Read The Blackwell Companion to Sociology Online
Authors: Judith R Blau
blacks, among whites and between blacks and whites. For all pairings, of course, the earnings of young uneducated heads of families are lower than the earnings
of young college graduates, revealing, on the face of it, a conventional skills gap effect.
But for white heads of families these differentials largely remained stable from 1970 to 1988. While young white uneducated heads of families only earned
about 25 cents for every dollar that young white educated family heads earned,
the wage premium for having a college degree remained largely stable through-
out the nearly two decades among whites. Among blacks, however, the wage
premium grew. Whereas young uneducated black male heads of families earned
25 cents for every dollar that young educated black male heads of families
earned in 1970, by 1988 they only earned 5 cents for every dollar that young
educated black male heads of families earned.
Thus, when a comparison is made between the earnings of young uneducated
black male heads of families and those of young educated white male heads of
families, a sizable increase in disparity is evident from 1970 to 1988. This
suggests that the widening of the income gaps between black and white families
may not be just a simple result of the growth of female-headed families among
blacks ± families whose heads earn less ± but a more complex effect of changing
returns to skills that differs between blacks and whites.
If the only effect were an overall decline in the returns to skills among young, uneducated family heads, the technological factors contributing to the rise in
182
W. A. Darity, Jr and S. L. Myers, Jr
Figure 13.2 Earnings disparities among young men, high school dropouts versus college graduates, 1970±1988.
Source: Authors' computations from 1976, 1985 and 1993 IRP Family Extract Files (CPS
March supplement tapes).
wage premia for highly educated workers would explain the rise in the racial
earnings gaps because of the high concentration of black family heads among the
young and uneducated. But more factors must be at play when there is a
divergence between the earnings of family heads who are black male college
graduates and those who are black male high school drop-outs, but no change in
the gap between college graduates and high school drop-outs among white male
family heads.
If anything, the differences between the races in the impact of changing returns to skills or education must be attributable to continuing labor market discrimination ± a market that consistently values a black male high school drop-out
differently from a similarly uneducated white ± or to aspects of pre-labor market discrimination that lower the value of the black high school drop-out's education below that of a similarly situated white. In short, either equally uneducated
blacks and whites with identical skills have unequal returns to those skills or
equally uneducated blacks and whites have unequal skills because of disparities
that originate outside the labor market.
The most recent debate about the pattern of divergence away from racial
economic parity in the USA comes after two decades of research on the causes
of an alleged movement toward parity. To appreciate the complexity of the
current debate, one must understand the earlier body of research. Below, we
Racial Economic Inequality in the USA
183
summarize the main contours of thè`black±white convergence'' dispute,
a dispute that emerged when economists and other social scientists debated
the existence and causes of the narrowing of the earnings gap between
blacks and whites. Note that the case for convergence centered on labor market
outcomes, earnings and wages, not wealth, per capita income, or family
income.
The main explanations offered for the alleged narrowing of the earnings gap
were twofold: the improvement in black human capital, especially as a result of
migration from the South and desegregation of Southern schools (Smith and
Welch, 1977), and the passage and enforcement of civil rights laws (Freeman,
1981). A more agnostic perspective held that there was no real narrowing of the
gap, only an illusion of racial progress (Butler and Heckman, 1977; Lazear,
1979; Darity and Myers, 1980). Reasons given for thèìllusion'' of progress
differed among authors, but one major explanation indicated that the lowest
earners were drawn out of the labor force, causing the mean earnings of the
positive earners to rise.
Subsequent research has indicated that while the labor force drop-out effect
partially accounts for the change, it does not fully account for it (Brown, 1984; Vroman, 1986); the first two arguments remained as contender explanations for
the residual closure in the gap. Presumably, then, the more recent renewed
widening of the earnings gap must be the result of: (a) the reversal of the positive effects of human capital gains during the 1960s and 1970s; (b) a decline in
enforcement of affirmative action; or (c) altogether new factors not operating
during the earlier era.
The evidence used to support the case for convergence in black±white earnings
was drawn from aggregate data on relative labor market earnings. The mean
income ratio for black males and white males rose from about 55 percent for all
workers in 1950 to 66 percent by 1975 (Smith and Welch, 1977, 1978). The
mean income ratio for black females and white females rose from 61 percent in
1950 to 95 percent by 1975, close to parity (Smith, 1978).
Figures 13.3 and 13.4 show these upward trends. Figure 13.3 plots the ratio of
black±white mean incomes for all male workers and for full-time, year-round
male workers. The steady increase in the earnings ratio is sharpest for year-
round, full-time employees after 1964, the year of the passage of the most
comprehensive US civil rights law since the Reconstruction period. Thereafter,
and into the 1980s, the ratio levels off for all workers but maintains a slight
positive slope for year-round, full-time workers.
Figure 13.4 reveals a sharper upward trend in the ratio of black±white mean
incomes among females, a trend that began its upward climb well before the
enactment of the 1964 Civil Rights Bill and that levels off and even turns
downward by the late 1970s. The data from these two figures are the source
of the claim during the late 1970s and early 1980s that black±white earnings
were converging. The upward trends were extrapolated forward in time to
envision the prospect of complete elimination of the gap. The debate then turned to how to explain the change in the economic status of blacks. What accounted
for the improvement?
184
W. A. Darity, Jr and S. L. Myers, Jr
Figure 13.3 Ratio of black to white mean income, males, all workers and year-round full-time workers, 1948±1986.
Source: Authors' computations from US Bureau of the Census, Money Income of Households, Families and Persons in the United States, 1987. Current Population Reports, Series P60±162.
Washington DC, US Government Printing Office, 1988.
Figure 13.4 Ratio of black to white mean income, females, all workers and year-round full-time workers, 1948±1986.
Source: Authors' computations from US Bureau of the Census, Money Income of Households, Families and Persons in the United States, 1987. Current Population Reports, Series P60±162.
Washington DC, US Government Printing Office, 1988.
Racial Economic Inequality in the USA
185
Two major competing hypotheses were advanced. The first was the position
taken by James Smith and Finis Welch (1977, 1978) at RAND and UCLA
respectively. They argued that the improved quantity and quality of black
education, combined with South±North and rural±urban migration of blacks
during the 1940s, 1950s, and 1960s, led to a decline in the average productivity differential between blacks and whites. This in turn led to a decline in the
earnings gap. At the core of the Smith and Welch view was the decisive role
they gave tò`human capital'' differences (which they associated largely with
years of formal schooling in explaining average racial wage differences). The
human capital gap was being closed as black schooling improved, ostensibly
due to the rising quality of Southern schools attended by blacks as well as the
beneficial effects of black migration to other regions where schools were
superior.
Smith and Welch also argued that there was à`vintage effect,'' claiming that
younger cohorts of blacks had educational experiences more similar to compar-
ably aged whites, and therefore had more similar human capital endowments
and more similar labor market experiences. The earnings gap for younger
blacks, then, would be expected to be narrower than the earnings gap for
older blacks. In general, Smith (1978) concluded, ``Blacks are becoming less
distinguishable from whites in at least one relevant index of performance ±
market earnings.'' The underlying reason, for Smith and Welch, was the closing
of the gap between blacks and whites in terms of human capital acquisition.
Smith and Welch's Panglossian vision of black economic progress is rooted in
a perspective that downplays any significant role for discrimination in labor
markets as the source of racial economic inequality. Discrimination was, in their estimation, solely a pre- or extra-market phenomenon and an important factor
in the historical disparity in schooling opportunities for black and white youths.
In their view, the labor market generally processes all individuals with reason-
able fairness (or market fairness) based on the individual's productivity-linked characteristics. Thus, as the historical differential in schooling opportunities apparently declined, so did the fundamental basis for earnings inequality decline as well.
The Smith and Welch perspective leads to the conclusion that the labor
market generally affords equal opportunity. As the pre-market environment
comes to provide equal opportunity as well, Smith and Welch's analysis suggests
that equal results will be the outcome. For Smith and Welch there is no necessary inconsistency between equal opportunity and equal results. Furthermore, there
is no need for any special programmatic intervention for blacks, aside from
continuing to ensure that educational opportunities for blacks move toward
matching those available for whites. The labor market works and needs
no corrective measures such as affirmative action or anti-discrimination
measures.
An alternative explanation was provided by Harvard economist Richard Free-
man (1981), who argued that the trend toward economic convergence was
attributable to a decline in labor market discrimination engineered by govern-
ment anti-discrimination enforcement measures. In short, Freeman also took the
186
W. A. Darity, Jr and S. L. Myers, Jr
position that equal opportunity would lead to equal results, but for equal
opportunity to prevail government intervention would be required in employ-
ment markets.
Although disagreeing on the causes, Freeman, and Smith and Welch agreed on
thè`fact'' of a positive trajectory for black economic progress in the 1960s and 1970s. But there were dissenters, especially the authors of this chapter, who
argued that the evidence used to make the case for convergence was misleading
at best. An initial basis for the dissent was the discovery that the data on which Smith and Welch, and Freeman based their findings did not account for zero
earners ± persons continuously unemployed or out of the labor force during the
year. Black experience of long-duration joblessness is much higher than that for whites. Consequently, earnings and income ratios calculated exclusively from
data on working persons will be biased by the selection effect. The bias tends to work by raising black±white earnings ratios artificially.
For males, black labor force drop-outs are disproportionately from the lower
end of the income spectrum, while white labor force drop-outs are dispropor-
tionately from the higher end of the wage spectrum. When the earnings time
series is corrected to account for males with no earnings in a given year, the
change in the black to white mean ratio vanishes during the decade 1967
through 1977. Indeed, the black±white earnings ratio for males was slightly
lower in 1977 (55 percent) than in 1967 (57 percent) after the correction (Darity, 1980, p. 164). By 1990 the black±white male earnings ratio for full-time, year-round workers was 70 percent, but for all males, with or without earnings, it
was only 60 percent (US Bureau of the Census, 1992, p. 57, table 11).
For females, the Freeman and the Smith and Welch black±white earnings and
income ratios were biased by the dramatic growth in the entry of white women
into the labor force after the 1950s. Black women had long had high labor force
participation rates (Darity, 1980, pp. 159±67). The time-series data from 1953
through 1977, unadjusted for zero income recipients among females, give the
impression that the earnings ratio of black±white females soared remarkably
from 55 percent in 1955 to 94 percent by 1975. When the series is adjusted to
account for women with no incomes in a given year it flattens significantly; the ratio already was 84 percent as early as 1953, never dips below 70 percent
during the interval, and was at 94 percent by 1977. Again, by 1990 the black±