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The Differing Nature of Black-White Wage Inequality Across Employment Sectors

Author

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  • David Bjerk

Abstract

This paper argues that the underlying causes of racial wage inequality may dif- fer across labor market sectors. In particular, because employers hiring for jobs in the more highly skill-intensive sector have a greater incentive to accurately as- sess worker skill than employers hiring for jobs in the less skill-intensive sector, these more skill-intensive employers also have incentives to invest more in skill re- vealing technology, and thereby obtain more precise information regarding worker skill, than less skill-intensive employers. Under some technologies, these cross sec- tor information differences will lead to several implications regarding racial wage inequality. Most notably, (i) after controlling for worker skill, very little racial wage inequality should remain in the highly skill-intensive sector, yet substantial racial wage inequality may remain in the less skill-intensive sector, and (ii) workers from the relatively worse paid group should be more likely than similarly skilled workers from the better paid group to work in the highly skill-intensive sector. Using data from the NLSY, I find empirical support for these implications. Specifically, after controlling for pre-market academic skills, the entire racial wage gap disappears in the highly skill-intensive sector, but almost half of the unconditional gap remains in the less skill-intensive sector. Furthermore, I find that black workers are roughly 25 percent more likely than similarly skilled white workers to work in the highly skill-intensive sector.

Suggested Citation

  • David Bjerk, 2004. "The Differing Nature of Black-White Wage Inequality Across Employment Sectors," Department of Economics Working Papers 2004-09, McMaster University.
  • Handle: RePEc:mcm:deptwp:2004-09
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    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2004-09-bwskill_WP.pdf
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    References listed on IDEAS

    as
    1. Moro, Andrea & Norman, Peter, 2003. "Affirmative action in a competitive economy," Journal of Public Economics, Elsevier, pages 567-594.
    2. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-571, June.
    3. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    4. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, pages 340-347.
    5. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-895, October.
    6. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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