Are estimates of racial wage discrimination influenced by Labor market conditions? Evidence from the national longitudinal survey

ABSTRACT

Wage decomposition analysis of recent earnings data for men from the National Longitudinal Survey of Youth reveals that estimates of racial wage discrimination, measured by the portion of the wage gap not resulting from human capital differences, are directly related to the black male unemployment rate. Our results indicate that deteriorating labour market conditions contribute to racial wage inequality.

KEYWORDS:

• Wages
• race
• discrimination
• inequality
• human capital
• labour markets

JEL CLASSIFICATION:

• J15
• J00

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The Mincer wage function parameters are estimated via separate OLS regressions for black and white males in each sample year:

$ln{W}_i=\alpha +\sum _j{\beta }_j{X}_j+\epsilon$ The dependent variable is the logarithm of hourly earnings for the ith worker, $X_j$ is a standard set of personal characteristics linked to earnings (education, experience, mother’s education, AFQT score, and dummy variables for industry, occupation, marital status, region, union status, and urban residence); ε is the stochastic error term. Variable definitions, sample means, and OLS regression parameter estimates for the Mincer wage functions are available from the authors upon request. In general, the estimated parameters and goodness of fit measures are consistent with results reported in the literature.

² We adopt the standard approach by assuming white men face the ‘discrimination-free’ wage structure (Blinder (1973; Oaxaca 1973). Although the wage decomposition technique has numerous shortcomings, it remains a standard tool for comparing wages among groups of workers.

³ From 1990 to 2014 the US economy experienced three recessionary periods: 1990-91, 2001, and 2007-2009.

⁴ We are grateful to an anonymous referee for suggesting this robustness check.