Black-White Earnings Ratios Since the Civil Rights Act of 1964: The Importance of Labor Market Dropouts / Charles Brown.

By:

Brown, Charles

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0617.Publication details: Cambridge, Mass. National Bureau of Economic Research 1981.Description: 1 online resource: illustrations (black and white)Subject(s):

H - Public Economics

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: Previous analyses of postwar black/white earnings ratios have found a more rapid rate of increase in the period since 1964 than before. The reason for this acceleration is unresolved. One view is that federal equal-employment activities have increased the relative demand for black labor. An alternative view is that rising relative earnings reflects (1) reductions in relative supply and (2) the "statistical" effect of low earners raising median earnings by withdrawing from the labor market. This study differs from previous work on the subject in two ways. First, the restrictions on the universe from which published median earnings data by race are calculated are discussed explicitly. The restrict ion most commonly addressed in previous work (having positive earnings in the year in question) is found to be less important than an undiscussed restriction (being employed as a wage and salary worker the following March). Second, data on the distribution of earnings are used to determine the effect of labor market dropouts on median earnings, instead of trying to estimate this effect (as well as demand and supply effects) from time series data. This permits comparison of "corrected" and "uncorrected" post-1964 trends. For males, about half of the "uncorrected" trend remains after the relative earnings variable is corrected for labor market withdrawals. For females, between half and four fifths remains.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0617 (Browse shelf(Opens below))	Not For Loan

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1981.

Previous analyses of postwar black/white earnings ratios have found a more rapid rate of increase in the period since 1964 than before. The reason for this acceleration is unresolved. One view is that federal equal-employment activities have increased the relative demand for black labor. An alternative view is that rising relative earnings reflects (1) reductions in relative supply and (2) the "statistical" effect of low earners raising median earnings by withdrawing from the labor market. This study differs from previous work on the subject in two ways. First, the restrictions on the universe from which published median earnings data by race are calculated are discussed explicitly. The restrict ion most commonly addressed in previous work (having positive earnings in the year in question) is found to be less important than an undiscussed restriction (being employed as a wage and salary worker the following March). Second, data on the distribution of earnings are used to determine the effect of labor market dropouts on median earnings, instead of trying to estimate this effect (as well as demand and supply effects) from time series data. This permits comparison of "corrected" and "uncorrected" post-1964 trends. For males, about half of the "uncorrected" trend remains after the relative earnings variable is corrected for labor market withdrawals. For females, between half and four fifths remains.