WRITING in 1978, William Julius Wilson, an influential sociologist, began a controversy in “The Declining Significance of Race.” Mr Wilson argued that the plight of poor black Americans was due more to labour-market forces than to contemporary racial discrimination. “I wanted to call attention to the worsening condition of the black underclass, in both absolute and relative terms, by relating it to the improving position of the black middle class,” he later wrote. Four decades later a bevy of economic studies provide some vindication for Mr Wilson. While highly educated African-Americans are now more successful than ever, the bottom appears to have fallen out for poor blacks. Although the earnings gap between the typical white and black man began narrowing from 1940, the trend stopped in the mid-1970s. Many assume that the earnings gap then stayed constant, but it has in fact widened. Today the difference is as large as it was in the 1950s.
That is one result from a recent
working paper by the economists Patrick Bayer of Duke University and Kerwin Charles of the University of Chicago. Previous studies of racial wage gaps only examined those in work. That understates the problem because a staggering number of prime-age black men are not—35% compared in 2014 with 17% of whites (see chart 1). Much of this difference is due to mass incarceration. Nearly 8% of prime-age black men did not work because they were institutionalised—the vast majority in prison—compared with 1.5% of whites. The elevated rates of workforce non-participation and unemployment for black men could also be explained by employers’ reluctance to hire applicants with criminal records.
At the top end of the income scale, the earnings of black men and white men are closer, even as their peers in the middle fall further behind. To illustrate this, Messrs Bayer and Charles use a useful thought experiment which they call the “earnings rank gap”. Suppose that a man at the exact middle of the black earnings distribution were white instead. How would he look then? And how has his relative position changed over time? In 1940 a black man in the 50th percentile among blacks would fall in the 24th percentile if he were white. By 2014, his position would have barely budged, resting only at the 27th percentile. Things look much better for the well-to-do black man, sitting at the 90th percentile of the black earnings distribution. In 1940 he’d only be at the 53rd percentile among white men. In 2014 he would be at the 74th (see chart 2).
Two forces are behind this tale of diverging fortunes among African-Americans. The first is not specific to race. Declining rates of union membership, deindustrialisation and rising income inequality have wreaked havoc among middle- and lower-class black men. The second force is race-specific. As discrimination declined, black Americans entered occupations that had previously been closed off to them. “In 1960, the very smartest black kid in Texas could not go to the most selective college in America. And even if he did, he became a preacher,” explains Mr Charles. “Today, he goes to Princeton. And when he’s out, he can become an editor at
The Economist.”
A much-discussed study published in March by Census Bureau researchers and the economists Raj Chetty of Stanford University and Nathaniel Hendren of Harvard University showed that black boys did much worse in the labour market than white boys, even if they had similarly rich parents, educational qualifications and inherited wealth. Yet the same was not true of black girls, who showed no differences in wages upon controlling for parental income. In response, some formulated a muddled theory of racial discrimination specific only to black men and not women. A clearer explanation of this trend are the stark differences in high-school completion and incarceration between black and white boys, which the authors also show. A black boy born to parents in the top 1% of the earnings distribution had the same chance of being in prison as a white boy whose parents made $36,000 per year.
