The Wage Gap Between Black and White Workers Will Likely Get Worse


Research consistently shows racial pay inequity is still widespread among the U.S. workforce. Even though the 1964 Civil Rights Act made it unlawful to discriminate against any individual with respect to their compensation on the basis of their race, bias still rears its head in subtle ways that impact the everyday lives and finances of Black Americans, as the current movement for racial equality calls out. And its effects are long-lasting: Pay disparities among Black and white Americans add up to stark differences in the accumulation of generational wealth. And there are signs that it could get worse.
Black communities across the country have been disproportionately affected by the pandemic from both health and economic standpoints. These disparities are plainly evident as reflected in the number of reported cases and deaths, where non-Hispanic Black Americans are three times more likely to be infected and twice as likely to die from Covid-19 than white Americans. At the same time, Black Americans are also more likely to be frontline workers, have lower average incomes and so are less likely to have savings to weather layoffs, and have been among the hardest hit by unemployment. Facing this crisis on an already unequal footing makes pay equity for Black Americans all the more urgent to address.
In the professional world, racial bias can creep into performance reviews, pay increase decisions, or even referrals and mentorships. In 2018, my colleagues and I researched pay raises between equally qualified employees working in similar jobs and organizations. We found that although no racial or ethnic group was more or less likely to ask for a raise, men of color were 25% less likely than white men to receive a raise when they ask. Similarly, we found that a third of workers received some type of employee referral for their current job, yet men of color are 26% less likely than white men to receive them. Women of color were 36% less likely. We also found that referred employees are more likely to have a positive relationship with their manager, have a higher engagement at work, and higher satisfaction for their employer. Combined, these factors can subsequently influence performance reviews, promotions, and pay increases.
We found that despite no racial or ethnic group being more or less likely to ask for a raise, men of color were 25% less likely than a white man to receive a raise when they ask.
One way to detect racial pay bias is through the controlled measurement of pay using employment characteristics. Our online salary survey collects profiles providing information about location, occupation, education, and other pay variables. Respondents also reported demographic information, including their race. Due to the fact our data skews toward professional white-collar workers, we limited our sample to those with at least a bachelor’s degree since the propensity for professional white-collar work is not equally distributed across races and ethnicity. By focusing on those with at least a college education, our comparison across races represents a more apples-to-apples comparison.
We leveraged a sample of 216,000 respondents to provide insights into the racial wage gap before and during the Covid-19 pandemic and economic crisis. Our research showed that the pandemic-induced recession continues to slow down wage growth across various industries where Black employment is more likely, such as the hospitality and food services sector. The crisis also leaves Black workers particularly vulnerable to layoffs and unemployment. The overall workforce unemployment rate was 12.9% in the second quarter. While the unemployment rate for white workers was slightly lower at 12%, for Black workers it was 16.1%. Our research on unemployment penalties has found that on average, those who were unemployed at the time of receiving a job offer make 4% less than someone who was not unemployed.
We looked at two different measurements: the controlled wage gap and the uncontrolled wage gap among college graduates. The uncontrolled racial wage gap does not factor for employment characteristics, such as job title or years of experience, when assessing income by race. It simply compares the median income for each group. The controlled racial wage gap, on the other hand, is a comparison of pay between white men and people of color who have the same job and qualifications. While this controlled measurement is useful in providing a sterile assessment of pay equity between both groups, it cannot capture the innumerable obstacles faced by people of color to attain positions of power and prestige comparable to those held by white men. For a Black professional, these barriers might include microaggressions in the workplace, imposter syndrome, the pressures of “black excellence,” or the mental burden of code-switching to the vernacular of white culture.
From our pre-COVID-19 sample, we found that Black men with a bachelor’s degree see overall uncontrolled earnings of $0.87 for every dollar earned by a white man. For Black women last year, the pay gap was $0.75. From our sample collected amid the Covid-19 pandemic, the overall uncontrolled pay gap for Black men has slightly improved to $0.89. It has also slightly improved for women, to $0.77. As for the controlled pay gap, both Black men and women last year earned $0.98 for every dollar earned by a white man in the same occupation with the same amount of experience. These pay gaps have not changed since the beginning of the crisis in March.
Even as we see minor gains in pay equity among our sample, this may be the result of the recession slowing wage growth for all demographic groups so that there is a smaller gap in pay between white and Black Americans. As such, this reduction in the racial wealth gap is a product of the recession rather than a new, more equitable economic environment. If anything, this fraught economic period marked by uncertainty in the labor market is maintaining the status quo where Black earnings never quite catch up to white earnings.
Our numbers indicate that meritocracy, the idea that power and resources are ideally and equally bestowed upon individuals on the basis of intelligence, talent, and hard work, is a myth. There is no better example of this than the controlled pay gap. A Black woman with the same job and qualifications as a white man will make $0.98 for his every dollar earned. If the median annual salary of white men with a bachelor’s degree is $77,500, then for equally qualified Black women it is $75,600. If we expand these annual salaries over a 40-year career and account for average yearly wage growth, the lifetime earnings of white men are $5,840,000. For Black women, it is $5,700,000. That is a difference of $140,000 over the course of a lifetime of equal work.
This fraught economic period marked by uncertainty in the labor market is maintaining the status quo where Black earnings never catch up to white earnings.
Wage growth also appears to be unequal. In our research on peak earnings for various demographic groups, we find that women of all racial or ethnic groups make less than white men when they start their careers. Most of these groups have periods of higher wage growth earlier in their careers, which then slows down and becomes eclipsed by white men’s wage growth later on. However, for Black women, their wage growth never surpasses that of white men. So our simplified analysis of lifetime earnings, which assumes equal wage growth between these groups, falls short. The actual difference in lifetime earnings is likely far greater.
The racial wealth gap is more than just the difference in pay between white and Black individuals. It is the result of centuries of systemic racism that has denied Black Americans an opportunity to gain wealth and robbed them of it if they did. The wealth and opportunity each generation of white Americans inherit are juxtaposed against this history of cruel and passive inequality perpetrated against Black Americans. Even when a Black woman in the next generation “pulls herself up by the bootstraps” and works hard to stand on equal footing with a white man in corporate America, she’ll still fall $140,000 short.