| It might seem natural to gauge the
amount of discrimination in labor markets by looking at the average wages of
different groups. For instance, in recent years the wage of the average black
worker in the U.S. has been about 20 percent less than the wage of the average
white workers. The wage of the average female worker has been about 30 percent
less than the wage of the average male worker. These wage differentials are
sometimes presented in political debate as evidence that many employers
discriminate against blacks and women. Yet there is an obvious problem with this
approach. Even in a labor market free of discrimination, different people have
different wages. People differ ill the amount of human capital they have and in
the kinds of work they are able and walling to do. The wage differences we
observe in the economy are, to a large extent, attributable to the determinants
of equilibrium wages. Simply observing differences in wages among broad groups
say little about the prevalence of discrimination. Consider, for example, the
role of human capital. About 80 percent of white male workers have a high school
diploma, and 25 percent have a college degree By contrast, only 67 percent of
black male workers have a high school diploma, and only 12 percent have a
college degree. Thus, at least some of the difference between the wages of
whites and the wages of blacks can be traced to differences in educational
attainment, Similarly, among white workers, 25 percent of men have a college
degree, whereas only 19 percent of women have a college degree, indicating that
some of the difference between the wages of men and women is attributable to
educational attainment. In fact, human capital is probably even more important in explaining wage differentials than the foregoing numbers suggest. For many years, public schools in predominantly black areas have been of lower quality than public schools in predominantly white areas. Similarly, for many years, schools directed girls away from science and math courses, even though these subjects may have greater value in the marketplace than some of the alternatives. If we could measure the quality as well as the quality of education, the differences in human capital among these groups would seem even larger. Human capital acquired in the form of job experience can also help explain wage differences. In particular, women tend to have less job experience on average than men. One reason is that female labor-force participation has increased over the past seven decades. Because of this historic change, the average female worker today is younger than the average male worker. In addition, women are more likely to interrupt their careers to raise children. For both reasons, the experience of the average female worker is less than the experience of the average male worker. Yet another source of wage differences is compensating differentials. Some analysts have suggested that women take more pleasant jobs on average than men and this fact explains some of the earnings differential between men and women. For example, women are more likely to be secretaries, and men are more likely to be truck drivers. The relative wages of secretaries and truck drivers depend in part on the working conditions of each job. Because these nonmonetary aspects are hard to measure, it is difficult to gauge the practical importance of compensating differentials in explaining the wage difference that we observe. In the end, the study of wage differences among groups does not establish any clear conclusion about the prevalence of discrimination in U.S. labor markets. Most economists believe that some of the observed wage differentials are attributable to discrimination, but there is no consensus about how much. The only conclusion about which economists are in consensus is a negative one: Because the differences in average wages among groups in part reflect differences in human capital and job characteristics, they do not by themselves say anything about how much discrimination there is in the labor market. Of course, differences in human capital among groups of workers may themselves reflect discrimination. The inferior schools historically available to black students, for instance, may be traced to prejudice on the part of city councils and school boards. But this kind of discrimination occurs long before the worker enters the labor market. In this case, the disease is political, even if the symptom is economic. |