Skip to main content

Advertisement

SpringerLink
Log in

Racial Earnings Disparities with Endogenous Labor Market Participation

  • Original Article
  • Published:
Journal of Economics, Race, and Policy Aims and scope Submit manuscript

Abstract

This paper examines racial disparity in wage income earnings in the USA across different quantiles, after accounting for the endogeneity of labor market engagement which is captured using the continuous variable: annual number of weeks worked. Controlling for this endogeneity is important because changes in income earned would affect the labor supply, while on the labor demand side any pressures that cause racial disparity is likely to affect both hiring and pay decisions. State-sector level averages for weather-related work absences are used as instruments for number of weeks worked at the individual level and robustness of the results are verified. The instrumental variable conditional and generalized quantile regression techniques are used for analyzing the disparity. The results find that the racial disparity gets larger at the upper quantiles even when controlling for other covariates ensure that the individuals are similar in important attributes.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. The literature on US race demographics is enormous. Only a few papers are cited here to provide a sample.

  2. A recent policy that prohibits employers from asking job candidates their salary history targets disparity defined similar to this paper: this policy is aimed at reducing the impact of historical attributes on current wage for individuals otherwise similar in job market attributes,. http://www.npr.org/2017/05/30/528794176/proposals-aim-to-combat-discrimination-based-on-salary-history

  3. Wage income includes wages, salaries, commissions, cash bonuses, tips, and other money income received from an employer.

  4. Although unemployment and labor force participation are continuous variables when expressed as rates for a population, it is a binary variable at the individual level which is the unit of analysis for the current paper.

  5. Steven Ruggles, Katie Genadek, Ronald Goeken, Josiah Grover, and Matthew Sobek. Integrated Public Use Microdata Series: Version 7.0 [dataset]. Minneapolis: University of Minnesota, 2017. https://doi.org/10.18128/D010.V7.0.

  6. Sarah Flood, Miriam King, Steven Ruggles, and J. Robert Warren. Integrated Public Use Microdata Series, Current Population Survey: Version 5.0. [dataset]. Minneapolis: University of Minnesota, 2017. https://doi.org/10.18128/D030.V5.0.

  7. Bendick (1994), Cancio et al. (1995), and Hirsch and Winters (2014) also consider the sample of working age males of different race, in their analyses of income disparities.

  8. Here, black refers to the classification “Black/African American/Negro” in the ACS survey questionnaire

  9. Although the 95% confidence interval of the estimated race coefficients do not overlap, simultaneous estimation of the different quantiles using bootstrapped errors was not able to find statistical difference.

  10. Also interesting is the fact that age for peak income now emerges to be 39, 47, and 54 years at 0.25, 0.5, and 0.75 quantiles, respectively. This is significantly earlier than the estimates from the non-instrumented quantile income rewards on additional weeks worked have stopped increasing.

References

  • Ahn T, Arcidiacono P, Wessels W. The distributional impacts of minimum wage increases when both labor supply and labor demand are endogenous. Journal of Economic & Business Statistics. 2011;29:12–23.

    Article  Google Scholar 

  • Aiken- Morgan Adrienne T, Marsiske M, Dzierzewski J, Jones RN, Whitfield KE, Johnson KE, et al. Race-related cognitive test bias in the ACTIVE study: a MIMIC model approach. Exp Aging Res. 2010;36(4):426–52.

    Article  Google Scholar 

  • Aiken -Morgan Adrienne T, Marsiske M, Whitfield KE. Characterizing and explaining differences in cognitive test performance between African American and European American older adults. Exp Aging Res. 2008;34(1):80–100.

    Google Scholar 

  • Albrecht J, van Vuuren A, Vroman S. The black-white wage gap among young women in 1990 cs. 2011: the role of selection and educational attainment. Labour Econ. 2015;33:66–71.

    Article  Google Scholar 

  • Andersen T, Bhattacharya J. Unfunded pensions and endogenous labor supply. Macroecon Dyn. 2013;17(5):971–97.

    Article  Google Scholar 

  • Appiah, AK. and A Gutmann (1998) Color conscious: the political morality of race (Princeton University Press).

  • Bayer, P. & Charles, K. K. (2016), Divergent paths: structural change, economic rank, and the evolution of Black-White earnings differences, 1940-2014, NBER Working Paper No 22797.

  • Bendick M, Jackson C, Reinoso V. Measuring employment discrimination through controlled experiments. Rev Black Polit Econ. 1994;23:25–48.

    Article  Google Scholar 

  • Bertrand M, Mullainathan S. Are Emily and Greg more employable than Lakisha and Jamal? A field experiment on labor market discrimination. Am Econ Rev. 2004;94:991–1013.

    Article  Google Scholar 

  • Bureau of Labor Statistics, U.S. Department of Labor (2011), The Economics Daily, Occupational employment by race and ethnicity.

  • Bureau of Labor Statistics, U.S. Department of Labor (2012), Issues in Labor Statistics, Work absences due to bad weather: analysis of data from 1977 to 2010.

  • Burton P, Kelly C, Lethbridge L, Phipps S. Child health and parental paid work. Rev Econ Househ. 2017;15(2):597–620.

    Article  Google Scholar 

  • Cancio AS, Evans TD, Maume DJ. Reconsidering the declining significance of race: racial differences in early career wages. Am Sociol Rev. 1996;61:541–56.

    Article  Google Scholar 

  • Chernozhukov V, Hansen C. An IV model of quantile treatment effects. Econometrica. 2005;73:245–61.

    Article  Google Scholar 

  • Chernozhukov V, Hansen C. Instrumental variable quantile regression: a robust inference approach. J Econ. 2008;142:379–98.

    Article  Google Scholar 

  • Collins PH. Intersectionality’s definitional dilemmas. Annu Rev Sociol. 2015;41:1–20.

    Article  Google Scholar 

  • Cross H, Kenney G, Mell J, Zimmerman W. Differential treatment of Hispanic and Anglo job seekers: hiring practices in two cities, vol. 1989. Washington DC: Urban Inst; 1989.

    Google Scholar 

  • Culp JM. Colorblind remedies and the intersectionality of oppression: policy arguments masquerading as moral claims. New York University Law Review. 1994;69:162–96.

    Google Scholar 

  • Dague L, De Leire T, Leininger L. The effect of public insurance coverage for childless adults on labor supply. Am Econ J Econ Pol. 2017;9(2):124–54.

    Article  Google Scholar 

  • Darity W Jr. Stratification economics: the role of intergroup inequality. J Econ Financ. 2005;29(2):144–53.

    Article  Google Scholar 

  • Darolia R, Koedel C, Martorell P, Wilson K, Perez-Arce F. Race and gender effects on employer interest in job applicants: new evidence from a resume field experiment. Appl Econ Lett. 2015;23(12):853–6.

    Article  Google Scholar 

  • Ellis AP, Ryan AM. Race and cognitive-ability test performance: the mediating effects of test preparation, test-taking strategy use and self-efficacy. J Appl Soc Psychol. 2003;33

  • Fang H, Eggleston KN, Rizzo JA, Zeckhauser RJ. Jobs and kids: female employment and fertility in China. IZA Journal of Labor & Development. 2013;2:12.

    Article  Google Scholar 

  • Farkas G, Vicknair K. Appropriate tests of racial wage discrimination require controls for cognitive skill: comment on Cancio, Evans, and Maume. Am Sociol Rev. 1996;61:557–60.

    Article  Google Scholar 

  • Fisher JD, Houseworth CA. The widening black-white wage gap among women. Labour. 2017;31(3):288–308.

    Article  Google Scholar 

  • Fix M, Struyk RJ, editors. Clear and convincing evidence: measurement of discrimination in America. Washington, DC: Urban Inst; 1993.

    Google Scholar 

  • Gayle, G-L and Golan, L and Soytas, M (2015), What accounts for the racial gap in time allocation and intergenerational transmission of human capital? (2015-02-27). FRB St Louis Paper No. 2015–018.

  • Goryakin Y, Suhrcke M. The impact of poor adult health on labor supply in the Russian Federation. Eur J Health Econ. 2017;18(3):361–72.

    Article  Google Scholar 

  • Hall R. Wages, income, and hours of work in the U.S. labor force. In: Cain G, Watts H, editors. Income maintenance and labor supply. New York: Academic Press; 1973.

    Google Scholar 

  • Halpern-Meekin, S, K Edin, L Tach, J Sykes (2015), It’s not like I’m poor: how working families make ends meet in a post-welfare world (University of California Press).

  • Hamilton D, Darity W. Can ‘baby bonds’ eliminate the racial wealth gap in putative post-racial America? The Review of Black Political Economy. 2010;37:207–16.

    Article  Google Scholar 

  • Hamilton D, Darity W, Price AE, Sridharan V, Tippett R. Umbrellas don’t make it rain: why studying and working hard isn’t enough for black Americans. Oakland, CA: Insight Center for Community Economic Development; 2015.

    Google Scholar 

  • Hamermesh, DS., KR. Genadek, and M Burda. (2017), Racial/ethnic differences in non-work at work. Working Paper No. w23096, National Bureau of Economic Research, Cambridge MA.

  • Hernandez DJ, Denton NA, Blanchard VL. Children in the United States of America: a statistical portrait by race-ethnicity, immigrant origins, and language. Ann Am Acad Pol Soc Sci. 2011;633:102–27.

    Article  Google Scholar 

  • Hirsch BT, Winters JV. An anatomy of racial and ethnic trends in male earnings in the US. Rev Income Wealth. 2014;60(4):930–47.

    Google Scholar 

  • Iyigun M, Walsh RP. Endogenous gender power, household labor supply, and the quantity–quality trade-off. J Dev Econ. 2007;82:138–55.

    Article  Google Scholar 

  • James DR. Commentary: colorblind versus color-conscious justice. Soc Sci Hist. 2000;24(2):429–34.

    Google Scholar 

  • Juhn C, Potter S. Changes in labor force participation in the United States. J Econ Perspect. 2006;20(3):27–46.

    Article  Google Scholar 

  • Kaestner R, Garrett B, Chen J, Gangopadhyaya A, Fleming C. Effects of ACA Medicaid expansions on health insurance coverage and labor supply. J Policy Anal Manage. 2017;36(3):608–42.

    Article  Google Scholar 

  • Kalenkoski CM, Ribar D, Stratton LS. The influence of wages on parents’ allocations of time to child care and market work in the United Kingdom. J Popul Econ. 2008;22:399–419.

    Article  Google Scholar 

  • Kwak, D. (2010). Implementation of instrumental variable quantile regression (IVQR) methods, Michigan State University.

  • Laird J. Public sector employment inequality in the United States and the great recession. Demography. 2017;54:391.

    Article  Google Scholar 

  • Mehta KM, Simonsick EM, Rooks R, Newman AB, Pope SK, Rubin SM, et al. Black and white differences in cognitive function test scores: what explains the difference? J Am Geriatr Soc. 2004;52(12):2120–7.

    Article  Google Scholar 

  • Nisbett RE, Aronson J, Blair C, Dickens W, Flynn J, Halpern DF, et al. Intelligence: new findings and theoretical developments. Am Psychol. 2012;67(2):130–59.

    Article  Google Scholar 

  • Nocetti D, Smith W. Precautionary saving and endogenous labor supply with and without intertemporal expected utility. J Money, Credit, Bank. 2011;43:1475–504.

    Article  Google Scholar 

  • Pager D. The use of field experiments for studies of employment discrimination: contributions, critiques, and directions for the future. Ann Am Acad Pol Soc Sci. 2007;609:104–33.

    Article  Google Scholar 

  • Pencavel, J, (1987), Labor supply of men: a survey, Ch. 01, p. 3–102 in Ashenfelter, O. And Layard, R. Eds., Handbook of Labor Economics, vol. 1, Elsevier.

  • Ployhart RE, Ziegert JC, McFarland LA. Understanding racial differences on cognitive ability tests in selection contexts: an integration of stereotype threat and applicant reactions research. Hum Perform. 2009;16(3):231–59.

    Article  Google Scholar 

  • Powell D. Unconditional quantile treatment effects in the presence of covariates. Santa Monica, CA: RAND Corporation; 2010.

    Google Scholar 

  • Powell D. Quantile treatment effects in the presence of covariates. Santa Monica, CA: RAND Labor and Population Working Paper; 2016.

    Google Scholar 

  • Romm AT. Retirement date effects on saving behavior: endogenous labor supply and non-separable preferences. International Journal of Economic Theory. 2017;13(3):327–46.

    Article  Google Scholar 

  • Quillian L. How long are exposures to poor neighborhoods? The long-term dynamics of entry and exit from poor neighborhoods. Popul Res Policy Rev. 2003;22:221–49.

    Article  Google Scholar 

  • Rushton JP, Jensen AR. Thirty years of research on race differences in cognitive ability. Psychol Public Policy Law. 2005;11:235–94.

    Article  Google Scholar 

  • Sawhill, IV. and RV. Reeves (2016), The case for ‘race-conscious’ policies, Brooking institution social mobility memos.

  • Schurer S. Bouncing back from health shocks: locus of control and labor supply. J Econ Behav Organ. 2017;133:1–20.

    Article  Google Scholar 

  • Trevisan E, Zantomio F. The impact of acute health shocks on the labour supply of older workers: evidence from sixteen European countries. Labour Econ. 2016;43:171–85.

    Article  Google Scholar 

  • Tomaskovic-Devey D, Thomas M, Johnson K. Race and the accumulation of human capital across the career: a theoretical model and fixed-effects application. Am J Sociol. 2005;111:58–89.

    Article  Google Scholar 

  • Turner M, Fix M, Struyk R. Opportunities denied, opportunities diminished: racial discrimination in hiring. Washington, DC: Urban Inst Press; 1991.

    Google Scholar 

  • Wagmiller RL Jr. Race and the spatial segregation of jobless men in urban America. Demography. 2007;44:539–62.

    Article  Google Scholar 

  • Wang Y, Zhang C. Gender inequalities in labor market outcomes of informal caregivers near retirement age in urban China. Fem Econ. 2017;24(2):147–70.

    Article  Google Scholar 

  • Wilson F, Tienda M, Wu L. Race and unemployment: labor market experiences of black and white men, 1968–1988. Work Occup. 1995;22(3):245–70.

    Article  Google Scholar 

  • Wozniak A. Attitudes and perceptions in the labor market for less skilled black men. American Journal of Economics and Sociology. 2011;70(3):811–44.

    Article  Google Scholar 

  • Wright JS. Color-blind theories and color-conscious remedies. The University of Chicago Law Review. 1980;47(2):213–45.

    Article  Google Scholar 

  • Zhu A. Maternal employment trajectories and caring for an infant or toddler with a disability. Appl Econ. 2016;48:4606–21.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, Spears School of Business, Oklahoma State University, Stillwater, 350 Business Building, Stillwater, OK, 74078, USA

    Bidisha Lahiri

Authors
  1. Bidisha Lahiri
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Bidisha Lahiri.

Ethics declarations

Conflict of interest

The authors declare that they have no conflict of interest.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Lahiri, B. Racial Earnings Disparities with Endogenous Labor Market Participation. J Econ Race Policy 1, 16–25 (2018). https://doi.org/10.1007/s41996-018-0007-7

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s41996-018-0007-7

Keywords

JEL classification

Search

Navigation