Tanvi Misra is a staff writer for CityLab covering immigrant communities, housing, economic inequality, and culture. She also authors Navigator, a weekly newsletter for urban explorers (subscribe here). Her work also appears in The Atlantic, NPR, and BBC.
Discrimination is a key reason why.
The recently released Census Bureau numbers show that finally, after almost a decade of recession and an uneven recovery, America is heading in the right economic direction. Overall, incomes are up, and poverty rates are lower. But not everyone shares those gains equally. Black workers have been left behind. In fact, the difference between their hourly wages compared to white workers is wider than it was back in 1979, a new report by the Economic Policy Institute finds.
Back then, black men made around 22 percent less than the hourly wages of white men—so 88 cents for every dollar earned by the average white worker, per hour. Black women, at the time, earned just 6 percent less in hourly wages compared to white counterparts. In 2015, that wage gap for black men increased to 31 percent (dark blue line in graph below), and for black women, to a striking 19 percent (dark red line). These disparities existed even after controlling for factors like education, experience, and geography (light blue and light red lines below):
So, why is this happening? The clues lie in that jagged trajectory of the wage gap. Historically, in periods of high unemployment, sluggish wage growth, and declining unionization, the racial wage gap has stretched out. In periods with tighter labor markets (when there are more jobs than workers), the wage gap shrinks. In other words, economic blows at the national level tend to hurt black workers the hardest.
Here’s a graph showing the wage growth between 1979 and 2014, for example. Across the board, wages have far lagged behind productivity (which is defined as the the economic output of workers, and indicates how much workers should be earning). But black workers generally tend to lag behind white ones in the same gender categories. “As a result, pay disparities by race and ethnicity have remained unchanged or have expanded,” the report reads. (Note that women, in general, have made significant strides with respect to wage growth, but that doesn’t mean that their actual wages are higher than their male counterparts.)
There is also a non-economic factor that stubbornly drives wages of white and black workers apart: discrimination, defined here as “racial differences in skills or worker characteristics that are unobserved or unmeasured in the data.” Basically, Wilson and her colleagues controlled for factors including education, experience, geography, industry, occupational segregation, and effect of unionization. The part of the wage gap that none of these explanations could account for was attributed to discrimination—and this is a key part of the the unsolvable wage-gap puzzle.
EPI’s chart below illustrates the contribution of discrimination to the widening wage gap. The bars show the total change in the black-white wage gap between 1979 and 2015 for new and experienced men and women. The dark blue portion of each bar is part of that increase that’s explained by discrimination, or at least, not explained by measurable factors. The effects varied, but for black women with 11 to 20 years of experience, these unobservable factors accounted for 7.5 of the 10.8 percent increase in the racial wage gap in the last 36 years.
The widening gap in wage is, obviously, bad news for black workers. But they’re not the only group that should be concerned about it. “When you you have a significant part of your population that's underpaid, that takes away from what people could potentially contribute to the economy," Valerie Wilson, EPI's director of the Program on Race, Ethnicity, and the Economy, tells CityLab. When black workers consume less, invest less, save less, and so on, the economy is less robust than it would have have otherwise been. Everybody loses.