Racial wage differential in usa

However, this did not flatten out income disparities, it only narrowed racial wage gap. Several studies focus on discrimination as a reason for racial wage gap. Theoretical models suggest that discrimination against minorities may be caused by negative social attitudes towards them or that employers infer quality of job applicant from another race due to perception of poor quality work from people of that background. The stereotype that people from minority background do poor quality work may explain why employers do not prefer people from minority group or offer them low wages. In this paper, I will analyze if wage differences are due to level of education, gender, age or other unexplained factors. LITERATURE REVIEW William Julius Wilson, an influential sociologist, in 1998 wrote a paper in “The Declining Significance of Race.

” In the paper, his argument was that the cause of discrimination against blacks especially the poor ones was more of labour-market forces than racial discrimination. that the plight of poor black Americans was due more to labour-market forces than to contemporary racial discrimination. Several years later, many studies prove Mr. Wilson right. Education and age differences are usually viewed of as explanations for wage gap, but wage gaps persist despite the control of these factors. Collins and Wanamaker found out in the 20th century, that black sons in 10th percentile of income distribution grew up to rank 20 percentile points below white sons, a demonstration that race has played a big role in earnings gap between black and white men. DATA AND METHODOLOGY To answer our research questions, multiple regression analysis is used.

Data used for this study was obtained from American Time Use Surveys for the year 2005. Initially, I had planned to use up to 6 factors but due to limited data, I used three factors. 50, p<0. 05 indicates that independent variable significantly predicts the independent variable. All variables added statistically significantly to the prediction, p<0. The equation to predict income is Income = 9. 1612(Female) – 0. 2535(Female) – 0. 0064(Age) + 0. 1503(EduInYears) In table 3; the decomposition results show that the mean of log HhldIncome (lnHhldIncome ) is 10. 79 for whites and 10. 30 for nonwhites, giving a wide gap of 0. However, they explain a small part of the racial wage gap. There are other unexplained factors that contribute largely to the gap. POLICY IMPLICATIONS Findings for this study are that there is a wide racial wage gap between whites and nonwhites.