February 21, 2020

Education is often touted as the great equalizer that enables minorities from lower-income backgrounds to compete for a piece of the American Dream. Anecdotal accounts of Black or Hispanic children, from marginalized communities, “pulling themselves up by their bootstraps” and achieving great success find their way into impassioned speeches from teachers to preachers, politicians to business leaders.

Data from the Bureau of Labor Statistics, however, tell a very different story. Even after completing four-year undergraduate and graduate degrees, Hispanics and African Americans earn less than non-Hispanic Whites with the same and often less education.
Disparity Despite Similarities in Post-Secondary Education

The numbers are sobering. The chart below shows the Current Population Survey’s 2018 median income levels by Race and Bachelor’s degree attainment:

Black and Hispanic bachelor’s degree holders earn nearly a quarter less than Asians and Whites with equal levels of education. Bachelor’s degrees, however, come in lots of flavors so one could argue that Whites and Asians are majoring in subjects that lead to higher wages, like STEM. Asians, for example, are more likely to major in STEM and obtain jobs in the field. This does not, however, explain why wage differences exist more broadly.

Here’s what earnings look like for individuals who have earned professional degrees like doctors, lawyers, dentists and pharmacists:


Even when Blacks and Hispanics go the extra mile and earn professional degrees, their incomes still don’t break six figures. Whites and Asians, however, double their incomes by earning professional degrees, allowing them to make well over $100,000 a year.

So, why the disparity? We might be tempted to explain it by pointing out the differences in chosen careers by ethnicity. But research shows that “wages of black men are approximately 13 percentage points lower than wages of similarly aged white men with the same college degree and major.” Additionally, African American men who live in the South earn less than African American men with similar degrees who live in other parts of the country. This is not true, however, of White men.

In 2020, African American men are still subjected to the South’s legacy of racial inequality. No amount of hard work or education has been enough to combat entrenched racial discrimination, and it plays out by way of hiring discrimination and wage inequality.

But other minorities are also impacted. The high earnings achieved by Asians might lead some to believe that they’ve overcome U.S. racial barriers. That’s not true. Asian earnings are heavily influenced by the large number of them who entered the U.S. on H1-B work visas which are reserved for skilled, educated individuals employed in specialized occupations. A high proportion of Asian Americans are entering the country as high earners and maintain that status. But even then, they are often subjected to the opportunity gap, and not given a clear path to career advancement. In fact, according Harvard Business Review, Asian Americans are the least likely group in the U.S. to be promoted to management.

Common Misconceptions

America prides itself as being the land of opportunity where everyone has a fair shot at success. That’s what makes this wage gap so disheartening and a national embarrassment on the global stage. But, acknowledging that a problem exists is the first step towards solving it. To do that, we must have an honest conversation about perceptions in America. Whites think that the wealth held by Black households equals about 80% of Whites. Data from the U.S. Census Bureau, however, reveals that Black wealth is only about 7% than that of Whites.

Furthermore, Whites now believe they are the victims of racism more often than Blacks. This is troubling as it suggests they feel that more opportunities for minorities mean fewer opportunities for them. That is demonstrably not the case. Most small businesses are now being started by minorities, out of necessity, which then go on to create jobs for everyone. Immigrants, in fact, are disproportionately entrepreneurs and job creators.

Narrowing the Racial Wage Gap

It’s unlikely that wage and wealth disparity will disappear on its own. In fact, at every level of wage distribution, the gap between Black and White wages was larger in 2018 than it was in 2000.  That is discouraging but the problem can be addressed. Options to start narrowing the racial wage gap include:

  •     Better enforcement of racial work anti-discrimination laws
  •     Policies that promote stronger labor standards
  •     Improvements to worker bargaining power
  •     Eliminating past earnings questions from job applications
  •     Increased mentorship opportunities for minority workers
  •     Incentives for minority entrepreneurs and business owners

Additionally, economic outcomes are heavily influenced by social networks. People, regardless of race, are more likely to extend opportunities to people of similar social standing as themselves. Creating better opportunities for minority graduates to mingle with or be mentored or sponsored by decision-makers from other groups will help them build social capital to use when seeking well-paid employment.

The U.S. economy is consumer driven. Closing the racial wage gap will benefit all Americans by ensuring that the next generation of workers, who will be majority-minority, earn enough to contribute equally to our economic growth, thus maintaining our nation’s leadership role in the global economy.

 

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