Education, occupation are major factors in racial income gaps

Since the late 1970s and early 1980s, the earnings of Black workers have fallen relative to the earnings of white workers in much of the United States, according to a new study from Michigan State University.

The relative losses have been larger in the Great Lakes region than in any other part of the U.S. and larger in Michigan than in any other state, said Charles Ballard, author of the study and professor of economics at MSU.

“Forty years ago, Black workers earned more in Michigan than in any other state,” Ballard said. “Since then, in much of the country, Black workers’ earnings at least kept up with inflation, but white workers’ earnings grew faster.

“In Michigan, however, the inflation-adjusted earnings of Black men are substantially less now than they were in the late 1970s,” Ballard said. “In recent years, the typical Black man in Michigan earned about 20% less than 40 years ago. The real earnings of Black women in Michigan have also fallen, but not by as much.”

In Michigan, from 1976-1981, Black women earned on average 15% more than non-Hispanic white women, but from 2012-2017, Black women earned 15% less than white women. And Black men earned 91% as much as white men from 1976-1981, but that fell to 76% by 2012-2017.

Ballard and his co-author John Goddeeris, also a professor of economics at MSU, analyzed data from the Current Population Survey, the primary source of labor-force statistics for the U.S., for 1976 to 2017, focusing on full-time workers aged 25 to 54. The most important factors they found to explain the income gap are racial differences in education and occupation.

Ballard and Goddeeris found that even though the racial gap in educational attainment is smaller than it once was, a substantial gap remains in all regions of the country. Black workers also are more likely to work in low-paying occupations than white workers who have the same education.

“Even among the college-educated, Black workers are still not paid the same as their white counterparts with the same educational attainment,” Goddeeris said.

The researchers did find some factors that reduced the racial earnings gap:

• Federal employees tend to be well paid, and a relatively large share of Black women workers are employed by the federal government.

• Those who live outside a metropolitan area earn less than those who live inside a metropolitan area. Outside the south, Black workers are more likely than white workers to live in a metropolitan area.

But these advantages are small, and not enough to offset the effects of education and occupational segregation, Ballard said.

“To close the racial income gap, we need to address the systemic and structural racism that exists in our country,” Ballard said. Improving educational opportunities for Black students should be a top priority.”


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