Racial Wage Inequality: Job Segregation and Devaluation across U.S. Labor Markets

TLDR

Despite decades of research showing greater black‑white inequality in local areas where the black population is relatively large, little is known about the mechanisms for this effect. The study aims to test whether job segregation and devaluation explain the black concentration effect on wage inequality. It uses a unique dataset of individuals nested within jobs across labor markets to examine these mechanisms. Results show that larger black populations are linked to greater segregation of black workers into black‑dominated jobs, but no evidence that devaluation increases with black population size, indicating that discrimination via exclusion from better‑paying jobs drives the racial wage gap.

Abstract

Despite decades of research showing greater black‐white inequality in local areas where the black population is relatively large, little is known about the mechanisms for this effect. Using a unique data set of individuals nested within jobs across labor markets, this article tests two possible mechanisms for the black concentration effect on wage inequality: job segregation and devaluation. Results show that black population size is associated with greater segregation of black workers into black‐dominated jobs. On the other hand, no evidence is found that the penalty for working in a black‐dominated job (the devaluation effect) increases as a function of black population size. The article concludes that discrimination against workers—especially exclusion from better‐paying jobs—is an important mechanism for the effect of black population size on the racial wage gap.