Is there a pay differential between whites and blacks? Essay

Forty-five years ago, President Kennedy signed the Equal Pay Act into law, by pronouncing it unauthorized and illegal to pay African Americans and whites employed in the same work place different wages for the same exact equal work. The ratio of whites to African Americans average pay was 58 percent on an annually income. According to the Lexicon Universal Encyclopedia, wage differential is the difference in wage rates between two types of workers. Wage differential is very common in our society today. Researchers have concluded that wage differential only exists in certain demographic areas, based on race and gender. There is a common prophecy that men earn more earnings than women, and whites earn more earnings than African Americans. According to MSN. com, discrimination is different treatments of others based solely on their membership in a socially distinct group or category, such as race, ethnicity, religion, age or disability. Also, discrimination is an unfair act with compelling force, which is commonly known throughout society. Unlawful discrimination is related to the mistreatment of others. Due to discrimination occurring in the work place, African American employees are being shortchanged on their wages for doing the same job that whites are doing and are earning more earnings than African Americans. Researchers have found out that this has happened and is still occurring in jobs today, and therefore the government will have to make an intervention to displace discriminatory acts in businesses. Using data from a 2006 Survey of Income and Discrimination Participation, researchers were able to come up with the fact that there is a 62 percent difference in the wages that are offered to African Americans. Labor curves are sloping upwards and this means that wage discrimination against African Americans sometimes reduce not just their percentage wage but also their percentage of employment rates. The difference in average pay between African Americans and whites are a result of the labor market. The characteristics that African Americans and whites bring are totally different resulting in different wages. Some jobs discriminate against African Americans by employers and co-workers who would rather prefer whites. There are jobs that prefer white males only to do manual and physical labor, but you have African Americans in a white male only field ready to take on the work and try and do a better job at it. II. IDENTIFYING THE ISSUES According to the BlackCommentator Magazine, it says that there are two common excuses for wage racial inequality and that is age and geographic location. Racial wage plays a part in inequality due to the fact that African Americans are younger than whites. So therefore younger African American will take a lower pay than older whites. Dealing with the geographic area of African Americans; African Americans mostly reside in the South. The South is known for its low paying jobs and whites have acquired this knowledge and decided to move North in an effort to find better jobs and better knowledge. African Americans are obtaining the skills that whites have acquired and are really becoming similar, the only problem is that whites are getting paid more and this is a result of a significant gender wage gap. Public policy in the United States has aimed at improving and equalizing opportunities for African Americans. According to â€Å"Explaining Trends in the Gender Wage Gap† a report by The Council of Economic Advisors, it estimates that whites were over paid and that African Americans were under paid by at least 60 percent in the mid 1950s. In the 1970s, the ratio began to rise, and in the mid 1990s, the gender wage pay began to rise even more again reaching more than 75 percent. The gender wage gap can be revisited to an unexplained part in society that may be due to African Americans low labor market skills. Reduced gender wage gap for African Americans has contaminated our society today. If African Americans would invest in more labor skills and education, then the gender wage gap will make an increasing hike. Researchers have attempted to retrieve evidence on the gender wage gap. Economists have known that African Americans and whites wages are determined on the combining of the employer and employee status. Needless to mention on the two interact with one another. Understanding the establishment of wage differentials is determined by how important the labor market theories are of the environment. The magnitude of how this affects the labor market is tremendously understated. According to www. clinton4. nara. gov, the U. S. Census Bureau Standard Statistical Establishments lists that the gender wage gap must decompose as a result of African Americans in a substantially proportioned rate of pay wage gap. There still remains a wage differential in the gender wage gap of about 75 percent of what whites earns. There has been a decline in the gender wage gap in recent decades about 25 percent over the last 20 years. The Occupational Employment Statistics program for the Bureau of Labor Statistics is allowed to calculate occupational wage differentials to the highest degree of occupational setting across sectors of the economy. The empirical difference of wage differential among African Americans and whites estimates how wages are influenced by individual works. The decomposition of wages between a worker and their job is the regulation that the workforce supposedly provides stable establishments in the economy. The Gender Wage Gap (Median annual earnings of African Americans and Whites). YearWhite menBlack menWhite womenBlack women 1970100%69. 0%58. 7%48. 2% 197510074. 357. 555. 4 198010070. 758. 955. 7 198510069. 763. 057. 1 199010073. 169. 462. 5 199210072. 670. 064. 0 199410075. 171. 663. 0 199510075. 971. 264. 2 199610080. 073. 365. 1 199710075. 171. 962. 6 199810074. 972. 662. 6 199910080. 671. 665. 0 200010078. 272. 264. 6 200310078. 275. 665. 4 200410074. 576. 768. 4 The average African American has only one-ninth of net worth or asset of the average white person. The wealth gap among African Americans and whites is just not based on income. Wealth gaps came about in the 1960s and hit the African American society really hard. Earning gaps respond at all levels of education; even when the levels of education and work experience are the same between African Americans and whites. The racial gap consistently remains between 10 to 20 percent, and the racial gap does not necessarily reflect discrimination, but mostly it observes the labor market that has segmented into two races. The whites are continuing to receive an advantage in the segmented markets over equally qualified blacks. The wealth gap is at the core of many socioeconomic differences that have persisted during the post dramatic era. Closing the racial wealth gap will be an extreme challenge to face in the years to come. According to Kenneth Crouch, an Associate Professor of Economics says that the distribution of African Americans wages have become more like that of white, yet the considerable process has yet to be made before there can be such a word called equal among African Americans and whites. There is a visibility between African Americans and whites in fringe benefits due to the total compensation with a percentage of nearly 40 percent. The benefit level depends on the income of African Americans and whites for adequate health pensions and a successful retirement. Fringe benefits are a big part of life and will come in handy when needed most. During the recent years, African Americans and whites non-wage compensation had increased more than wages and salaries. It was also contemplated that fringe benefits had no serious biases which resulted from the neglect of salaries and wages. Human capital is the attributes of a person that is productive in some economic context such as a stock of productive skills and or technical knowledge embodied in labor. Many early economic theories refer to it simply as labor, one of three factors of production, and consider it to be a tangible resource — homogeneous and easily interchangeable. It often refers to formal educational attainment, with the implication that education is investment whose returns are in the form of wage, salary, or other compensation. These are normally measured and conceived of, as private returns to the individual but can also be social returns. Human capital is often viewed as the most important determinant of wages. Human capital may come in different forms such as, schooling, training courses, honesty, and lectures therefore human capital like this will most likely raise earnings in today’ society. People cannot be separated from knowledge, health, or values that they may have acquired through human capital. According to Harvard economists, Richard Freeman, he wrote The Overeducated American, and this caused a huge downfall to investments in human capital. This made people come to a realization that maybe education, training, and investments really did not raise productivity or raise earnings. The economy of human capital has brought about a dramatic change in the lives of African Americans. III. DATA (TRENDS IN THE BLACK-WHITE WAGE GAP) The wage gaps between African Americans and whites are largely determined by educational disparities and occupational differences. There is evidence that African Americans fall short on wages due to the relative wage median. A government study finds that the African American wage gap in employment and earnings reduces when educational achievement levels are advanced. There are some mere facts that go along with the wage differential of African Americans and whites: †¢Whites continue to receive substantial privileges and preferences than African Americans †¢The argument that racial wage gap merely reflects different levels of qualifications and experience between African Americans and whites is simply unattainable. †¢African Americans test scores and other academic achievements is different and the whites test scores account for at least 17 percent of the wage gaps †¢African Americans median incomes are presented in every region and are lower than median incomes for whites †¢African Americans lack the natural resources that are need in order to better themselves and receive an attainable education. On average African American workers also have less education than white workers and are more likely to work in lower paying occupations. Depending if African American employees have the same education as white workers, African Americans relative wages would only improve by only a few cents on every dollar. The growing disparities of wage gaps are likely to be persistent, educated, and well skilled workers. Education and training are the most important investments in human capital. Education and work experience play a major part in expanding the career percentage. Education and work experience can account for about one half of the racial wage gap. Education is a very distinctive part of what your income is based on. It depends on your educational level and how far you chose to go in your education process. It is highly important to grace your presence with some kind of college degree, so that you will have something to fall back on. A higher education is a positive for human capital. Opening up access to education and reducing the barriers to therefore formalize reconstruction among the most liberal policy-problem solvers are becoming available to improve wages for African Americans across the country. According to â€Å"The Effect of a College Degree on Wages: The Different Experiences of African Americans and Whites by Sylvia Jones, the labor market experiences after graduation is useful to a variety of entities. It includes observing the effects of education of an individual earning a high-indulged wage figure, in addition to other factors such as age, gender, and experience. There is a major difference in the earnings between college graduates and high school graduates. There is about a 65 percent difference in this correlation. There are so many African American men and women with high school diplomas who are displaced in the same jobs that have work experience but lack a college degree. Do African American men and women that acquire a college degree make more money than those with work experience? Studies have revealed that other aspects of discrimination in the labor market are due to the enormous jump in the number of African Americans and white workers who finish high school. The trend in African Americans is a remarkable downgrade because the relatively larger share does not have a high school diploma. The Bureau of Labor Statistics (BLS) indicated that white men and women with a higher education have higher earnings and are less likely to be unemployed. Jobs that require a higher education account for about 71 percent of all jobs and it is rapidly growing to increase the economy. The United States still has that thrive to produce high paying jobs that are requiring advanced education. IV. WAGES AND OBSERVABLE CHARACTERISTICS The wages for African Americans and whites are substantially different because of the educational process, which we all fail to realize that we need. African Americans as people need to realize that the world is changing and that technology is also changing. Some African American men and women lack the knowledge to know when it’s okay to come up and outshine others because you want more in life than the next person. There has been a vast improvement since the 1980s in African Americans attending college to advance their career to get the same career wage percentage as whites. African Americans tend to sideline to other occupations that may fit into their perspective and that lets others realize, who may be afraid to come up and that’s basically called occupational segregation. Occupational segregation is the concentration of men and women in different kinds of job, as where the workforce of a particular industry or sector is mostly made up of one particular gender. Occupational segregation is one of the main reasons for the gender gap wage gap between men and women. For African American men and women working full-time it is currently 45% of that group receiving unfair wages compared to whites. According to â€Å"Gender Inequality and Difference,† occupational segregation has been concluded into many debates about gender. The causes of occupational segregation are gender bias based on stereotypical, biological and social differences between men and women. Occupational segregation problems arise when these stereotypes are used subconsciously to prejudge a person’s ability and competence such as a woman is emotional and caring, and a man is aggressive and competitive. Levels of occupational segregation are held responsible for the discrepancy between African Americans and whites among wage differential. Occupational segregation is basically another form of discrimination. The analysis of the changes that has influenced the occupational segregation on African Americans earning’s should clarify the mechanisms that maintain the gender inequality in the labor market. According to the National Center for Education Statistics, the relationship between African Americans and whites in the educational progression varies in different economic outcomes. The black-white educational gap differed in size dependent on the consistency of demonstrating necessarily the widening of the gap or the narrowing of the gap in African American cases. The occupational segregation is due to the empirical approach estimating the function of the earnings for African American to combine demographic and socioeconomic characteristics to accumulate wage determination. African Americans historically worked disproportionately some of the lowest paying occupations known to man. The most important factor in explaining this continuous trend is a reduction in the concentration of lower pay in industries for African Americans. Studies have also shown that in the 1960s, wage inequality in the United States has sharply declined following the passage of the Civil Rights Act and other anti-discriminatory measures that happened historically to try and help African Americans receive the equality of what is right. Wage contingency in the 1960s may have been some sort of aide by a set of unique forces. Post 1968 wage convergence has been imputed into racial growth in the quantity and quality of schooling, and the immense impact of anti-discrimination enacted, resulting to the Great Compression. This may have produced some un-marked erosion of wage differentials between skilled and unskilled in order to form the labor of the Great Compression. The Great Compression followed the Great Depression and produced a wage differential that structured more than that ever has been experience. Wage compression’s contribution to racial discrimination throughout the wage factor has a greater impact on whites than African Americans. Between half and one-thirds of whites and African Americans wage discriminations can be attributed to the utmost changes in wage structures induced by the Great Compression. Wage structure changes are similar through wage distribution, differences in wage convergence due to movements of African Americans is primarily due to observable quantities (X’s) and the amount of wage distribution. The Great Compression only increased the relative wages of African Americans in the short term, but may have also helped in the long run. The Great Compression led to a greater racial wage convergence in the 1960s among African Americans by the narrowing differences between skilled workers and unskilled workers, and by the divulgence of wages within occupational orientation and other labor market groups. The Great Compression produced a substantial narrow amount of wage differentials in the United States. The Great Compression was solely a narrowing of mean wage discrimination between occupational grouping, education, and the color of ones skin. The effect of change in wage differential – the prices and residual terms are evidence that throughout wage distribution only occurs in African Americans. Compression is considered observation in prices was about thirty to fifty percent times the residual rate. This is a fairly high rate in dealing with compression of African Americans. Groshen’s methodology and basic finding has been replicated according to the Bureau of Labor Statistics acknowledging that 40-45 percent of individual wage varies in the establishment of wage differentials. Groshen offers three main reasons in explanation for why there is no sole source in the establishment of wage differentials. The first explanation talks about labor quality and how employers sort workers by the ability of prediction that systematically produce team models. Industry wage differentials are estimated longitudinal which proxies’ information for the standard human capital variables. The second explanation is the existence of wage differentials for that of differentials with are compensated. Compensating differentials is defined as wage premiums paid to workers to compensate them for undesirable working conditions. The relationship between the wage rate and compensating differentials is used to analyze relations of risk and undesirable attributes. Therefore this puts salaries and wage on the back burner because some of the employees know that they are not being treated equal but never say a word because they are compensated. The idea of compensating differentials has been used to annihilate issues such as the loss of income and the risk of future unemployment. The third and final explanation results in negotiating and bargaining. Employers offer to share profits of the company as an act of bargaining. Some show a positive relationship between the individual’s wage and the industry’s profit, resulting in the employee to have taken a loss. V. CONCLUSION Using the wage decomposition by Groshen, it has been documented that the wage structural program paid to certain occupational standards such as African Americans being paid less and not being treated as equals compared to whites is becoming above the wage premium predicted. Forty-five percent of wage variation is explained by merely knowing the individuals standards that he or she has established. Today’s characteristics are being observed for their accountability is being reduced by more than half which was less than a century ago. There is the written authorization to act in the place of another known as proxy to determine the unobserved characteristics of the establishment that are correlated with today’s wages. This is because our method controls observed and unobserved characteristics in the workforce therefore restricting an extension on the possibility of further investigations. This paper examines that there was the existence of wage differentials back in the 1940s through to the 1980s. There is also a recent analysis that shows that matched employer-employee workers are breaking the barriers of treating one person of different ethnicity with the same amount work experience and the same amount of education that another person of a different ethnicity has. There has been a significant change in wage differential since the resources are available to African Americans as well as other ethnic groups. The paper follows the wage gap and its factors throughout using cross-sectional data. There is bias information being imputed from earnings in the section of the wage differentials which characterizes the classification exhaustive. An ignored implication concludes that researchers in the future need to pay closer attention on how wage differentials are estimated differently according to the presence of imputed earnings. 1. James P. Smith and Michael P. Ward, â€Å"Women’s Wages and Work in the Twentieth Century,† RAND Corporation, October 1984. 2. Frank Levi and Richard J. Murnane, â€Å"U. S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations,† Journal of Economic Literature, Vol. XXX (September 1992), pp. 1333-1381. 3. Elaine Sorensen, â€Å"Gender and Racial Pay Gaps in the 1980’s: Accounting for Different Trends,† Urban Institute, Washington, D. C. , 1991. 4. Anil Bamezai, â€Å"Rising Earnings Disparity and Technological Change,† RAND Corporation, 1989 dissertation. 5. Joseph R. Meisenheimer II, â€Å"How do immigrants fare in the U. S. labor market? ,† Monthly Labor Review, December 1992. 6. U. S. Department of Commerce, Economics and Statistics Administration, Bureau of the Census, â€Å"Monthly News from the U. S. Bureau of the Census, Census and You,† Vol. 28, No. 2. , February 1993. 7. Nabanita Datta Gupta, â€Å"Probabilities of Job Choice and Employer Selection and Male-Female Occupational Differences,† American Economic Review, Vol. 83, No. 2, May 1993. 8. 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