State prisoners working sign. Photo: Rusty Clark, https://www.flickr.com/photos/rusty_clark/ https://creativecommons.org/licenses/by/2.0/
The racial wage gap, which measures the difference in average reported employment earnings between demographic groups such as Black and white men, could be 33 percent higher than previously reported, according to new research from the University of Massachusetts Amherst.
UMass economist Jeannette Wicks-Lim analyzed almost 30 years of U.S. Census Bureau wage data and survey panels of prime working-age men, age 25 to 54, from 1981 to 2008. The panels included an average of 21,000 participants per panel, The Journalists Resource reported.
Wicks-Lim concluded that measurements of racial wage gaps that don’t account for the incarcerated and people who have been out of work for long periods probably miss the full economic picture.
Accounting for men who are incarcerated and men who are out of work for more than a year expands the racial wage gap by close to a third during the timeframe she studied, she said.
When Wicks-Lim’s analysis only included men who worked regularly or were unemployed for less than a year, she found that white men earned 46 percent more per year, on average, than Black men.
But when she included incarcerated men and “nonemployed,” the gap grew 28 percentage points, to 74 percent.
Wicks-Lim counted people as nonemployed if they had no earnings for at least a year during a four-year panel in which they participated.
“We know that there are more and more people who are not participating in the labor market,” Wicks-Lim said. “And we know that this has a racial dimension to it because of the very publicized phenomenon of mass incarceration — but also the labor force participation rate among men has been declining.”
Incarcerated at more than five times the rate of whites, Black people make up 12 percent of the U.S. population but 38 percent of the prison and jail population, according to the Prison Policy Initiative. If Black people and Hispanics were incarcerated at the same rates as whites, prison and jail populations would decline by almost 40 percent.
A strong labor market in the first quarter of 2023 brought historically low Black unemployment, with Black unemployment rates at or above 5 percent. However, Black workers continued to experience unemployment at twice the rate of white workers. White unemployment in the same period was 2.8 percent, according to the Economic Policy Institute.
Being out of work for long periods, such as incarceration, impacts future earnings. Those who have been out of a job earn less than those continually employed, and Black men are more affected by this trend than white men, Wicks-Lim found.
Analyzing racial wage gaps among people who have jobs “is a perfectly useful exercise,” Wicks-Lim said. “I don’t mean to criticize that at all.”
However, for a broader view of earnings outcomes across racial groups, she said, “it’s really important to look at the employment dimension. It’s really important to know who is in and out of the labor force, who is in and out of a job — because we know that those things are racialized.”
In the early 1980s, researchers and news stories proclaimed that the racial wage gap between Black and white workers had shrunk, The Journalists Resource reported. At the time, Duke University economist and wealth inequality expert William Darity disputed these findings, saying they were the result of selection bias because they excluded people without earned income from the analysis.
“The central argument is this: Blacks who are receiving incomes may well be moving closer to whites who are also receiving incomes,” Darity wrote in his 1980 paper, “Illusions of Black Economic Progress,” published in The Review of Black Political Economy. “Nevertheless, if the proportion of Blacks who receive no income is consistently larger than the proportion among whites, racial inequality measured by the ratio of per capita incomes may not reveal the same evidence of approaching parity.”
