There are few economic problems more frustrating than the stubborn gaps in wages and unemployment rates between blacks and whites. Despite decades of trying to reduce or eliminate these gaps, black workers continue to experience higher unemployment rates and lower wages than whites. That's true even after correcting for age, education and occupational differences. This is not a formula for racial harmony.
The latest evidence of the gaps comes in a study by economists at the Federal Reserve Bank of San Francisco. They found that, since 1979, the average earnings of black men had slipped from about 80 percent of white male earnings ($15 per hour vs. $19 per hour in inflation-corrected dollars) to about 70 percent of white male earnings ($18 per hour vs. $25 per hour) in 2016. Although black wages had increased, the gain lagged significantly behind that of whites.
For black women, the trend was similar, though the gaps were smaller. From 1979 to 2016, black women's wages fell from roughly 95 percent of white women's wages ($11 vs. $12 an hour) to 82 percent ($16 vs. $20).
To explain these gaps, the economists — Mary Daly, Bart Hobijn and Joseph Pedtke — searched for factors that would automatically skew black wages below those of whites. For example, if fewer black workers are college graduates than whites, their average wages would be lower, because better-educated workers are better paid. Similarly, older and middle-aged workers typically earn more than younger workers. If black workers are younger, their wages would be lower.
The economists studied five possible explanations for the gap. In addition to education and age, they were geography (some states have higher wages than others), occupation/industry (some pay better than others) and part-time status. If blacks are overrepresented in low-paying groups, that will drag down average black wages. Since 1979, these factors explained, on average, nearly 60 percent of the black-white wage gap for men and about 70 percent of the gap for women.
The trouble is that the unexplained wage gaps have been growing over time. Today, almost half of the wage gap for men can't be explained. For women, the unexplained gap is about two-fifths. Why have the unexplained gaps increased? The study doesn't say.
An earlier study done by Federal Reserve economists in Washington suggested three possibilities, as summarized by the Economist magazine: (1) poor schooling — on average, the degrees earned by blacks are not worth as much in the labor market as similar degrees earned by whites. (2) black men experience higher incarceration rates, reducing their employability; (3) outright discrimination — many employers automatically favor whites.
Another hypothesis — consistent with poor schooling — is that employers value achievement, as measured by test scores, as much as degrees, says economist Harry Holzer of Georgetown University, chief economist of the Labor Department in the Clinton administration. "There are big racial gaps in achievement" that could be depressing black wages. "But we really don't know," he says.
Whatever the causes, they probably also apply to high black unemployment rates. The San Francisco Fed study found that even during economic expansions, black unemployment rates averaged 6 percentage points higher than whites' rates.
This gap indicates "that black job seekers face different job opportunities than their white counterparts," the study said.
For years, the black unemployment rate has been roughly double the white rate, and that relationship hasn't fundamentally changed. In August, the black unemployment rate was 7.7 percent, almost exactly twice the white rate of 3.9 percent.
Still, both figures are relatively low. As long as the economy avoids a recession, there ought to be more job opportunities for both whites and blacks. The question is what happens when, inevitably, the next recession arrives. What seems unarguable is that America's racial climate would improve if black and white job prospects were strong and roughly equal. That would be a real American Dream come true.
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