the disparities in labor market outcomes between Black and White workers. We provide a dynamic search and matching model of the labor market where we incorporate two kinds of network effects: i) job finding through social contacts and ii) transmission of work norms by network neighbors. When considering the first type of network effect, an increase in the level of social segregation leads to higher unemployment rates and lower wages for both the Black and White worker groups. At the same time, inter-group disparities increase, however, social segregation can account for only a negligible share of the Black-White residual wage gap.When studying the norm transmission role of social networks, the model is able to explain the whole residual wage gap, however, predicts a negative relationship between the level of social segregation and the wage gap, which contradicts the empirical evidence. We show that combining the two kinds of network effects can account for both the empirically observed magnitude of the Black-White wage gap and it's increasing pattern in the level of social segregation. We use this latter model version to study the impact of policy changes on the inter-group inequality.

The black–white wage gap among young women in 1990 vs. 2011: The role of selection and educational attainment

In this paper, we compare the black–white median log wage gap for women aged 26–31 in 1990 and 2011. Two stylized facts emerge. First, the pattern of selection in the two years is similar — the gaps observed among women employed in 1990 and 2011 substantially understate the gaps that would have been observed had all 26–31 year-old women been working in those years. Second, both the median log wage gap observed in the data and the selection-corrected gap increased substantially between the two years, a fact that can be mostly attributed to changes in the distributions of educational attainment among young black and white women.

A detailed decomposition of synthetic cohort analysis

We present a detailed decomposition method and provide a Stata estimator to assess relative changes between two groups over time in a synthetic cohort analysis. Using the convergence of black–white wage gap between 1960 and 1970 as an example, we show that education accounts for 73% of the value of change in characteristics while experience explains only 3%.

Municipal Housekeeping

Gains in 20th century real wages and reductions in the black-white wage gap have been linked to the midcentury ascent of school quality. With a new data set uniquely appropriate to identifying the impact of female voter enfranchisement on education spending, we attribute up to one-third of the 1920–40 rise in public school expenditures to the Nineteenth Amendment. Yet the continued disenfranchisement of black Southerners meant white school gains far outpaced those for blacks. As a result, women’s suffrage exacerbated racial inequality in education expenditures and substantially delayed relative gains in black human capital observed later in the century.

People Skills and the Labor-Market Outcomes of Underrepresented Groups

In this article, the authors show that people skills are important determinants of labor-market outcomes, including occupational choice and wages. Technological and organizational changes have increased the importance of people skills in the workplace. The authors particularly focus on how the increased importance of these skills has affected the labor-market outcomes of underrepresented groups, assuming that gender differences in interactions and cultural differences and prejudice may impede cross-racial and ethnic interactions. Estimates for Britain, Germany, and the United States are consistent with such an explanation. An acceleration in the rate of increase in the importance of people skills between the late 1970s and early 1990s in the United States can help explain why the gender wage gap closed and the black-white wage gap stagnated in these years relative to the preceding and following years.

Extremal Quantile Regressions for Selection Models and the Black-White Wage Gap

We consider the estimation of a semiparametric location-scale model subject to endogenous selection, in the absence of an instrument or a large support regressor. Identification relies on the independence between the covariates and selection, for arbitrarily large values of the outcome. In this context, we propose a simple estimator, which combines extremal quantile regressions with minimum distance. We establish the asymptotic normality of this estimator by extending previous results on extremal quantile regressions to allow for selection. Finally, we apply our method to estimate the black-white wage gap among males from the NLSY79 and NLSY97. We find that premarket factors such as AFQT and family background characteristics play a key role in explaining the level and evolution of the black-white wage gap.