Study: Racial Wage Gaps Larger Today Than in 1979

By Stephen Miller, CEBS Sep 28, 2016
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The pay disparity between white and black workers was larger in 2015 than it was in 1979, according to new research. The increasing racial wage gap has been especially detrimental to black employees' economic well-being during the period of weak wage growth over the past decade, in the wake of the Great Recession.

Researchers from the Economic Policy Institute (EPI), a liberal think tank in Washington, D.C., compared black and white workers' average hourly wages, adjusting for education, experience and region of residence. After taking these factors into account, they still found a sizeable wage gap between black and white workers.

The paper, Black-White Wage Gaps Expand with Rising Wage Inequality, reports that in 2015:

  • Black men's average hourly wages were 22 percent less than those of white men in comparable jobs; in 1979, the wage gap was 16.9 percent.

  • Black women's average hourly wages were 11.7 percent less than those of white women; in 1979, the gap was 4.5 percent.

"While racial wage gaps are worse today than in 1979, the deterioration has not appeared along a straight line," said paper co-author Valerie Wilson, director of EPI's program on race, ethnicity and the economy. "During the late 1990s, the gaps shrank, due partially to tight labor markets which made discrimination more costly, and policy decisions like raising the minimum wage. Since 2000, the gaps have grown again."


Source: Economic Policy Institute.

New entrants into the labor market—who tend to be younger workers—face smaller (though still significant) wage gaps when compared to those who have been working longer, EPI found. However, it seems that these early labor market disadvantages persist and grow as black workers pursue their careers.

Pew: Gaps Significant but Narrowing

Separately, the nonprofit Pew Research Center recently released its own research on pay disparities, which found that both race- and gender-based wage gaps in the U.S. remain significant, even as they have narrowed in some areas over the years. Among full- and part-time workers in the U.S., for instance, in 2015, black employees earned just 75 percent as much as white employees in median hourly earnings, Pew found.


Source: Pew Research Center.

"Research shows that a majority of each of these gaps can be explained by differences in education, labor force experience, occupation or industry, and other measurable factors," said Eileen Patten, a Pew research analyst who focuses on demographic trends. For instance, she cited an earlier study that showed that controlling for standardized educational test scores reduced the wage gap between black and white men in 2006 by roughly 70 percent. However, the remaining wage gap, which could not be explained by concrete factors, could be attributed—at least in part—to discrimination.

Another recent Pew report found that roughly two-thirds of black adults say that black people in the U.S. are generally treated less fairly than white people in the workplace, while just 22 percent of white adults and 38 percent of Hispanic adults agree.

Ensuring Fair Pay

Beth Zoller, a legal editor at XpertHR, a provider of employment law resources in New York City, recommends a multifaceted approach to achieving pay equity by race, ethnicity and gender, which incorporates the following steps:

  • Train supervisors to avoid wage discrimination. Ensure that all supervisors and managers know how to make employment decisions based on legitimate and nondiscriminatory reasons.

  • Document guidelines for salaries and bonuses. Ensure that salary guidelines and requirements for bonuses (whether based on merit, productivity, sales or commissions) are well-documented and based on fair, objective, predictable and measurable criteria. This information should be clearly conveyed to employees so that they understand the employer's expectations.

  • Be ready to defend all employment decisions. Ensure that all decisions regarding pay, performance and promotions are carefully documented. Doing so will serve as a defense in case of a claim of wage discrimination.

  • Audit pay practices. Ensure that differences in pay for the same or comparable positions are based on legitimate and nondiscriminatory factors and supported by written documentation. If they are not, take action to correct this situation.

New EEO-1 Form Requires Reporting Pay Data by Gender and Race

On Sept. 29, the Equal Employment Opportunity Commission (EEOC) issued new requirements on businesses to provide employee pay data by gender and race beginning in March 2018. For the first time, this pay information will be reported on the EEO-1 form that, with some exceptions, private employers with 100 or more employees and federal contractors with 50 or more employees must file each year. The pay-data disclosures are meant to identify possible workplace discrimination that can leave employees of different genders or races with different wages for the same work.

Related SHRM Article:

Employees Rarely Understand Their Employer’s Pay PolicySHRM Online Compensation, September 2016

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