We’ve known for a while that black Americans aren’t making economic progress. A recent report from the Economic Policy Institute, a left-leaning think tank, shows that the black-white wage gap is now the widest it has been since 1979. What's more interesting, though, is how inequality has been increasing, and for whom.
It used to be that low-skilled black workers suffered the greatest disadvantage relative to their white counterparts. But there has been a strange reversal in the past 40 years. EPI finds that the black-white wage gap has become wider — and is widening faster — among those with more education.
This chart illustrates the history of the wage gap among men with less than 10 years of job experience. The early years are the most crucial in a person’s career, and also the most sensitive to fluctuations in the job market.
In 1980, black men entering the job market with just a high school diploma earned 15 percent less than similar white men on average. In contrast, black men with bachelor’s degrees or more earned only 5 percent less than similar white male college graduates.
College, in other words, once seemed a surefire route to something approaching racial equity. Nowadays, the picture is more complicated.
While the racial wage gap among less-educated men has held steady at about 15 percent, that gap for men with college diplomas increased significantly in the 1980s, and now hovers between 15 and 20 percent. In 2014, the penalty for being educated-while-black was about 18 percent. The penalty for less-educated black men was 16 percent.
A similar pattern exists for women. Among less-educated women with less than 10 years of job experience, the black-white wage gap was 6.2 percent in 2014. But among college-educated women, the wage gap was closer to 12 percent.
The authors of the report — Valerie Wilson, director of EPI's program on race, ethnicity and the economy, and William Rodgers III — calculate how different factors have contributed to these changes.
Among early-career men, for instance, the earnings disparities between white and black workers have widened by about 3 percent since 1979. These disparities would have been even wider had African Americans not made gains in college attainment during this time. But that educational progress was overshadowed, the researchers say, by two major forces: increasing discrimination and increasing income inequality.
“We have minimum wages, but there isn’t a wage ceiling,” Wilson said. “There’s much more room for discrimination and inequality at the top. What’s happened is that the top one percent have really pulled away.”
Income growth in recent decades has been limited, more or less, to the highest echelon of earners, a group that is overwhelmingly white. Out of every 1,000 households in the top 1 percent, only two are black, while about 910 are white. And so, as economic forces lifted the incomes of the 1 percent, the blacks on lower rungs of the economic ladder have been largely left behind.
Much of those income gains were concentrated among financial-sector workers and corporate executives — occupations where blacks remain highly underrepresented. In part, African Americans are not given the same opportunities to rise; lawsuits have accused Merrill Lynch, for instance, of systematically discriminating against its black brokers. And in part, black workers simply don’t have the right connections to get ahead.
“Finance and management still remain very white-dominated, and those are the occupations that are seeing the highest rates of return,” Harvard sociologist Devah Pager, who was not involved in the study, said in an interview. “And to an extent, those kind of jobs are filled through elite networks that African Americans have been historically excluded from.”
These facts help explain why a recent Pew Research Center survey shows that African Americans with more education perceive more economic inequality. Among blacks with four-year college degrees, 81 percent say that blacks today are financially worse off than whites. But among blacks with no college experience, only 46 percent agree with that statement.
Pew also finds that college-educated blacks are more likely to report personal experiences with discrimination, and more likely to say that being black makes it harder to get ahead in life.
The data suggest an irony: By climbing the economic ladder, African Americans get perspective on the full system of inequality in America.
No matter your race, the world can appear fairly egalitarian if you and all your neighbors are working for minimum wage at Walmart. But graduating college introduces people to new dimensions of disadvantage. If you’re a minority on Wall Street or at a corporate law firm, where the rewards are larger but also much more unevenly distributed, you may become more attuned to how discrimination leads to denied promotions and missed opportunities to impress the bosses.
The widening black-white wage gap isn't just occurring at the top, Wilson and Rodgers say.
In 1979, the median wage for white workers was $16.89 an hour, while the median wage for black workers was $13.89 — a gap of about 18 percent. By 2015, that gap had increased to 26.2 percent. This means that even among middle-class workers, whites have been outpacing blacks.
The researchers blame this largely on rising discrimination, which they say may have resulted in part from the increasingly lax enforcement of anti-discrimination laws. That is one of the few explanations left after they controlled for a slew of other factors, including differences in education levels, local labor market conditions, industry structure, unionization rates and years of experience.
The EPI report adds to a sense that the economy is biased against black progress. We know that the Great Recession was especially damaging to African American wealth. We know that black people are more sensitive to downturns in the job market; they have a harder time finding a job, and are among the first to be fired when the economy seizes up. We know that for the past 50 years, the black unemployment rate has always been double that of the white unemployment rate.
Now, it is undeniably clear that rising income inequality — one of the major economic problems of our time — disproportionately impedes black workers. Perhaps this should have been obvious. But the people who steer the economy, who are trained to think in terms of faceless consumers and anonymous firms, don't always recognize the racial consequences of their decisions. That might change soon. Many politicians have been urging the Fed recently to recognize how its actions would specifically affect African Americans. Because when the economy's rewards are unevenly distributed by race, economic policy implicitly becomes racial policy.