Wage Gap Between Whites and Blacks is Becoming Inexplicable

Commutes are equally miserable for all.(Reuters/Lucas Jackson)
Commutes are equally miserable for all. (Reuters/Lucas Jackson)

The gap in employment and earnings between black and white workers in the US is nothing new. Still, 53 years after the Civil Rights Act outlawed discrimination, research from the Federal Reserve Bank of San Francisco shows that the gap in wages between races has widened in recent years.

The research also highlights a particularly concerning aspect of this: the increase in the wage gap between black and white workers is also becoming more difficult to explain. That’s to say that the disparity in earnings that cannot be tied to location, education, working hours, job type, or age, is increasing.

In 1979, the average black man in the US earned about 80% of the average white man’s hourly wage. By 2016, the average black man earned just 70% as much. Among women, in 1979 the average black woman earned 95% of the average white woman’s wage, but last year this had fallen to 82%.

If, according to economic theory, wages are a reflection of productivity, this gap should be explained by “observable” factors such as age, education, and job type. Location and part-time work status are also easily measured. Researchers at the San Francisco Fed went further, trying to quantify how much these observable factors explained the gap, instead of harder-to-measure factors, such as institutions, historical pay norms, discrimination, and the public policies like the minimum wage.

In the charts below, the black line plots the earnings gap in each year and the bars separate out the factors causing it. The red bar shows the “unexplained” difference.

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SOURCE: Eshe Nelson