5
Racial Differences in Labor Market Outcomes Among Men

Harry J.Holzer

This paper reviews evidence of racial differences, among men, in labor-market outcomes such as wages, employment, and labor-force participation. Data are presented for trends over time and differences across racial and ethnic groups. Differences between Whites and Blacks are considered, as are some differences involving Hispanic and Asian men, both immigrants and U.S. born. Also considered are various explanations for the noted trends. Possible future trends are discussed, as well as implications for policy and further research.

RELATIVE WAGES AND EMPLOYMENT: TRENDS AND REMAINING DIFFERENCES

Figure 5–1 plots trends in the Black/White wage ratio from 1940 to 1990. Table 5–1 gives a brief list of earnings ratios, based on amounts of labor-market experience, for 1971, 1981, and 1988. The data plotted in Figure 5–1 indicate that the wages of Black men improved dramatically during this time period. In 1940, the wages of Black men were, on average, only 40 percent as high as those of White men; by 1990, they were roughly 75 percent as high. Within this overall trend, however, the rate of progress has been quite uneven. There were two periods of sharp improvement—1940 to 1950 and 1960 to 1975. In contrast, improvements during 1950 to 1960 were much more modest; and since 1975, the relative wages of Black men have stagnated or even declined.

Table 5–1 lists differences in the ratios of relative wages based on



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America Becoming: Racial Trends and Their Consequences - Volume II 5 Racial Differences in Labor Market Outcomes Among Men Harry J.Holzer This paper reviews evidence of racial differences, among men, in labor-market outcomes such as wages, employment, and labor-force participation. Data are presented for trends over time and differences across racial and ethnic groups. Differences between Whites and Blacks are considered, as are some differences involving Hispanic and Asian men, both immigrants and U.S. born. Also considered are various explanations for the noted trends. Possible future trends are discussed, as well as implications for policy and further research. RELATIVE WAGES AND EMPLOYMENT: TRENDS AND REMAINING DIFFERENCES Figure 5–1 plots trends in the Black/White wage ratio from 1940 to 1990. Table 5–1 gives a brief list of earnings ratios, based on amounts of labor-market experience, for 1971, 1981, and 1988. The data plotted in Figure 5–1 indicate that the wages of Black men improved dramatically during this time period. In 1940, the wages of Black men were, on average, only 40 percent as high as those of White men; by 1990, they were roughly 75 percent as high. Within this overall trend, however, the rate of progress has been quite uneven. There were two periods of sharp improvement—1940 to 1950 and 1960 to 1975. In contrast, improvements during 1950 to 1960 were much more modest; and since 1975, the relative wages of Black men have stagnated or even declined. Table 5–1 lists differences in the ratios of relative wages based on

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America Becoming: Racial Trends and Their Consequences - Volume II FIGURE 5–1 Relative wages of White and Black males: Trends in Black-White wage ratio, 1940–1990. Reprinted with permission from George Borjas, John F. Kennedy School of Government, Harvard University. TABLE 5–1 Adjusted Black/White Earnings Ratios Based on Years of Experience, 1971, 1981, 1988   Years of Experience Year 0–9 10–19 20+ 1971 0.88 0.78 0.79 1981 0.85 0.80 0.83 1988 0.82 0.84 0.84 Note: Adjusted for differences in education, veteran and marital status, region, urban residence, number of children, and hours worked. SOURCE: Blau and Beller (1992). Reprinted by permission. years of experience. Although Black men with 10 or more years of labor-market experience continued to gain in relative wages during the 1980s, the group with the fewest years of experience lost ground relative to Whites. Data indicate that the deterioration in earnings relative to Whites was greatest among young Black men with a college degree; but the deterioration in absolute terms was much greater among the less educated (Juhn et al., 1993; Bound and Holzer, 1996), and reflected the dramatic

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America Becoming: Racial Trends and Their Consequences - Volume II decline in earnings experienced by less-educated young men of all races during the past 20 years. The deterioration in relative earnings among young Black men can be observed even after one adjusts for Black-White differences in education, region of residence, etc. In the mid-1970s, young Black men were earning 10 percent less than White men with similar education, age, and area of residence; by the late 1980s, that gap had risen to about 20 percent (Bound and Freeman, 1992). Controlling for differences in other measures of skills, however, such as test scores, will account for at least some of the remaining racial difference (a point addressed below). Table 5–2 shows differences, by race, in rates of employment, labor-force participation, and unemployment. The data indicate that in 1970, compared to Whites, Blacks’ labor-force participation rate was roughly 3 percentage points lower, and their unemployment rate was roughly 3 percentage points higher. But the labor-force activity of Black men deteriorated substantially during the 1970s and 1980s relative to Whites, while unemployment rose. Some of this deterioration in the relative employment of Black men was occurring during the early 1970s, while their relative wages were still improving (Cogan, 1982). Although part of this can be attributed to increases in school enrollment rates among young Black men, the trend can be found even among the nonenrolled. The deterioration continued into the late 1970s and 1980s, during which time relative wages were also deteriorating. Of course, employment and unemployment rates for both Whites and Blacks follow a strong cyclical pattern, and both groups showed strong improvement in the late 1990s. Unemployment rates during 1998 aver- TABLE 5–2 Employment Ratios, Labor Force Participation Rates, and Unemployment Rates (percent), by Race   Employment Labor-Force Participation Unemployment Year Blacks Whites Blacks Whites Blacks Whites 1970 71.9 77.8 77.6 81.0 7.3 4.0 1975 62.7 73.6 72.7 79.3 13.7 7.2 1980 62.5 74.0 72.1 78.8 13.3 6.1 1985 60.0 72.3 70.8 77.0 15.3 6.1 1990 61.8 73.2 70.1 76.9 11.8 4.8 1994 60.8 71.8 69.1 75.9 12.0 5.4   SOURCE: Bureau of Labor Statistics data from Employment and Earnings, January 1971 through January 1998.

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America Becoming: Racial Trends and Their Consequences - Volume II TABLE 5–3 Unemployment Rates (percent) for White, Black, and Hispanic Males, by Age, 1994 Age (years) Whites Blacks Hispanics 16–17 16.5 39.3 33.3 18–19 14.7 36.5 22.5 20–24 8.8 19.4 10.8 25–54 4.3 9.1 7.7 >55 4.0 6.4 8.0 All ages>6 5.4 12.0 9.4   SOURCE: Blau and Beller (1992). Reprinted by permission. aged roughly 4 and 9 percent for White and Black men, respectively, even though the absolute decline in unemployment among Blacks during the 1990s was greater. The Black/White unemployment ratio, however, remained roughly constant during this period. Recent gains are important, but how long will they last? Even while they last, they do not fully reverse the strong secular trend toward lower relative employment activity among Black men. Table 5–3 indicates that overall unemployment rates in 1994 were more than twice as high among Black men as among White men. Unemployment rates were dramatically higher among teenagers than among prime-age (25 to 64 years old) males for each racial group; but the numbers for Blacks were particularly striking, as almost 40 percent of Black teenagers in the labor force were unemployed. In fact, labor-force activity was, in 1994, declining among all racial groups for young men with low levels of education—i.e., high school diplomas only and especially high school dropouts—apparently in response to the decline in real wages they had experienced in the 1970s and 1980s (Juhn, 1992). But, again, the decline among less-educated young Black men was most dramatic. Table 5–4 presents relative wages for various groups of Hispanic and Asian men in 1979. The unadjusted ratios show raw differences in means between various ethnic groups and White males; the adjusted ratios adjust for differences in education level, age, region of residence, English proficiency, etc. The raw (or unadjusted) data indicate the wide range of earnings across these groups relative to Whites. On the one hand, Asian Indian and Japanese men were earning somewhat more than White men; however, Mexican, Puerto Rican, and Vietnamese men were earning less than two-thirds as much. But, after adjusting for differences in the characteristics mentioned above—education level, age, etc. —the range of rela-

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America Becoming: Racial Trends and Their Consequences - Volume II TABLE 5–4 Unadjusted and Adjusted Ethnic/White Earnings Ratios, 1979 Ethnic Group Unadjusted Adjusted American Indian 0.74 0.92 Asian Indian 1.13 0.98 Chinese 0.89 0.89 Cuban 0.79 0.96 Filipino 0.79 0.92 Japanese 1.05 1.01 Korean 0.89 0.82 Mexican 0.66 0.98 Puerto Rican 0.63 0.95 Vietnamese 0.64 0.98 Note: Adjusted for differences in education, age, hours worked, marital status, region, knowledge of English, and place of birth. SOURCE: Carlson and Schwartz (1988). Reprinted by permission. tive earnings narrows dramatically; in fact, virtually all these groups of men, were, in 1979, earning 90 percent or more of what White men earned. Differences in educational attainment and language ability seem to account for much of the differences in the raw data, especially for Hispanics (Reimers, 1983; Trejo, 1997). Dramatic differences in educational attainment and language proficiency across ethnic groups often reflect a high concentration of immigrants among some of the groups. Figure 5–2 presents wage rates, obtained from the 1990 Census, of U.S.-born Hispanic and Asian men in comparison to those of Whites. The data reveal much smaller differences in wages across groups than are shown in the unadjusted data in Table 5–4. Indeed, U.S.-born Chinese and Japanese men were earning more than White men; and U.S.-born Cuban and Puerto Rican men were earning almost 90 percent as much, even in the raw data. However, the relative importance of educational and language deficiencies among some groups of Hispanic and Asian men has grown over the past few decades, as large numbers of less-educated immigrants have arrived in the United States. This largely accounts for the fact that overall educational attainment and earnings for Hispanic men fell over the past 20 years (Council of Economic Advisers, 1998). As the children of these groups assimilate, their relative education and earnings should improve

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America Becoming: Racial Trends and Their Consequences - Volume II FIGURE 5–2 Relative wage rates in 1990 of U.S.-born Asian and Hispanic men aged 25–64. (A) Asian. (B) Hispanic. Reprinted with permission from George Borjas, John F.Kennedy School of Government, Harvard University.

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America Becoming: Racial Trends and Their Consequences - Volume II substantially, although some differences of opinion exist as to whether the convergence in earnings over time for the more recent immigrant groups has been as rapid as for earlier immigrant groups (Chiswick; 1986; Borjas, 1994). To sum up, these data indicate substantial differences in employment and earnings across groups, and in trends over time. Although the relative earnings of Black men have improved since 1940, the rate of progress has been uneven; and there has been some recent deterioration in their relative earnings. Overall, Hispanic and Asian men earn considerably less than Whites, but much of this is accounted for by lower levels of education and language proficiency, particularly among recent immigrants. EXPLAINING THE BLACK-WHITE TRENDS How do we account for the improvements in relative earnings of Black men from, roughly, 1940 to 1975, especially during 1940 to 1950 and 1960 to 1975? And what accounts for the deterioration in relative earnings and employment more recently? Improvements in the relative earnings of Blacks during the pre-Civil Rights period seem to be explained primarily by their immigration from the rural South to the industrial North and Midwest, and by improvements in the quantity and quality of education attained, particularly in the South (Smith and Welch, 1989; Margo, 1990; Card and Krueger, 1992). Improvements in education, in turn, seem at least partly to reflect political and legal developments, including the Supreme Court decision in Brown v. Board of Education of Topeka in 1954 (Boozer et al., 1992; Donohue et al., 1998). Improvements during the 1940s seem to reflect advances made by Black men during World War II, as they moved into more skilled positions vacated by White men who went away to war. The dramatic progress made by Black men during the 1960s and early 1970s also seems to reflect rapid improvements in their quantity and quality of education and occupational status, as well as in relative earnings within education and occupation groups. Much of this improvement can be tied to social and economic changes induced by the Civil Rights Acts of 1964 and 1972 (Freeman, 1981; Heckman and Payner, 1989; Chay, 1995). Declines in discriminatory behavior seem to be particularly apparent in the South, where discrimination against Blacks had historically been greatest, as Black men began to be increasingly employed in professional/ managerial occupations. Other administrative actions and court decisions, such as the implementation of Affirmative Action requirements for government contractors and the “disparate impact” cases brought in the af-

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America Becoming: Racial Trends and Their Consequences - Volume II termath of Griggs v. Duke Power in 1971, likely contributed as well (Brown, 1982; Leonard, 1990).1 Given the strong improvements that occurred during 1960 to 1975, what accounts for the stagnation and even deterioration in relative earnings, and employment, since then? A number of developments seem to be responsible for these reversals, on both the demand and the supply sides of the labor market, reflecting both employers/jobs and Black workers. Some of these developments, such as rising employer demand for skills and declining industrialization/unionism, seem to account for the deterioration in employment rates and earnings observed among young Blacks. Other factors, such as labor-market discrimination and social/ spatial factors, have not necessarily worsened over time, but no doubt contribute to the persistence of racial gaps in employment and earnings noted above. Rising Employer Demand for Skills During the past two decades, earnings inequality has risen quite dramatically in the labor market. Earnings gaps have risen between educational groups and between those with different levels of cognitive ability, after controlling for education (Levy and Murnane, 1992; Murnane et al., 1995). Although the educational attainment and test scores of Blacks improved somewhat over the past two decades (e.g., Mare, 1995; Hauser and Huang, 1996), large gaps remain relative to Whites. The high school graduation rates of Blacks continued to improve significantly during the 1980s, though their tendency to graduate from college improved much more slowly. Improvements in test scores among students continued until roughly the mid-1980s and have leveled off or mildly deteriorated since then. Thus, as Blacks remained more concentrated among the less-educated and less-skilled groups, they were likely disproportionately hurt when the relative earnings of men in the less-educated, less-skilled groups declined (Juhn et al., 1993).2 Furthermore, differences in educational attainment and test scores together may account for most of the racial 1   Although Affirmative Action requirements of federal government contractors were first introduced by Executive Order 11246 in 1965, enforcement of these provisions was limited until the late 1960s and early 1970s. Similarly, changes in the enforcement of the Civil Rights Act, such as the use of class-action suits after 1972, likely contributed to the economic effects of the act as well. 2   Questions about the extent to which rising returns to unmeasured skills can account for the relative stagnation or deterioration of Black earnings have been raised by Card and Lemieux (1994) and by Chay and Lee (1997), largely on the basis of timing issues and differences in patterns across educational groups.

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America Becoming: Racial Trends and Their Consequences - Volume II difference in wages, though less so for differences in employment rates. Ferguson (1993) and Neal and Johnson (1996) provide evidence of lower test scores based on the National Longitudinal Survey of Youth (NLSY). Rodgers and Spriggs (1996) note, however, that racial differences remain in the market returns to these scores and also in their determinants. Significant racial differences in wages remain in other datasets besides the NLSY, even after controlling for education and test scores—e.g., in the High School and Beyond data (Murnane et al., 1995). Employers continue to be reluctant to hire Blacks for jobs that require significant cognitive skills and credentials, such as specific experience or previous training, even those jobs for which formal educational requirements are not high (Holzer, 1996). Declining Industrialization and Unionism Rising demand for skills can account for some of the increase in inequality during the past two decades, but some part of that increase also seems to reflect factors such as declining employment in manufacturing and declining levels of union membership (Levy and Murnane, 1992). Although Black males were no more heavily concentrated in manufacturing jobs nationwide than were White males in the 1960s, they were more heavily concentrated in manufacturing jobs in the urban Midwest. Declines in manufacturing and union membership help account for the particularly strong declines in Blacks’ relative employment and earnings in the Midwest since 1970 (Bound and Freeman, 1992; Bound and Holzer, 1993, 1996). Black men have traditionally been more likely to be members of unions than White men, and enjoyed particularly large wage gains from such membership (Freeman and Medoff, 1984). The declining presence of unionism in the economy has, no doubt, hurt Blacks disproportionately. Persistent Discrimination Although labor-market discrimination against Blacks has clearly declined over time, there is evidence that it persists. The clearest evidence comes from audit studies, in which matched pairs of Black and White job seekers with comparable credentials, in terms of education and experience, apply for various advertised job openings. These studies found that Blacks are less likely to receive job offers, on average, than Whites (Fix and Struyk, 1994; Bendick et al., 1994). When comparing the likelihood of White and Black applicants to be employed, clear differences can be found across various kinds of firms: Black applicants are much less likely to be hired by small establishments

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America Becoming: Racial Trends and Their Consequences - Volume II than by large ones and are less likely to be hired for jobs that involve significant contact with White customers (Holzer, 1998; Holzer and Ihlanfeldt, 1998). The greater degree of informality and subjectivity in the hiring procedures of smaller establishments likely contributes to their more discriminatory behavior (Braddock and McPartland, 1987; Holzer, 1987). Discrimination might also be greater in establishments located in the suburbs than those located in central cities. The greater tendencies of some of these establishments to discriminate seem to be, at least partly, related to the lower level of monitoring of smaller and/or suburban establishments by Civil Rights enforcement agencies. For instance, only firms with 100 or more employees are required to file Equal Employment Opportunity (EEO)-1 forms with the federal government, unless they have federal contracts. Suburban firms are also less likely to be monitored, and are therefore less likely to be found in violation of antidiscrimination statutes, as they receive fewer Black applicants and have fewer Blacks in their relevant local labor markets (Bloch, 1994). Discrimination against Blacks seems more clearly pronounced at the hiring stage, perhaps because of how EEO laws are implemented. Donohue and Siegelman (1991) show that most EEO cases involve allegations of discrimination in promotions or discharges, rather than hiring. Thus, some employers might feel they’d face a greater likelihood of being sued if they do hire young Blacks than if they don’t (Bloch, 1994). The tendency of employers to discriminate in hiring seems to more clearly impact Blacks than Hispanics, and Black males than Black females (Holzer, 1998b). Kirschenman (1991) provides evidence that employers have a greater fear of Black men than Black women. The greater tendency to discriminate against Blacks seems consistent with ethnographic evidence showing that employers prefer other ethnic groups, especially immigrants, to U.S.-born Blacks, believing that other ethnic groups have a better “work ethic” (Kirschenman and Neckerman, 1991). Although the audit studies suggest that some hiring discrimination against Hispanics remains (Kenney and Wissoker, 1994), Hispanics might be able to avoid the adverse effects of this discrimination by applying for jobs primarily in sectors where it is known that employers do not discriminate against Hispanics and where they have strong networks (Holzer and Reaser, forthcoming [2000]; Waldinger, 1996). If discrimination against Black men is heavily related to employer (and perhaps customer) fear of crime or violence, it is likely more serious against less-educated than more-educated Blacks. In fact, relative wage gaps are higher among less-educated Blacks (Council of Economic Advisers, 1998). It is possible that such discrimination has grown more serious over the past few decades as crime rates, and their correlation with educa-

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America Becoming: Racial Trends and Their Consequences - Volume II tion levels, have increased in regard to Black men (Freeman, 1992). The growing value that employers seem to put on “soft skills,” such as social and verbal skills, might also contribute to a growing reluctance to hire less-educated Black men for jobs where such skills are important (Moss and Tilly, 1995). Social/Spatial Factors Although residential segregation between Whites and Blacks has declined modestly over the past few decades, it remains high (Massey and Denton, 1992; Farley and Frey, 1993). Furthermore, economic segregation seems to be rising, especially the tendency of low-income Blacks to live in predominantly Black and poor neighborhoods (Jargowsky, 1997). These facts are likely to have a number of implications for the labor-market performance of Blacks, especially those with lower incomes. For one thing, residential segregation seems to be associated with lower educational attainment and lower employment outcomes (Cutler and Glaeser, 1997). Economic segregation of Blacks also seems to contribute to these problems (O’Regan and Quigley, 1996). Although the exact mechanisms through which these effects occur are somewhat obscure, data suggest that “social isolation” contributes to a lower quality of education and a variety of problematic behaviors among Blacks.3 The social isolation of low-income Blacks might also limit their access to employment and/or higher wages because it denies them access to effective employment networks (Braddock and McPartland, 1987; Holzer, 1987). Another mechanism through which residential segregation appears to limit labor-market opportunities for Blacks is “spatial mismatch,” in which inner-city Blacks have difficulty gaining access to jobs located in relatively distant suburbs. Although this notion has been controversial for decades, recent evidence seems largely to bear it out (e.g., Holzer, 1991; Kain, 1992). Blacks are generally located further away from areas of strong employment growth and high job vacancy rates than are Whites, and this distance seems to be associated with lower employment rates for them (Hughes and Sternberg, 1992; Raphael, 1998; Ihlanfeldt, 1998). Black employees at central-city firms are also more likely to quit their jobs when such firms relocate to suburban areas (Zax and Kain, 1996; Fernandez, 3   See Ellen and Turner (1997) for a recent review of the literature on “social isolation” and neighborhood effects. The best micro-level evidence that social contacts affect behavior adversely among young people in poor Black neighborhoods can be found in Case and Katz (1991). Borjas (1992) also presents evidence that neighborhoods may have intergenerational effects across a wide range of ethnic groups.

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America Becoming: Racial Trends and Their Consequences - Volume II Improving Access to Housing and Transportation Given the evidence that racial and economic segregation generate a wide range of negative outcomes among young Blacks, and that “spatial mismatch” also limits their employment opportunities, improving the access of Blacks to residences and jobs in suburban areas seems critical. Greater residential mobility would likely generate positive outcomes along a wide range of dimensions. Rosenbaum and Popkin (1991) provide such evidence from the well-known Gautreaux experiment, in which central-city residents who moved to suburban areas enjoyed improvements in their employment and earnings relative to those who did not move. Preliminary, and somewhat more ambiguous, evidence from the more recent Moving-to-Opportunity demonstration project is discussed by Katz et al. (1997). Greater residential mobility can be encouraged through greater enforcement of open housing laws, and pressure or incentives for suburban areas to limit zoning and other exclusionary practices (Haar, 1996). Alternatively, greater job mobility could be provided for those who remain in poorer Black neighborhoods (Hughes and Sternberg, 1992; Harrison and Weiss, 1997), through the efforts of “labor-market intermediaries” who provide job-placement assistance and transportation to suburban employment. The Center for Employment and Training (CET), originally located in San Jose, California, is perhaps the best-known program that relies on a combination of these interventions, along with training that is customized to meet the needs of local employers. Evaluations have indicated positive effects on the employment and earnings of minority participants (Melendez, 1996); however, CET primarily serves disadvantaged Hispanics and their community, and it remains unclear whether this model would work for other groups, such as Black males. Local economic development assistance, which has traditionally occurred through “enterprise zones,” but which more recently can involve support for a broader range of institutions and services, is not inconsistent with this approach (Giloth, 1997). Although enterprise zones have not traditionally been a cost-effective mechanism for improving employment and earnings of disadvantaged zone residents (Papke, 1993), the more recent federally funded “empowerment zones” can potentially be used to fund a much wider array of services to disadvantaged workers who reside in a zone. However, no formal evaluations of the effects of these zones have been performed to date. EEO Laws and Affirmative Action Recent evidence suggests that affirmative action raises the employment of minorities and women in establishments that practice it, without

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America Becoming: Racial Trends and Their Consequences - Volume II generating major losses of economic efficiency or productivity (Leonard, 1984, 1990; Holzer and Neumark, 1998, 1999; Conrad, 1997). Nevertheless, affirmative action remains extremely unpopular with White voters, especially when it is perceived as generating “preferential treatment.” There is evidence to support the notion that employment in the affirmative action sector is redistributed from White males to other groups whose educational credentials are lower than their own, even though their productivity is generally comparable. Evidence also suggests that employment of White males in firms that practice affirmative action is about 15 percent lower than it otherwise would be, but that most of this employment is redistributed to White females rather than minorities (Holzer and Neumark, 1999). The “displaced” White males presumably gain employment in the non-affirmative action sector, though perhaps at somewhat lower wages than they otherwise would earn. Holzer and Neumark (1999) also show that firms engaging in affirmative action recruit applicants much more broadly, screen them more intensely, and invest more heavily in training new employees. This, presumably, enables them to hire minorities whose credentials on paper might be weaker but whose actual job performance compares favorably with that of White males. A clearer public discussion of the benefits as well as costs of affirmative action is desirable, particularly while so many political and legal efforts are under way to dismantle it. Furthermore, some investigation is needed of how alternative university admission mechanisms affect educational and employment outcomes of minorities. One such mechanism is affirmative action based on family income rather than race/gender, which has been analyzed by Kane (1995). Another approach, used at the University of Texas, guarantees admission to all Texas high school students who rank within the top 10 percent of their high school class. If political and legal restrictions to affirmative action continue to grow, these restrictions should be accompanied by a strong public embrace of EEO principles, and better enforcement of existing EEO laws. More specifically, EEO laws at the hiring stage need to be strengthened precisely in those areas where employment discrimination against Blacks seems to be most serious—i.e., at smaller and/or suburban establishments. This could be done either through more extensive use of the audit methodology, or by relying on real applicants whose access to smaller/suburban establishments is encouraged through the kinds of job mobility policies described above. Because most firms traditionally do not keep records of the race of their job applicants, the courts have generally inferred these numbers from the number of Blacks who reside in the local area (Bloch, 1994). If mobility policies succeed in generating many more Black applicants in areas where few currently live, there would be some need to document exactly where they apply for work and where they are—and are not— being hired.

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America Becoming: Racial Trends and Their Consequences - Volume II Job Creation and Wage/Benefit Supports for Low-Wage Workers Less-educated young Black males face many barriers in the labor market, and some—especially those with poor skills, little work experience, and/or criminal records—may not be employable in the private sector, even under the best of conditions. Therefore, greater use of employer-wage subsidies or public-sector employment to improve job availability for this group is probably warranted (Gottschalk, 1998; Katz, 1998). Some promising models of public-sector employment for young men include the Youth Corps and Youth Build (American Youth Policy Forum, 1997). For young males, these programs combine skills acquisition with employment and the provision of service to communities. When used, public-sector employment should be thought of as “transitional” and providing credentials that might make participants more attractive to private-sector employers. Ultimately, however, low-wage employment in either the private or public sector will not enable young males to support families or resist the appeals of the illegal job market. Therefore, approaches to improve their earnings and benefits need to be considered. Two methods to directly increase the wages of low-wage workers are to (1) increase the minimum wage or (2) expand the Earned Income Tax Credit, perhaps by making it more generous to adults without custody of children. There remains some controversy among economists about whether minimum-wage increases reduce employment, though relatively modest increases, such as those legislated to date, are likely to generate only small disemployment effects. Reducing Crime/Helping Incarcerated Youth As noted above, crime reduction could have quite positive implications for young Black males in the labor market, if employers, both White and Black, become less fearful of them and become willing to employ them. Of course, this assumes that crime reduction can be accomplished in fair and racially unbiased ways (Kennedy, 1997). But it also raises the potential number of incarcerated young Black men, whose labor-market opportunities, once they leave prison, are severely constrained. Special training and job-creation efforts for them, perhaps undertaken with government financial support but administered by the kinds of effective labor-market intermediaries described above, would be an important complement to the kinds of “get tough” policies that have been implemented nationally.

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America Becoming: Racial Trends and Their Consequences - Volume II IMPLICATIONS FOR RESEARCH A number of issues remain unclear in the research literature about the differences in labor-market outcomes of men across racial groups. For many issues, there is a strong need for continued work. What Are the Specific Mechanisms by Which Differential Labor Outcomes Occur? Although there seems to be little doubt about the overall importance of factors such as skills, spatial location, and racial discrimination in the labor market for Black men, the exact mechanisms by which these effects operate remain somewhat unclear. For instance, is “spatial mismatch” primarily a function of limited transportation, limited information, or some other factor such as perceived hostility among White suburbanites? Regarding skills, exactly which skills do employers find most deficient among young Black men, and are the perceptions of these employers accurate? Do these deficiencies manifest themselves primarily through Black mens’ performance during job interviews, in which case the deficient skills are more “soft” than “hard,” through limited and/or unstable work experience, or through other means? And to what extent do their skill deficiencies limit their performance on the job when hired? As for discrimination against young Black men, is it really driven by employer fear of poor work performance, poor attitudes, crime, lawsuits, or some other factor? Answers to these questions are critical for developing effective policy responses; yet our knowledge of these matters remains quite limited. What Are the Effects of the Interplay Between Personal, Familial, and Neighborhood Factors? Related to the previous issue is an uncertainty about the extent to which the problems of Blacks in low-income communities are the result of personal, familial, or neighborhood forces. For instance, to what extent are the weaker skills that young Blacks bring to the labor market a result of underfunded schools, a poor social environment in the schools and neighborhood, or limited family educational resources? To what extent is participation in crime influenced by the same set of factors? Even when the right data are available, it is notoriously difficult to sort out neighborhood effects statistically from personal/family factors, given the problems of individual and family sorting (or self-selection) across neighborhoods (Ellen and Turner, 1997). Sorting out the exact causal patterns here

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America Becoming: Racial Trends and Their Consequences - Volume II is also difficult—e.g., does crime among young Black men lead to residential segregation and discrimination—especially among White suburbanites—or vice versa? And to what extent are the labor-market problems the result of interactions between their skills, social networks, etc.? If that is the case, is addressing these factors separately bound to fail? Identifying Cost-Effective Policy Responses In this critical area, our knowledge is perhaps weakest of all. Given the many programs that have failed to generate sustained improvements for disadvantaged Black youth, which ones are effective? When some programs or institutions do succeed for minority men, such as CET for Hispanics, or the Catholic schools for young Blacks, do we know why they work, and can we replicate their success elsewhere? This requires effective evaluation studies, using random-assignment methodology as much as possible, as well as more qualitative analyses of the processes underlying the various interventions. REFERENCES American Youth Policy Forum 1997 Some Things Do Make a Difference for Youth. Washington, D.C.: American Youth Policy Forum. Anderson, E. 1980 Some observations on Black youth unemployment. In Youth Employment and Public Policy, B.Anderson and I.Sawhill, eds. Englewood Cliffs, N.J.: Prentice Hall. Barnett, S. 1996 Economics of school reform: Three promising models. Pp. 299–326 in Holding Schools Accountable, H.Ladd, ed. Washington, D.C.: The Brookings Institution. Bendick, M., C.Jackson, and V.Reinoso 1994 Measuring employment discrimination through controlled experiments. Review of Black Political Economy 23(Summer):25–48. Blau, F.D., and A.H.Beller 1992 Black-White earnings over the 1970s and 1980s: Gender differences in trends. Review of Economics and Statistics 74(2):276–286. Bloch, F. 1994 Antidiscrimination Law and Minority Employment. Chicago: University of Chicago Press. Boozer, M., A.Krueger, and S.Wolkon 1992 Race and school quality since Brown v. Board of Education. Brookings Papers on Economic Activity—Microeconomics. Washington, D.C.: The Brookings Institution. Borjas, G. 1992 Ethnic capital and intergenerational mobility. Quarterly Journal of Economics 107(February):123–150.

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America Becoming: Racial Trends and Their Consequences - Volume II 1994 The economics of immigration. Journal of Economic Literature 32(December):1667– 1717. 1996 Labor Economics. New York: McGraw Hill. Bound, J., and R.Freeman 1992 What went wrong? The erosion of relative earnings and employment among young Black men in the 1980s. Quarterly Journal of Economics 107(February):201– 232. Bound, J., and H.Holzer 1993 Industrial shifts, skill levels and the labor market for Black and White males. Review of Economics and Statistics 75(November):387–396. 1996 Demand shifts, population adjustments and labor market outcomes, 1980–90. Working paper, National Bureau of Economic Research. Braddock, J., and J.McPartland 1987 How minorities continue to be excluded from equal employment opportunities: Research on labor market and institutional barriers. Journal of Social Issues 43:5–39. Brown, C. 1982 The federal attack on labor market discrimination: The mouse that roared? Research in Labor Economics 5:33–69. Card, D., and A.Krueger 1992 School quality and Black-White relative earnings: A direct assessment. Quarterly Journal of Economics 107(February):151–200. Card, D., and T.Lemieux 1994 Changing wage structure and Black-White wage differentials. American Economic Review 84(May):29–32. Carlson, L., and C.Swartz 1988 The earnings of women and ethnic minorities, 1959–1979. Industrial and Labor Relations Review 41(4):530–546. Case, A., and L.Katz 1991 The company you keep: The effects of family and neighborhood on disadvantaged youth. Working paper, National Bureau of Economic Research. Chay, K. 1995 Evaluating the impact of the 1964 Civil Rights Act on the economic status of Black men using censored longitudinal earnings data. Unpublished, Princeton University. Chay, K., and D.Lee 1997 Changes in relative wages in the 1980s: Returns to observed and unobserved skills and Black-White wage differentials. Unpublished, University of California at Berkeley. Chiswick, B. 1986 Is the new immigrant less skilled than the old? Journal of Labor Economics (April). Clotfelter, C., and H.Ladd 1996 Recognizing and rewarding success in public schools. In Holding Schools Accountable, H.Ladd, ed. Washington, D.C.: The Brookings Institution. Cogan, J. 1982 The decline in Black teenage employment. American Economic Review (September). Conrad, C. 1997 The economic costs of affirmative action. In Economic Perspectives on Affirmative Action, M.Simms, ed. Washington, D.C.: Joint Center for Political and Economic Studies.

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America Becoming: Racial Trends and Their Consequences - Volume II Council of Economic Advisers 1998 Changing America: Indicators of Social and Economic Well-Being by Race and Hispanic Origin. Washington, D.C.: U.S. Government Printing Office. Currie, J., and D.Thomas 1996 Does subsequent school quality affect the long-term gains from Head Start? Working paper, National Bureau of Economic Research. Cutler, D., and E.Glaeser 1997 Are ghettoes good or bad? Quarterly Journal of Economics 112(August):827–887. Donohue, J., J.Heckman, and P.Todd 1998 Social action, private choice, and philanthropy: Understanding the sources of improvements in the Black schooling in Georgia. Working paper, National Bureau of Economic Research. Donohue, J., and P.Siegelman 1991 The changing nature of employment discrimination litigation. Stanford Law Review (May). Ehrenberg, R., and R.Smith 1997 Modern Labor Economics. Reading, Mass.: Addison Wesley. Ellen, I., and M.Turner 1997 Does neighborhood matter? Assessing recent evidence. Housing Policy Debate 8(4). Evans, W., and R.Schwab 1995 Finishing high school and starting college: Do Catholic schools make a difference? Quarterly Journal of Economics (November). Farley, R., and W.Frey 1993 Latino, Asian and Black segregation in multi-ethnic metro areas: Findings from the 1990 Census. Working paper. Population Studies Center, University of Michigan. Ferguson, R. 1993 New evidence on the growing value of cognitive skills and consequences for racial disparity and returns to schooling. Mimeograph. Kennedy School of Government, Harvard University. Fernandez, R. 1994 Race, space, and job accessibility: Evidence from a plant relocation. Economic Geography 70(October):390–416. Filer, R., D.Hamermesh, and A.Rees 1996 The Economics of Work and Pay. New York: Harper Collins. Fix, M., and R.Struyk 1994 Clear and Convincing Evidence. Washington, D.C.: The Urban Institute Press. Freeman, R. 1981 Black economic progress since 1964: Who has gained and why? In Studies in Labor Markets, S.Rosen, ed. Chicago: University of Chicago Press. 1991 The employment and earnings of disadvantaged young workers in a labor shortage economy. Pp. 103–121 in The Urban Underclass, C.Jencks and P.Peterson, eds. Washington, D.C.: The Brookings Institution. 1992 Crime and the employment of disadvantaged youth. Pp. 201–233 in Urban Labor Markets and Job Opportunities, G.Peterson and W.Vroman, eds. Washington, D.C.: The Urban Institute. Freeman, R., and J.Medoff 1984 What Do Unions Do? New York: Basic Books. Giloth, R. 1997 Jobs and Economic Development. New York: Sage Publications.

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America Becoming: Racial Trends and Their Consequences - Volume II Gottschalk, P. 1998 The impact of changes in public employment on low-wage labor markets. In Generating Jobs, R.Freeman and P.Gottschalk, eds. New York: Russell Sage Foundation. Haar, C. 1996 Suburbs Under Siege: Race, Space and Audacious Judges. Princeton, N.J.: Princeton University Press. Harrison, B., and M.Weiss 1997 Workforce Development Networks. New York: Sage Publications. Hauser, R., and M.Huang 1996 Trends in Black-White test score differentials. Discussion paper, Institute for Research on Poverty. Heckman, J., and B.Payner 1989 Determining the impact of federal antidiscrimination policy on the economic status of Blacks. American Economic Review 79(March):138–177. Holzer, H. 1986 Reservation wages and their labor market effects for White and Black male youth. Journal of Human Resources 21 (Spring):157–177. 1987 Informal job search and Black youth unemployment. American Economic Review 77(June):446–452. 1991 The spatial mismatch hypothesis: What has the evidence shown? Urban Studies 28(February):105–122. 1996 What Employers Want: Job Prospects for Less-Educated Workers. New York: Russell Sage Foundation. 1998 Why do small firms hire fewer Blacks than larger ones? Journal of Human Resources 33(4):896–914. Holzer, H., and K.Ihlanfeldt 1996 Spatial factors and the employment of Blacks at the firm level. New England Economic Review (May/June):65–82. 1998 Customer discrimination and employment outcomes for minority workers. Quarterly Journal of Economics 113:835–867. Holzer, H., K.Ihlanfeldt, and D.Sjoquist 1994 Work, search and travel for White and minority youth. Journal of Urban Economics 35(May):320–345. Holzer, H., and D.Neumark 1998 What does affirmative action do? National Bureau of Economic Research working paper. 1999 Are affirmative action hires less qualified? Journal of Labor Economics 167(July):534– 569. Holzer, H., and J.Reaser Forth-coming [2000] Black applicants, Black employees, and urban labor market policy. Journal of Ur ban Economics. Hoxby, C. 1996 The effects of private school vouchers on schools and students. In Holding Schools Accountable, H.Ladd, ed. Washington, D.C.: The Brookings Institution. Hughes, M., and J.Sternberg 1992 The New Metropolitan Reality: Where the Rubber Meets the Road in Antipoverty Policy. Washington, D.C.: The Urban Institute.

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America Becoming: Racial Trends and Their Consequences - Volume II Ihlanfeldt, K. 1997 Information on the spatial distribution of job opportunities. Journal of Urban Economics 41:218–242. 1998 Is the labor market tighter outside of the ghetto? Unpublished manuscript, Georgia State University. Jargowsky, P. 1997 Poverty and Place. New York: Russell Sage Foundation. Juhn, C. 1992 Declines in male labor force participation: The role of declining opportunities. Quarterly Journal of Economics 107(February):79–122. Juhn, C., K.Murphy, and B.Pierce 1993 Wage inequality and the rise in returns to skills. Journal of Political Economy 101(June):410–442. Kain, J. 1992 The spatial mismatch hypothesis three decades later. Housing Policy Debate 3(2):371–460. Kane, T. 1994 College entry by Blacks since 1970: The role of college costs, family background and the returns to education. Journal of Political Economy 102(October):878–911. 1995 Racial preferences in college admissions. Unpublished, Harvard University. 1996 Comments on Chapters 5 and 6. In Holding Schools Accountable, H.Ladd, ed. Washington, D.C.: The Brookings Institution. Katz, L. 1998 Wage subsidies for disadvantaged workers. In Generating Jobs, R.Freeman and P. Gottschalk , eds. New York: Russell Sage Foundation. Katz, L., J.Kling, and J.Leibman 1997 Moving to opportunity in Boston: Early impacts of a housing mobility study. Unpublished paper, Harvard University. Kennedy, R. 1997 Race, Crime and the Law. New York: Pantheon. Kenney, G., and D.Wissoker 1994 An analysis of the correlates of discrimination facing young Hispanic job seekers. American Economic Review 84(June):674–683. Kirschenman, J. 1991 Gender within race. Unpublished manuscript, University of Chicago. Kirschenman, J., and K.Neckerman 1991 ‘We’d love to hire them but…’ Pp. 203–234 in The Urban Underclass, C.Jencks and P.Peterson, eds. Washington, D.C.: The Brookings Institution. Lalonde, R. 1995 The promise of public sector-sponsored training. Journal of Economic Perspectives 9(2):149–168. Leonard, J. 1984 Antidiscrimination or reverse discrimination: The impact of changing demographics, Title VII and affirmative action on productivity. Journal of Human Resources 19(Spring):145–174. 1990 The impact of affirmative action and equal employment opportunity law on Black employment. Journal of Economic Perspectives 4(Fall):47–63. Levy, F., and R.Murnane 1992 U.S. earnings levels and earnings inequality: A review of recent trends and proposed explanations. Journal of Economic Literature 30(December):1332–1381.

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America Becoming: Racial Trends and Their Consequences - Volume II Mare, R. 1995 Changes in educational attainment and school enrollment. In State of the Union, R. Farley, ed. New York: Russell Sage Foundation. Margo, R. 1990 Race and Schooling in the South: 1880–1950. Chicago: University of Chicago Press. Massey, D., and N.Denton 1992 American Apartheid. Cambridge, Mass.: Harvard University Press. Melendez, E. 1996 Working On Jobs: The Center for Employment and Training. Boston: Mauricio Gastonia Institute. Moss, P., and C.Tilly 1995 Soft skills and race. Working paper, Russell Sage Foundation. Murnane, R., J.Wilted, and F.Levy 1995 The growing importance of cognitive skills in wage determination. Review of Economics and Statistics 77(May):251–266. Neal, D. 1997 The effects of Catholic secondary schooling on educational attainment. Journal of Labor Economics 15(January):98–123. Neal, D., and W.Johnson 1996 Black-White differences in wages: The role of pre-market factors. Journal of Political Economy 104(October):869–895. O’Regan, K., and J.Quigley 1996 Spatial effects upon employment outcomes: The case of New Jersey teenagers. New England Economic Review (May/June):41–57. Papke, L. 1993 What do we know about enterprise zones? Working paper, National Bureau of Economic Research. Petterson, S. 1996 Are young Black men really less willing to work? American Journal of Sociology. Raphael, S. 1998 The spatial mismatch hypothesis of Black youth unemployment: Evidence from the San Francisco Bay area. Journal of Urban Economics 43(Spring):79–111. Raphael, S., M.Stool, and H.Holzer 1998 Are suburban firms more likely to discriminate against African-Americans? Discussion paper, Institute for Research on Poverty. Reimers, C. 1983 Labor market discrimination against Hispanic and Black men. Review of Economics and Statistics 65:570–579. Reynolds, A., and J.Temple 1998 Extended early childhood development and school achievement: Age thirteen findings from the Chicago Longitudinal Study. Discussion paper, Institute for Research on Poverty. Rodgers, W., and W.Spriggs 1996 What does the AFQT really measure? Race, wages, schooling and the AFQT score. Review of Black Political Economy 24(Spring):13–46. Rosenbaum, J., and S.Popkin 1991 Employment and earnings of low-income Blacks who move to the suburbs. Pp. 342–356 in The Urban Underclass, C.Jencks and P.Peterson, eds. Washington, D.C.: The Brookings Institution.

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America Becoming: Racial Trends and Their Consequences - Volume II Rouse, C. 1997 Private school vouchers and student achievement: An evaluation of the Milwaukee Parental Choice program. Working paper, National Bureau of Economic Research. Smith, J., and F.Welch 1989 Black economic progress since Myrdal. Journal of Economic Literature 27(June):519– 564. Trejo, S. 1997 Relative earnings of Mexican-Americans. Journal of Political Economy 105(December):1235–1268. Viscusi, W. 1986 Market incentives for criminal behavior. In The Black Youth Employment Crisis, R. Freeman and H.Holzer, eds. Chicago: University of Chicago Press. Waldinger, R. 1996 Still the Promised City? African-Americans and Immigrants in Post-Industrial New York. Cambridge, Mass.: Harvard University Press. Zax, J., and J.Kain 1996 Relocating to the suburbs: Do firms leave their Black employees behind? Journal of Labor Economics 14(July):472–504.