Seeing Is Believing
The findings were striking. First, black job seekers were offered significantly less compensation than whites by potential new employers. Second, blacks were much more likely to accept these lower offers than their white counterparts. “This is exactly what you would expect if blacks know that they’re being racially discriminated against,” Spenkuch adds. Finally, and surprisingly, the researchers found that wage gaps narrow over time as black workers stay at the same job. “As an employer I may discriminate against you by offering a lower wage when I first hire you,” Spenkuch explains, “but over time as you work for me, I come to know how good you really are as an individual, and I adjust your wage accordingly.”
By taking these variables into effect alongside race, the researchers found that the “raw” wage gap between black and white workers—“which we observe at around 30 to 35 percent, if we don’t adjust for anything,” Spenkuch explains—narrows to between ten and twelve percent. This means that racial discrimination must account for at least a third of the factors that contribute to black workers receiving lower wages than whites. “It follows intuitively from the two assumptions in our model,” Spenkuch says. “Those assumptions are not necessarily innocuous, but we feel confident that they are plausible.”
Bias by the Numbers
The kind of racial bias that drives this effect, says Spenkuch, is called “statistical discrimination”—“which has nothing to do with any emotional distaste for working with minorities,” he adds. “In our model, employers are purely profit-seeking. The employer says, ‘I don’t care why blacks are less productive on average; I know that they are, because of the lower SAT scores and other data that are observable. Therefore, if I don’t know anything else about the candidate, I have to treat him as I would the average candidate in that racial group—that is, less favorably. Of course, by law employers are not allowed to do that. But the data show that it’s happening.”
Spenkuch is quick to assert that “we haven’t necessarily overturned the last twenty years of research on discrimination in the labor market with one study.” After all, if a third of the wage gap between black and white workers is due to racial discrimination, that means that the majority of the gap is still being driven by other factors, such as disparities in education quality and other so-called “pre-market skill differentials.” “Those factors clearly matter,” Spenkuch says. “What we want to argue is that it’s wrong not to pay any attention to discrimination, too. These results suggest that it’s still going on—and enforcing existing legislation would substantially reduce the wage gaps we observe in the labor market. It wouldn’t eliminate them. But it would narrow them.”
Statistics That Hurt: How Racial Discrimination Affects Wages