Education Alone Does Not Explain the Racial/Ethnic Earnings Gap


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Americans in general experienced strong earnings growth from 2014 to 2015; this was especially true for blacks and Hispanics, as noted in the preceding article in this series. Over the longer term, however, the earnings gap between white Americans and most minority groups has increased. Disparities in education levels contribute to—but by no means fully explain—the racial/ethnic earnings gap in the U.S.

The 2015 median earnings for Americans over 25 years of age with earnings in 2015 was $48,356, based on U.S. Census Bureau Current Population Survey (CPS) data released last month. Among non-Hispanic whites, median earnings were $51,999, while median earnings among blacks and Hispanics were dramatically less: $40,281 and $35,469, respectively.*

A portion of this racial/ethnic earnings disparity can be explained in terms of education. Of the sample survey, only 3.0 percent of whites had less than a high school degree, compared to 5.8 percent of blacks and 25.2 percent of Hispanics. On the other end of the spectrum, 56.9 percent of whites had a college degree, compared to 42.9 percent of blacks and 28.9 percent of Hispanics. The higher level of educational attainment among whites explains to some extent the higher median earnings among whites relative to blacks and Hispanics.

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However, education alone does not fully explain the gap. If we examine median earnings of people with the same level of educational attainment, whites consistently earn more than blacks and Hispanics. Based on CPS data, 2015 median earnings among whites are 14.9 percent to 50.7 percent higher than that of blacks and 14.1 percent to 35.5 percent higher than that of Hispanics with the same level of education. The earnings gap between whites on the one hand and blacks and Hispanics on the other remains substantial. even after considering the margin of error in this CPS data.

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The racial/ethnic earnings disparity is further underscored by the fact that median earnings among blacks and Hispanics with an associate degree is approximately equal to that of whites with only a high school diploma or GED; in addition, blacks and Hispanics with a master’s degree earn slightly less than whites with only a bachelor’s degree.

Increasing the level of educational attainment among racial and ethnic minorities may shrink the racial/ethnic earnings gap, but will not fully close the gap so long as these minorities earn less than whites with the same level of education. In fact, the racial/ethnic earnings disparity tends to increase as the level of educational attainment increases. For example, among those with less than a ninth grade education, whites tend to earn about 18 percent more than blacks and Hispanics; meanwhile, among those with a professional degree, whites tend to earn 50.7 percent more than blacks and 35.5 percent more than Hispanics.

A new report on the earnings disparity between whites and blacks published by the Economic Policy Institute (EPI) traces the evolution of the earnings gap over the last several decades and reaches some disturbing conclusions:

Black-white wage gaps are larger today than they were in 1979, but the increase has not occurred along a straight line. During the early 1980s, rising unemployment, declining unionization, and policies such as the failure to raise the minimum wage and lax enforcement of anti-discrimination laws contributed to the growing black-white wage gap. During the late 1990s, the gap shrank due in part to tighter labor markets, which made discrimination more costly, and increases in the minimum wage. Since 2000 the gap has grown again.

The EPI report found that, despite the fact that a larger percentage of blacks have achieved a college degree in recent years, the earnings gap between whites and blacks has widened. (The narrowing of the gap from 2014 to 2015 was an exception to this rule.)

The report also finds that a pernicious combination of racism and growing income inequality has contributed to the growth in the racial earnings gap.

One of the reasons that the average black-white wage gap has continued to expand is the fact that very few African Americans earn wages that place them among the top 5 percent of all wage earners, where most growth has been concentrated. Only 3 percent of all chief executives are African American, and a disproportionate number of them are employed in the public or private nonprofit sectors, where salaries are lower and more likely to be capped than they are in the private for-profit sector.

In short, the black-white earnings disparity has increased because blacks are underrepresented among the top levels of wage earners—where most of the wage growth has occurred.

The EPI report lists several measures for reducing these wage inequalities, including the following:

  • Consistently enforce antidiscrimination laws in the hiring, promotion, and pay of women and minority workers.
  • Address the broader problem of stagnant wages by raising the federal minimum wage, creating new work scheduling standards, and rigorously enforcing wage laws aimed at preventing wage theft.
  • Strengthen the ability of workers to bargain with their employers by combating state laws that restrict public employees’ collective bargaining rights or the ability to collect “fair share” dues through payroll deductions, pushing back against the proliferation of forced arbitration clauses that require workers to give up their right to sue in public court, and securing greater protections for freelancers and workers in “gig” employment relationships [i.e., freelancers and those in temporary ad hoc employment relationships].

The temporary contraction in the racial/ethnic earnings gap in 2015 was good news. However, it will take more than one year of progress to close the chasm between whites and minority groups.

 

*“Earnings” refers to wages and salaries from a job and make up the single largest source of income. Several other categories of income were listed in a footnote to the preceding article. In this article, “whites” will refer to non-Hispanic whites, “blacks” will refer to “black alone” (i.e., reporting no other race), and “Hispanics” will refer to Hispanics of any race. Data presented in this article does not precisely match data from the preceding article because of differences in the samples; information sited in the preceding article focused on people 15 years of age and older who worked full-time for the entire year, while this article focus on people over 25 with earnings in 2015.