The Employment Effects of Wage Discrimination against Black Men

Abstract

When labor supply curves are upward-sloping, wage discrimination against black men reduces not only their relative wages, but also their relative employment rates. Using data from the 1984 Survey of Income and Program Participation, the authors estimate wage discrimination against black men and, for the first time, quantify the effects of that discrimination on the employment of black and white men. They find that 62% of the difference in offer wages to black and white men, and 67% of the difference in their observed wages, cannot be attributed to differences in productivity. Assuming that the unexplained wage differential is attributable entirely to employer discrimination, then the disincentive effects of wage discrimination reduced the relative employment rate of black men from 89% to 82% of white men's employment rate. Thus, wage discrimination and its employment effects resulted in a substantial transfer of resources from blacks to whites in 1984.