FacebookTwitterGoogle+RedditEmail

Why Isn’t the Median Wage for Black Workers Rising?

One of the main reasons that I and others have given for leaning on the Fed to keep interest rates down is that low unemployment disproportionately benefits those at the bottom. While we can and should try to help the disadvantaged through increased education, training, child care and other programs necessary to give them a foothold in the labor market, the easiest thing is allow them to get jobs.

When the Fed raises rates it is deliberately slowing the economy and thereby reducing the number of jobs available. The people who are then denied jobs are disproportionately the most disadvantaged groups, such as blacks, Hispanics, and less educated workers. These workers are hurt not only because fewer have jobs, but also because the bargaining position of those employed weakens when there is higher unemployment. In this telling of the story, wage gains for those at the bottom should be strongest during periods of low unemployment, as we have been seeing in the last few years.

For this reason, the latest data on median wages for black workers is somewhat surprising. The Bureau of Labor Statistics Usual Weekly Earnings series showed real median weekly earnings for full-time black workers in the first quarter of 2018 were up just 0.6 percent from the first quarter of 2017. Furthermore, taking the last three years together, it showed real weekly earnings for blacks were up by a meager 1.1, trailing the 2.8 percent rise in real earnings for the median white worker. The racial gap seems to be increasing even in this period of relatively low unemployment.

While that is a discouraging story, the picture is not as bad as it may first appear for a couple of reasons. First, the quarterly data are erratic, they jump around due to noise in the data. If we take a four-quarter moving average ending with the most recent quarter, this average has risen by 3.1 percent for African Americans over the last three years. That’s better, but it still trails the 4.7 percent increase in the real median earnings for whites by this measure.

But there is another aspect of the labor market that needs to be considered. As noted above, tighter labor markets have disproportionately allowed blacks to get jobs. The number of blacks employed in the first quarter of 2018 is 10.6 percent higher than in the first quarter of 2015. It’s 15.1 percent higher than the number for the first quarter of 2014. By comparison, employment of whites in the first quarter of 2018 was up by 2.9 percent compared with the first quarter of 2015 and 4.2 percent compared to the first quarter of 2014.

This matters for the median wage calculation, since the newly employed workers are likely to be concentrated at the bottom end of the wage distribution. These are likely people with less education and experience than most of the people who had previously been working. That means that the median black worker in 2018 likely had less education and experience than the median black worker in 2015.

This would have the effect of pulling down the wage at the median. If we wanted to do a true apples-to-apples comparison, we would be comparing the median worker in 2015 with someone higher up on the distribution in 2018. If we take the extreme case and assume that all the new entrants to the labor force between 2015 and 2018 were below the median, then the 2015 median black worker would be at roughly the 55th percentile of the wage distribution for black workers in 2018.

The usual weekly earnings for a black worker at the 75th percentile of the distribution was 56 percent higher than the median earnings in the first quarter of 2018. If we assume that the gap is linear (i.e. moving up five percentage points in the wage distribution closes the gap between the 75th percentile and 50th percentile by one fifth) it means that in this extreme case, we would have to add more than 11 percent to the median wage in 2018 to make an apples-to-apples comparison to the data for 2015. By that measure, black workers are indeed gaining ground in this tighter labor market. (This story is consistent with the real wage gains we see over the last three years for blacks lower down in the wage distribution, 9.6 percent for the 10th percentile, and 7.1 percent for the 25th percentile. These cutoffs would be less affected by the large increase in employment since many of the new workers would be above these cutoffs.)

We can do more careful analysis with the microdata, where we see what is happening to pay for African Americans when we control for age, education, gender, and other factors, but the picture in this summary data is not as negative as it may first appear. We know for certain that there has been a huge increase in employment over the last four years for black workers. Those at the bottom clearly have seen substantial wage gains over this period. It seems likely that those at the middle did as well.

This article originally appeared on Beat the Press.

More articles by:

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

July 17, 2018
Conn Hallinan
Trump & The Big Bad Bugs
Robert Hunziker
Trump Kills Science, Nature Strikes Back
John Grant
The Politics of Cruelty
Kenneth Surin
Calculated Buffoonery: Trump in the UK
Binoy Kampmark
Helsinki Theatrics: Trump Meets Putin
Patrick Bond
BRICS From Above, Seen Critically From Below
Jim Kavanagh
Fighting Fake Stories: The New Yorker, Israel and Obama
Daniel Falcone
Chomsky on the Trump NATO Ruse
W. T. Whitney
Oil Underground in Neuquén, Argentina – and a New US Military Base There
Doug Rawlings
Ken Burns’ “The Vietnam War” was Nominated for an Emmy, Does It Deserve It?
Rajan Menon
The United States of Inequality
Thomas Knapp
Have Mueller and Rosenstein Finally Gone Too Far?
Cesar Chelala
An Insatiable Salesman
Dean Baker
Truth, Trump and the Washington Post
Mel Gurtov
Human Rights Trumped
Binoy Kampmark
Putin’s Football Gambit: How the World Cup Paid Off
July 16, 2018
Sheldon Richman
Trump Turns to Gaza as Middle East Deal of the Century Collapses
Charles Pierson
Kirstjen Nielsen Just Wants to Protect You
Brett Wilkins
The Lydda Death March and the Israeli State of Denial
Patrick Cockburn
Trump Knows That the US Can Exercise More Power in a UK Weakened by Brexit
Robert Fisk
The Fisherman of Sarajevo Told Tales Past Wars and Wars to Come
Gary Leupp
When Did Russia Become an Adversary?
Uri Avnery
“Not Enough!”
Dave Lindorff
Undermining Trump-Putin Summit Means Promoting War
Manuel E. Yepe
World Trade War Has Begun
Binoy Kampmark
Trump Stomps Britain
Wim Laven
The Best Deals are the Deals that Develop Peace
Kary Love
Can We Learn from Heinrich Himmler’s Daughter? Should We?
Jeffrey St. Clair
Franklin Lamb, Requiescat in Pace
Weekend Edition
July 13, 2018
Friday - Sunday
Brian Cloughley
Lessons That Should Have Been Learned From NATO’s Destruction of Libya
Paul Street
Time to Stop Playing “Simon Says” with James Madison and Alexander Hamilton
Jeffrey St. Clair
Roaming Charges: In the Land of Formula and Honey
Aidan O'Brien
Ireland’s Intellectuals Bow to the Queen of Chaos 
Michael Collins
The Affirmative Action Silo
Andrew Levine
Tipping Points
Geoff Dutton
Fair and Balanced Opinion at the New York Times
Ajamu Baraka
Cultural and Ideological Struggle in the US: a Final Comment on Ocasio-Cortez
David Rosen
The New McCarthyism: Is the Electric Chair Next for the Left?
Ken Levy
The McConnell Rule: Nasty, Brutish, and Unconstitutional
George Wuerthner
The Awful Truth About the Hammonds
Robert Fisk
Will Those Killed by NATO 19 Years Ago in Serbia Ever Get Justice?
Robert Hunziker
Three Climatic Monsters with Asteroid Impact
Ramzy Baroud
Europe’s Iron Curtain: The Refugee Crisis is about to Worsen
Nick Pemberton
A Letter For Scarlett JoManDaughter
Marilyn Garson
Netanyahu’s War on Transcendence 
FacebookTwitterGoogle+RedditEmail