Divergent Paths: A New Perspective on Earnings Differences Between Black and White Men Since 1940

TLDR

The study examines how black–white earnings gaps among all men have evolved since 1940. The authors analyze both level and rank earnings gaps across quantiles to assess racial disparities. Median black–white earnings gaps widened to 1950 levels by the mid‑1970s, while black men’s median relative position remained unchanged; gains at higher percentiles are driven by college‑educated blacks, but lower‑percentile gains are offset by rising skill returns that penalize racial differences.

Abstract

We present new evidence on the evolution of black–white earnings differences among all men, including both workers and nonworkers. We study two measures: (i) the level earnings gap—the racial earnings difference at a given quantile; and (ii) the earnings rank gap—the difference between a black man's percentile in the black earnings distribution and the position he would hold in the white earnings distribution. After narrowing from 1940 to the mid-1970s, the median black–white level earnings gap has since grown as large as it was in 1950. At the same time, the median black man's relative position in the earnings distribution has remained essentially constant since 1940, so that the improvement then worsening of median relative earnings have come mainly from the stretching and narrowing of the overall earnings distribution. Black men at higher percentiles have experienced significant advances in relative earnings since 1940, due mainly to strong positional gains among those with college educations. Large relative schooling gains by blacks at the median and below have been more than counteracted by rising return to skill in the labor market, which has increasingly penalized remaining racial differences in schooling at the bottom of the distribution.