Study: Education, occupation major factors in racial income gap

MSU economics professor advocates multiple paths forward to increase equity and improve outcomes.
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In Michigan, from 1976-81, Black women earned on average 15% more than non-Hispanic white women, but from 2012-17, Black women earned 15% less than white women. And Black men earned 91% as much as white men from 1976-81, but that fell to 76% by 2012-17. Photo by iStock

A pair of economics professors did a deep dive into the racial wealth gap in the U.S. during the past 40 years, and the findings are not encouraging, especially for Black workers in Michigan.

Charles Ballard and John Goddeeris, professors of economics at Michigan State University, co-authored and this summer published a study entitled “Northern Losses and Southern Gains: Regional Variation in the Evolution of Black/White Earnings Differences in the United States, 1976-2017.”

The study found since the late 1970s and early ’80s, the earnings of Black workers have fallen relative to the earnings of white workers in much of the U.S.

The relative losses have been larger in the Great Lakes region than in any other part of the U.S. and larger in Michigan than in any other state, Ballard said.

“Forty years ago, Black workers earned more in Michigan than in any other state,” Ballard said. “Since then, in much of the country, Black workers’ earnings at least kept up with inflation, but white workers’ earnings grew faster.

“In Michigan, however, the inflation-adjusted earnings of Black men are substantially less now than they were in the late 1970s. In recent years, the typical Black man in Michigan earned about 20% less than 40 years ago. The real earnings of Black women in Michigan have also fallen, but not by as much.”

In Michigan, from 1976-81, Black women earned on average 15% more than non-Hispanic white women, but from 2012-17, Black women earned 15% less than white women. And Black men earned 91% as much as white men from 1976-81, but that fell to 76% by 2012-17.

Ballard and Goddeeris analyzed data from the Current Population Survey, the primary source of labor force statistics for the U.S., from 1976 to 2017, focusing on full-time workers aged 25 to 54. The most prominent factors they found to explain the income gap are racial differences in education and occupation.

Ballard and Goddeeris found that even though the racial gap in educational attainment is smaller than it once was, a substantial gap remains in all regions of the country.

Ballard said he believes the decline of high-wage manufacturing jobs that could be obtained with only a high school diploma — and sometimes not even that — has been one of the factors that contributed to Michigan’s widening wealth gap between white and Black workers, exacerbated by the fact that the rate of educational attainment of African Americans has not kept pace with the rate of educational attainment by white workers. This means that Black workers have not been able to participate in the increasingly positive impact on earnings that having a college degree makes.

Black workers also are more likely to work in low-paying occupations than white workers who have the same education.

“Even among the college-educated, Black workers are still not paid the same as their white counterparts with the same educational attainment,” Goddeeris said.

The researchers did find some factors that reduced the racial earnings gap:

  • Federal employees tend to be well paid, and a relatively large share of Black women workers are employed by the federal government.
  • Those who live outside a metropolitan area earn less than those who live inside a metropolitan area. Outside the south, Black workers are more likely than white workers to live in a metropolitan area.

But these advantages are small, and not enough to offset the effects of education and occupational segregation, Ballard said.

“To close the racial income gap, we need to address the systemic and structural racism that exists in our country,” Ballard said. “Improving educational opportunities for Black students should be a top priority.”

Ballard said MSU has devised solutions to create a more equitable education system during the past decade, starting with more robust academic advising/mentoring; summer programs to help low-income, minority and first-generation college students successfully matriculate as first-year students; and inclusive language in syllabi and college materials to assure students they belong and will be given the help they need to succeed.

“We had an experiment a couple of years ago (with) one control group that got normal (attention), and the treatment group got speeches and messages and stuff saying, ‘You’re a Spartan; we’re going to help you succeed,’ all this kind of stuff. That’s really low-cost intervention. And yet in this experiment, it raised grade point averages by one-tenth of a grade point,” Ballard said.

He said he believes changes to the workforce could have similar outcomes in channeling people of color into higher-paying jobs and getting them promotions to leadership at the same rate as their white counterparts, which would help close the wealth gap.

Ballard advocated for several steps that he said would boost earning power equity in the workforce, including:

  • A higher minimum wage
  • Stronger labor unions
  • A more progressive tax system that would tax those at the top income echelons at a much higher percentage relative to middle and low-income earners, as was once the case before the tax cuts for the wealthy that started in the 1980s through the present
  • Better enforcement of civil rights laws in hiring and education
  • Stronger earned income tax credits
  • Closing the education gap by changing the funding model for schools away from a property tax and millage approach to a more equitable system that doesn’t penalize schools in concentrated areas of poverty, as under resourced schools tend to keep minority students who live in those districts behind the pack and racing to catch up for the rest of their lives

For the report, Ballard and Goddeeris looked at data from 18 states and the District of Columbia that had enough Black employees in the workforce to make “meaningful comparisons” to the wages of white employees.

Although they did not include a variable on residential segregation in their methodology, Ballard mentioned a separate study by the outlet Governing — “Residential Segregation Data for U.S. Metro Areas” — that ranked 234 metropolitan areas in the country on an index of residential racial segregation. Of the 234 areas compared, 15 of the top 29 metros that are the most segregated by race are in the Great Lakes region, and six of those are in Michigan. The results of that study contradict a popular narrative among Michiganders that this state never had segregation like the South did under Jim Crow laws, when in fact, Michigan had redlining, neighborhood covenants and “white flight” spurred by government policies that encouraged white residents and barred Black residents from suburban areas, which resulted in essentially the same outcomes as those in the South.

The index of segregation in that study ranks communities on a scale of zero to 100, where zero means there is no segregation, and 100 means there is total racial segregation. The index number a community receives indicates what percentage of the people in that community would have to move somewhere else in order for an even Black-white spatial distribution to be achieved. In Detroit-Warren-Dearborn, that number is 73%. In Grand Rapids-Kentwood, the number is 64%.

Ballard pointed out that where residential segregation exists, so does school segregation, and the unequal system of K-12 education finance and resource gaps augment other types of existing disparities that affect a person’s lifetime earning power.

Although Ballard said he would like to be able to say that the data from the three years following the end date of the study (2017) will show the equity gap closing, he believes the opposite will be the case, with the racial wealth gap increasing due to the disparate health, educational and economic impacts of COVID-19 on minority populations.

“For me, it’s a kind of a depressing story, but it’s an important story,” Ballard said. “Maybe, just maybe, this will be a year in which the United States will finally try to do something more. We’ve addressed these disparities in fits and starts. The civil rights era really did make a difference, and Black earnings rose relative to white earnings all across the country in the ’60s and ’70s. But since then, that’s kind of petered out. …

“From my perspective as a researcher, I want to find out what we can find out, because I think knowing more is better than knowing less. Because I am interested in public policy issues and social justice, I hope this (study) will help stimulate a conversation. I think there are many white Americans who may have been laboring under the misconception that labor market outcomes for Black Americans are just fine, and our research suggests that’s not true; in fact, Black workers have lost a lot of ground relative to white workers. Especially in the wake of George Floyd, in a year when we’re talking about why we name Army bases after John Bell Hood and Robert E. Lee and Braxton Bragg, maybe this is a time when some white Americans can have their eyes opened.”

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