The wage gap between Blacks and Whites is the worst it’s been in nearly four decades, according to a new report from the Economic Policy Institute.
What’s driving the wage gap has little to do with access to education, disparities in work experience or where someone lives, EPI found. Rather, the researchers found “discrimination…and growing earnings inequality in general,” to be the primary factors at play.
“Race is not a skill or characteristic that should have any market value as it relates to your wages, but it does,” said Valerie Wilson, the director of the program on Race, Ethnicity and the Economy at the EPI and a co-author of the report.
How do they arrive at the conclusion that discrimination is at the root of the problem, especially when employers won’t admit to it and potential employees don’t know they’re being discriminated against?
“The way that we measure discrimination in this report,” Wilson said, “is that it’s the portion of the gap that remains after we control for all the other factors that would reasonably influence one’s earnings.”
Wilson and co-author William Rodgers, a public policy professor at Rutgers University, compared the wages of Black and White full-time workers living in the same regions with comparable educations and work experience. They made sure to examine worker’s pay within the same industries and types of jobs, and at other potentially distorting variables, but still came up with a wage gap.
“People should be troubled and really question why we would observe this pattern through 2015,” said Wilson. “Is the American dream really obtainable equally obtainable for all people?”
Last year, the hourly pay gap between Blacks and Whites widened to 26.7%, with Whites making an average of $25.22 an hour compared to $18.49 for Blacks, the EPI found. Almost 40 years ago, in 1979, the wage gap between Blacks and Whites was 18.1%, with Whites earning an inflation-adjusted average of $19.62 an hour and Blacks earning $16.07 an hour.
How does discrimination impact the wage gap? Consider the 2003 study where applicants with resumes boasting “Black-sounding” names — Lakisha or Jamal — were less likely to get callbacks for jobs. Then there’s the 2014 study by three prominent economists that analyzed the job searches of nearly 5,200 newly unemployed people in New Jersey:
“First, Black job seekers were offered significantly less compensation than Whites by potential new employers. Second, Blacks were much more likely to accept these lower offers than their White counterparts.”
The wage gap between Blacks and Whites has ebbed and flowed over the past four decades.
In the 1980s, there was a massive decline in the number of higher-paying unionized jobs, which hit African-Americans disproportionately hard, especially in the Midwest, according to EPI. These jobs were replaced by lower-paying positions.
There also was a collapse in political support and funding for federal anti-discrimination enforcement.
When the economy is not running at full capacity, there are more workers looking for work than there are available jobs. Employers have more workers to choose from and therefore they can afford to discriminate based on race. If the economy is roaring, however, employers need workers so much they no longer have that luxury.
The late 1990s saw a decline in the racial wage gap because booming economic growth forced employers to compete for workers, resulting in the largest and broadest wage gains in the past four decades, Wilson and Rodgers posit. Many states also began raising their minimum wages above the federal level, which helped ease the racial disparity.
Since 2000 though, the narrowing of the wage gap was undone, and the gap continued to grow. The lack of progress can be attributed to a recession in 2001 that was followed by a “jobless recovery,” the paper argues. A few years later, there was the much larger recession of 2007, which disproportionately affected African-Americans.
But by 2000, the wage gap started growing again. From 2000 to 2007, the gap between Whites and Black wages increased by 6.3% to 23.9%, driven by the 2001 recession that was followed by a “jobless recovery.” From 2007, the start of the Great Recession, to 2015, the wage gap grew by 10.5%.
Interestingly, the economists found that the racial gap in pay narrowed over time if employees stayed at the same company. The finding also dovetails with data from the EPI study, which pointed out that Black college graduates enter the workforce making less than White college graduates.
Taken together, Black people are starting their work lives with potential employers deciding whether their names disqualify them, with fewer job prospects and with lower entry-level wages. Discrimination, then, is part of the experience of Black workers long before and long after they’re hired.