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Skin Tone and Self-Employment: is there an Intra-Group Variation among Blacks?

  • Published:
The Review of Black Political Economy

Abstract

The purpose of this paper is to formally evaluate whether odds of entry into self-employment decrease as skin tone darkens for Blacks in the United States. Extending past work on inter-group differences in Black-White self-employment, based on data from National Longitudinal Survey of Youth 1997, with darker skin tone the odds of self-employment decline. Having spent more time in labor force further decreases the likelihood of self-employment for darker skin tone Blacks, and being a high-school graduate, scoring high on Armed Services Vocational Aptitude Battery (ASVAB), or higher past year income are not associated with self-employment of darker skin tone Blacks. While darker skin tone Blacks who are self-employed derive lower income, those who are self-employed and with more human capital (longer time spent in the labor force, scoring high on ASVAB or being a high school graduate) have a higher income.

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Notes

  1. Differences in wealth gap also exist among other races. A broad range of studies across different racial groups have shown that skin tone is negatively associated with economic outcomes. In a study of Latino men in Boston, Gómez, C. The continual significance of skin color: An exploratory study of Latinos in the Northeast. Hispanic Journal of Behavioral Sciences. 2000;22(1):94–103. found that that after “controlling for traditional human capital variables, differences in hourly wages persisted between dark-skinned men and the remainder of the male sample” (page 100). Puerto Ricans, who generally have darker skin, made $5427 less than Cubans, who generally have lighter skin. Similarly, Vietnamese, generally known to have darker skin tone had lower income than Chinese, generally known for lighter skin tone Burton, L.M., Bonilla-Silva, E., Ray, V., Buckelew, R., Hordge Freeman, E. Critical race theories, colorism, and the decade’s research on families of color. Journal of Marriage and Family. 2010;72(3):440–459.

  2. In the US, compared to 11.6% of the Whites engaged in self-employment only 3.8% of Blacks are involved in self-employment [Fairlie, R.W., Robb, A. Families, human capital, and small business: Evidence from the characteristics of business owners survey. Industrial & Labor Relations Review. 2007a;60(2):225–245, Fairlie, R.W., Robb, A.M. Why are Black-owned businesses less successful than White-owned businesses? The role of families, inheritances, and business human capital. Journal of Labor Economics. 2007b;25(2):289–323.]. Black owned business are more likely to fail and the gaps in rate and success in self-employment among Blacks have continued to increase in the past decades [Fairlie, R.W., Meyer, B.D. Trends in self-employment among white and black men during the twentieth century. Journal of human resources. 2000;35(4):643–669.]. However, variations in self-employment outcomes based on skintone differences among Blacks remain largely unexplored.

  3. Contrary to the linear probability model, where the coefficients are treated as the marginal effects, our estimates obtained using logit model represents the incremental effects on the natural log of odds ratio. The coefficients of our Logit model shows the incremental effects of natural log of odds ratio, i.e., \( \beta =\frac{\delta \ln \left(\frac{P}{1- P}\right)}{\delta X} \), where P is the probability of self-employment. We then find the change in odds ratio as \( \frac{\delta \left(\frac{P}{1- P}\right)}{\delta X}={e}^{\beta}-1 \). All estimates reported in the text are expressed as change in odds ratio.

  4. As a robustness test, we also use college degree as control instead of high school in our Model 3 of Table 3 and Model 2 of Table 7. The effects of skin tone on self-employment were similar in both cases. For the Model 2 of Table 7, being a college graduate though positive had no significant association with the likelihood of self-employment.

  5. In addition, to these factors that are known to influence self-employment, as discussed earlier, social networks could mitigate the negative effects of darker skin tone on self-employment. In NLSY 1997, based on past works on employment related social networks in NLSY 1979 [Wheeler, C.H. Cities and the growth of wages among young workers: Evidence from the NLSY. Journal of Urban Economics. 2006;60(2):162–184.], we identified two social network proxies: (i) whether someone recommended for the job; and (ii) the count of non-family members who recommended for the job. While the sample size for the first indicator was 8053 observations, and for the second indicator was 3268 observations f, controlling for whether someone recommended for the job, skin tone as negatively associated with the likelihood of self-employment (β = −0.0758, p < 0.01). Similarly, with increasing count of non-family members who recommended for the job, skin tone as negatively associated with the likelihood of self-employment (β = −0.206, p < 0.01). These findings, suggesting persistent effects of skintone in self-employment, when darker skin tone individuals have more connections in the traditional employment market, they have a lower preference for self-employment.

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Acknowledgements

We acknowledge excellent suggestions and helpful comments from the anonymous reviewer.

This research was conducted with restricted access to Bureau of Labor Statistics (BLS) data. The views expressed here do not necessarily reflect the views of the BLS.

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  1. Srikant Devaraj and Pankaj C. Patel contributed equally to this work.

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  1. Center for Business and Economic Research, Miller College of Business, Ball State University, 2000 W. University Ave, Muncie, IN, 47306, USA

    Srikant Devaraj

  2. Villanova School of Business, Villanova University, 800 E. Lancaster Ave, Villanova, PA, 19085, USA

    Pankaj C. Patel

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Pankaj Patel designed the research, study hypothesis and wrote the paper. Srikant Devaraj performed the empirical analysis and interpreted the results.

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This research was conducted with restricted access to geo-coded data from Bureau of Labor Statistics (BLS). The views expressed here do not necessarily reflect the views of the BLS.

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Devaraj, S., Patel, P.C. Skin Tone and Self-Employment: is there an Intra-Group Variation among Blacks?. Rev Black Polit Econ 44, 137–166 (2017). https://doi.org/10.1007/s12114-017-9249-x

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