Black-white wage gaps are worse today than in 2000
This week, my colleagues hosted a discussion on the policies that the 2020 presidential candidates should focus on in order to help black workers in the economy. One of the challenges that the presidential candidates should discuss is how to reduce the black–white wage gap—which has stubbornly persisted over the last four decades. Black-white wage gaps are large and have gotten worse in the last 20 years.
The latest findings on wage growth as documented in EPI’s State of Working America Wages 2019 report indicate wages in general are slowly improving with the growing economy, but wage inequality has grown and wage gaps have persisted, and in some cases, worsened. In this post, I will highlight the worsening black-white wage gap and look at it from multiple dimensions. Since 2000, by any way it’s measured, the wage gap between black and white workers has grown significantly.
The figure below compares wages for black and white workers over the last 19 years, highlighting the gaps in wages in 2000, the last time the economy was closest to full employment, 2007, the last business cycle peak before the Great Recession, and 2019, the latest data available. Against these benchmarks, I illustrated the growth in the average gap, the gap for low-, middle-, and high-wage workers, the gap for workers with a high school diploma, a college degree, and an advanced degree, and a regression-adjusted wage gap (controlling for age, gender, education, and region).
Black–white wage gaps widen across multiple measures: Black–white wages gaps at different points in the wage distribution, by education, and regression-based, 2000, 2007, and 2019
Notes: Sample based on all workers ages 16 and older. The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more. Educational attainment is based on mutually exclusive categories: e.g., high school is high school only, etc. Similar results are found for those with less than high school or some college. The regression-adjusted black–white wage gap controls for education, age, gender, and region.
Source: Author’s analysis of EPI Current Population Survey Extracts, Version 1.0 (2020), https://microdata.epi.org.
The black–white wage gap is smallest at the bottom of the wage distribution, where the minimum wage serves as a wage floor. The largest black–white wage gap as well as the one with the most growth since the Great Recession, is found at the top of the wage distribution, explained in part by the pulling away of top earners generally as well as continued occupational segregation, the disproportionate likelihood for white workers to occupy positions in the highest-wage professions.
It’s clear from the figure that education is not a panacea for closing these wage gaps. Again, this should not be shocking, as increased equality of educational access—as laudable a goal as it is—has been shown to have only small effects on class-based wage inequality, and racial wealth gaps have been almost entirely unmoved by a narrowing of the black–white college attainment gap, as demonstrated by William Darity Jr. and others.
Black workers can’t simply educate their way out of the gap. Across various levels of education, a significant black–white wage gap remains. Even black workers with an advanced degree experience a significant wage gap compared with their white counterparts. And after controlling for age, gender, education, and region, black workers are paid 14.9% less than white workers.
While the wage gaps differ depending on measure, what is obvious from the trends displayed is that the gaps widened in the full business cycle 2000–2007 and continued to grow in the Great Recession and its aftermath. Even though the black unemployment rate has fallen precipitously over the last several years, wage growth has remained particularly weak for black workers.
As always, it’s important to remember the historical and social contexts for differences in black and white labor market experiences and labor market outcomes (see Razza). Workers’ ability to claim higher wages rests on a host of social, political, and institutional factors outside of their control. The systematic social deprivation and economic disadvantage is maintained and reinforced by those with economic and political power. Furthermore, occupational segregation plays a significant role in these gaps, for both black men and black women. And, black women, in particularly, can face larger wages gaps with white men than the sum of their parts, meaning the black women face a double wage penalty for their race and gender. The trends in black–white wage gaps found here are supported by other important research that shows that black-white wage gaps expanded with rising inequality from 1979 to 2015.
Given a long history of excluding black Americans from social and political institutions that boost wage growth, the stubbornness of racial wage gaps is less surprising. However, the fact that they are getting worse is troubling. The good news is that policy can make a difference.
We see in the figure that the minimum wage keeps the lowest-wage black workers from even lower wages. In states that increased in the minimum wage between 2018 and 2019, low-wage workers saw stronger wage growth than in states that had no increase in their minimum wage in that period. Raising the federal minimum wage would disproportionately benefit black workers because they are overrepresented among low-wage workers and are less likely to live in states or localities that have passed a minimum wage that is higher than the current federal minimum.
Aside from strengthening and enforcing labor standards such as the minimum wage, making it easier for workers to form unions can narrow the black–white wage gap. Black workers are more likely to be in a union than white and get a bigger wage boost to being in a union than white. Therefore, unions can help shrink the black–white wage gap. Related, research has shown that the decline of unionization led to an expansion of the black–white wage gap.
Using all fiscal and monetary policy levers to achieve and maintain high-pressure labor markets can improve relative labor market outcomes for black workers, including participation in the labor force and work hours as well as wage growth. The U.S. certainly saw this stronger across the board growth in the tight labor market of the late 1990s.
In 2019, black wages exceeded their 2000 and 2007 levels across the wage distribution for the first time in this recovery. I’m hopeful that as the economy continues to move toward genuine full employment, black workers will see their wages rise. But it will take more than a couple of years of a full-employment economy to close racial wage gaps and compensate for years of lower wages, lower incomes, and lower wealth.