Abstract
Why do younger black males earn more relative to whites than do older black males? The literature offers two competing explanations. Smith and Welch suggest this pattern is evidence that employers are rewarding the improved skills of more recently, better-educated blacks. Lazear, and Duncan and Hoffman suggest that the pattern is the result of employer discrimination that prevents blacks from entering occupations that offer on-the-job training (OJT) and wage growth with experience. The competing views are tested by using the National Longitudinal Survey of Labor Market Experience of Young Men to compare black and white earnings and regression estimates in two periods. Regression results for 1968 and 1978 indicate that, as the NLS cohort aged, only white males had an age-earnings profile exhibiting the positive effect of OJT. Over the period, education coefficients decreased for both groups with the reduction greatest in black coefficients. This suggests that the earnings effect of education is not as stable for blacks as it is for whites over the life cycle. Black-white earnings ratios were approximately the same in both periods. The results reported here support the explanations offered by Lazear and by Duncan and Hoffman, implying that policies focusing on eliminating racial differences in educational quality may be insufficient in improving the relative position of blacks over the life cycle.
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Notes
See for example James P. Smith and Finis R. Welch, “Black Economic Progress After Myrdal,”Journal of Economic Literature, Volume 27 (1989), pp. 519–564; James P. Smith and Finis R. Welch, “Racial Discrimination: A Human Capital Perspective,” in Peter Philips and Garth Mangum (eds),Three Worlds of Labor Economics (New York: M.E. Sharpe, 1988); James P. Smith and Finis R. Welch, “BlackWhite Male Wage Ratios: 1960-1970,”American Economic Review, Volume 67, (1977), pp. 323–338; Finis R. Welch, “Black-White Differences in Returns to Schooling,”American Economic Review, Volume 63, (1973), pp. 893-905.
Edward Lazear, “The Narrowing of Black-White Wage Differentials is Illusory,”American Economic Review, Volume 69 (1979), pp. 553–564.
See for example Greg J. Duncan and Saul P. Hoffman, “A New Look at the Causes of the Improved Economic Status of Black Workers,”Journal of Human Resources, Volume 18 (1983), pp. 268–282; Greg J. Duncan and Saul P. Hoffman, “On-the-Job Training and Earnings Differences By Race and Sex,”Review of Economics and Statistics, Volume 61 (1979), pp. 594–603.
The NLS is described in Herbert Parnes, “Longitudinal Surveys: Prospect and Problems,”Monthly Labor Review (February 1975), pp. 11-15.
Welch, “Black-White Differences.”
See Gary S. Becker,Human Capital, 2nd ed. (New York: Columbia University Press, 1975).
Sharon P. Smith,Equal Pay in the Public Sector: Fact or Fantasy (Princeton, N.J.: Princeton University Press, 1977); Steven F. Venti, “Wages in the Federal and Private Sectors.” In David A. Wise (ed),Public Sector Payrolls (Chicago: University of Chicago Press, 1987), pp. 147–177.
Thomas J. Kniesner, Arthur H. Padilla and Solomon W. Polachek, “The Rate of Return to Schooling and the Business Cycle,”Journal of Human Resources, Volume 13 (1978), pp. 264–277.
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Duncan, K.C. The vintage schooling hypothesis and racial differences in earnings and on-the-job training: A longitudinal analysis. The Review of Black Political Economy 20, 99–117 (1992). https://doi.org/10.1007/BF02689936
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DOI: https://doi.org/10.1007/BF02689936