The Blackwell Companion to Sociology (45 page)

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

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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?

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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

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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±