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Learning Objectives
By the end of the chapter, the student will be able to do the following:
- Explain the complex factors that enter into the consideration of racial disparities in the labor market.
- Express how racial, ethnic, and gender disparities are part of income and labor market inequalities.
- Understand the purpose and approaches of affirmative action.
- Give examples of groups that have benefited from entrepreneurship and self-employment and groups that have not.
- Define chapter terms such as Gini coefficient, implicit bias, earnings gap, wage gap, skills mismatch hypothesis, and spatial mismatch hypothesis.
- Name and define three types of hiring discrimination.
Chapter Summary
Labor market and income inequalities have increased in recent years. The factors that influence this are multiple, such as lack of human capital; discrimination in the labor market; and how the types of jobs have changed through the deindustrialization of the economy. Self-employment and affirmative action have been some approaches to dealing with inequalities.
Income and quality of life increased after World War II until the early 1970s, after which incomes stopped increasing with the exception of the highest incomes. Union influence declined, which impacted pay negotiations with employers. Industrial decline began in the U.S. In 2012, one-third of the 153.6 employed earned less than $15,000 with the average earnings at $6,100. Positions that paid over $75,000 saw increases in earnings. The top 1 percent tripled their before-tax income. This meant that the top 1 percent of the 1 percent saw vast improvements in their incomes while poverty for others continued to increase. Romania is the only developed country that has more children in poverty than the U.S. Black and Latino children deal with hunger and poverty the most. Their parents earn less than whites and experience more labor market inequality. Employers hire black and Latinos less and pay them less. Inequalities in the labor market appear in unemployment rates, promotion practices, and employment stability. An earnings gap is a measure of disparities in overall pay, while a wage gap points to differences in hourly earnings. Latino women earn much less than Asian American men. Asian women earn less than Asian men. More white women receive higher paid positions than black women. Black women college graduates have a higher rate of employment than white women, but this does not mean they have higher lifetime earnings. Black women in low-skilled jobs remain low-wage earners over the course of their employment history compared to white and Latinos. Within group differences such as for Asian Americans persist. Inequalities in the job market are due to discrimination in hiring, promotion, and raises; differences in human capital; and structural influences. Discrimination can occur through implicit bias rather than an intention to harm. Hiring discrimination can be broken down into outright exclusion (categorical exclusion), changing standards for the job (shifting standards), or offering a job based on one’s race, such as a backroom job (race-based channeling). Larger systemic changes also play a role in disparities such as changes in the world economy that created less (deindustrialization) manufacturing jobs.