Chapter Nine: Income and Labor Market Inequality By Tanya Maria Golash-Boza

Earning and Labor Market Inequality Represents a Large Gap “… in 2013, the United States had more income inequality than Mexico … inequality is mapped on race and gender lines” (p. 237)

Inequality in the Americas The higher the number, the greater the economic inequality, calculated by dividing the annual income of the richest 20 percent by the annual income of the poorest 20 percent.

Income Inequality “Income inequality among Americans has increased in large part due to tremendous growth in the incomes of the highest earners and stagnation or decline in the incomes of the lowest earners.” (p. 238) “By 2007, the share of the national income held by the top 1 percent was higher than it had been since 1917….” (cited on p. 238)

Gini Coefficients for Advanced Economies, 2011 The Gini coefficient (also known as the Gini index or Gini ratio) (/dʒini/ jee-nee) is a measure of statistical dispersion intended to represent the income distribution of a nation's residents, and is the most commonly used measure of inequality. The Gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality . . . and 1 corresponds with perfect inequality (where one person has all the income--and everyone else has zero income).

Earnings Gap and Wage Gap The middle number of the range of earnings of blacks is less than the middle number in the range of earnings for whites not taking into account hours worked. This earnings gap has been consistent through U.S. history. The wage gap refers to the separation in the earnings of hourly wages.

Median Weekly Earnings by Race and Ethnicity, 2013 Figure 9-3. Median Weekly Earnings by Race and Ethnicity, 2013 Source: Bureau of Labor Statistics (2013b). Figure 9-3: Bureau of Labor Statistics, 2013. http://www.bls.gov/news .release/pdf/wkyeng.pdf

Numbers Differ: Gender, Race, and Educational Attainment Black women are at a higher risk of unemployment White women’s wages rose more than black women’s because white women gained well-compensated work

Numbers Differ: Gender and Race Men and women of different races have different weekly and yearly earnings. See Figures 9.4 and 9.5 in the text and also note the information on yearly earnings for Native Americans and differences among Asian men and women of different groups such as Hmong women earning $20,237 compared to Indian men: $51,904 (p. 243) Also in 2000, Native American men earning $29,954 compared to white men: $49,634 and white women $27,749 and Native American women $21,103. (p. 241)

Median Weekly Earnings by Race and Ethnicity and Gender, 2013 Figure 9-4: Bureau of Labor Statistics, 2013. http://www.bls.gov/news.release/pdf/wkyeng.pdf Figure 9-4. Median Weekly Earnings by Race and Ethnicity and Gender, 2013 Source: Bureau of Labor Statistics (2013b).

Numbers Differ: Gender, Race, and Educational Attainment (p. 242) 18–24 year olds Race High School Graduates Employed College Graduates Employed White 61% 82% Black 52% 86% Latina 55% 77%

Numbers Differ: Gender, Race, and Length of Time in Workforce (p. 243) Unskilled Women by Race Earnings at Time of Work Entry in 1995 economy Earnings at Fourteen Years in the Workforce in the 1995 economy Black $6.28 $7.48 White $6.42 $10.04 Latina $6.67 $9.34

Numbers Differ: Within Group Diversity for Asian American Men’s Earnings (p. 243) Grouping Earnings per Year Indians $51,904 Chinese $44,831 Koreans $38,776 Filipino $35,560 Vietnamese $31,258

Unemployment Unemployment: “Since 1970, the unemployment rate for blacks has been about twice that for whites.” (p. 246)(Figure 9-6) The unemployment rate always indicates the number of people actively looking for a job.

Unemployment Rate by Race/Ethnicity, 1973–2013 Figure 9-6. Unemployment Rate by Race/Ethnicity, 1973–2013 Sources: Freeman (2011); Bureau of Labor Statistics (2013b). Figure 9-6: Freeman 2011; Bureau of Labor Statistics 2013

Ways to Measure Joblessness The unemployment rate does not include all the people who are without jobs. A variety of other indicators provide a fuller picture of joblessness across race and ethnicity: Jobless rate Employment population ratio – an estimate of the probability that a person of working age is employed, factoring in those who aren’t looking for work. Under-employment – a category including jobless workers actively seeking work, people who are working part time yet are available to work full time, and those who have looked for work in the past year yet are not actively seeking employment.

Figure 9-7: Shierholz, Heidi, Economic Policy Institute, August 2013. http://www.epi.org/publication/ roughly-hispanic-black-workers-underemployed/ Figure 9-7. Under employment Rate of Workers Aged 16 or Older, by Race/Ethnicity, 2000–2013

Ways to Measure Joblessness Unemployment rate: “The Bureau of Labor Statistics counts people as unemployed when they do not have a job and have actively looked for work in the previous month.” (p. 246) Employment-population ratio: “this ratio estimates the probability that a person of working age is employed, factoring in those who are not looking for work.” (p. 246-247 ) It takes into account that some people stay at home, are unable to work due to disability, go to school, or are retired.

Ways to Measure Joblessness Underemployment: This covers a wide range of circumstances: 1. Those looking for job prospects. 2. People who work part-time, but prefer full-time work. 3. Those who have looked for work at some point during the year, but have currently stopped. “In 2013, 19 percent of Latino workers and 22 percent of black workers met this definition of underemployed, compared with 12 percent of white workers (see Figure 9-7).” (p. 247)

Employment Percent ages of Male High School Dropouts , Aged 22 to 30, by Race and Education History, 1980 and 1999 Figure 9-8. Employment Percent ages of Male High School Dropouts , Aged 22 to 30, by Race and Education History, 1980 and 1999 Source: Western and Pettit (2002).

Incarceration and Joblessness Disproportionately high rates of imprisonment impact labor participation as faced by the men and their families in the African American community. This results in low wages, stigma when returning to the workforce, and less earnings. Black men’s post-prison earnings grew 21% slower than white men’s earnings. (p. 250)

The Mark of a Criminal Record

Explaining Labor Inequalities Scholars use two characteristics to explain labor inequality: Individual—factors associated with the person Structural—factors associated with the labor market

Individual Factors Human capital differences in qualifications such as how much schooling completed, skill sets, and experience. This can explain a large part of labor inequalities but not all of it.

Individual Factors: Discrimination Discrimination against individuals in the low wage labor market takes three forms as uncovered in hidden tests of the job market: Categorical exclusion—when a person is not given an interview due to the applicant’s race. Shifting standards—when qualifications of the position change during the job seeking process after a hirer is cognizant of a job seeker’s race. Race-based job channeling—job seekers are told to apply for a different position.

Attempts at Fixes of Labor Inequality on an Individual or Group Level Self-employment—members of racialized and ethnic groups set out to create a job for themselves. This approach has been successful for some groups, but not other groups. Ethnic Enclave Economy—members of racialized and ethnic groups create businesses to serve their own group. In another theory, the racial enclave economy, the owner’s racial group both supplies business and sets boundaries for it.

Attempts at Fixes of Labor Inequality on an Individual or Group Level Embedded market—small businesses owned by ethnoracial group members face the challenges of the market as well as additional larger social obstacles such as male domination, white supremacy, and limited financial resources; “an upper-class male Mexican may be able to open a highly profitable Italian restaurant in a wealthy neighborhood whereas a poor female Mexican may be limited to opening a taqueria in the barrio.” (p. 261)

Structural Factors These are factors related to how the economy functions during a specific period of time and impacts the available jobs: Deindustrialization—this term describes how the economy shifted from making products (manufacturing) to low pay service-oriented jobs that provide less steady work. The manufacturing work shifted to overseas locations or became roboticized.

Structural Factors “Up until the 1980s, many black men were employed in manufacturing jobs, which had provided benefits and a family wage, permitting families to attain comfortable standards of living. Once these factories began to close, these comfortable lifestyles went with them. Black men were the hardest hit by this economic restructuring…” (p. 257)

The Changing Industrial Composition of the U.S. Economy, 1980–2010 Figure 9-9. The Changing Industrial Composition of the U.S. Economy, 1980–2010 Source: Demos (2011).

Structural Factors Skills mismatch hypothesis—this explains that the skills and qualifications (such as college degrees) held by those unemployed do not match the available jobs. This can be used to explain the high jobless rate of African American men.

Local Structural Factors Split Labor Market —this refers to how different racial groups would be paid a different wage, with the people of color being paid the lesser wages. Historically, the labor of white workers would also be protected by unions, while people of color would not be protected.

Attempts at Fixes to Labor Inequality on a Structural Level Affirmative Action—”refers to policies and procedures designed to combat ongoing discrimination in the workplace and in schools” (p. 259)

Attempts at Fixes to Labor Inequality on a Structural Level Forms of Affirmative Action: Government orders for government contractors and subcontractors Regulations requiring affirmation action by public employers Court orders based on anti-discrimination law Employers’ voluntary human resources policies

Attempts at Fixes to Labor Inequality on a Structural Level Those businesses who get government contracts are required to follow affirmative action planning. Many companies follow affirmative action plans in their companies. The 1972 Equal Opportunity Act established that companies found guilty of discrimination must put into place an affirmative action plan.

Conclusion: Attempts at Fixes to Labor Inequality on a Structural Level Despite positive actions, labor market inequalities continue in the present day.