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Press Release · May 7, 2003

Racial/Ethnic Wage Inequalities Persist in California

Wage Gap Between Whites, African Americans Has Worsened

SAN FRANCISCO, California, May 7, 2003 — Latinos and African Americans still earn lower hourly wages than whites in California, according to a study released today by the Public Policy Institute of California (PPIC). Worse, the wage gap between whites and African Americans has actually grown during the past decade, despite improvements in African American education and occupational status.

Overall, Latino workers earn less than 60 cents per dollar earned by white workers. Although some of this difference can be attributed to recent Latino immigrants with lower skills, even Latinos born in the United States face substantial wage gaps. Between 1979 and 2000, there was little change in wage differences between U.S.-born Latinos and whites in California: Latino men earned between 81 and 83 cents for every dollar earned by white men, and Latina women earned between 79 and 85 cents for every dollar earned by white women.

For African Americans, the trend took a turn for the worse over the past decade, with their relative wages falling from 81 to 74 cents per dollar for men and from 96 to 86 cents per dollar for women.

These disparities are likely to persist in the future, according to PPIC’s population program director and economist Deborah Reed, who co-authored the study with Jennifer Cheng. “Given California’s current economic climate and the fact that we’ve seen no improvement in Latino and African American wage gaps in twenty years, the prospects for substantial progress in the near term are bleak,” says Reed.

The report, Racial and Ethnic Wage Gaps in the California Labor Market, finds that Latino wage disparities can be largely explained by education and occupational differences. If U.S.-born Latinos had the same educational attainment as whites, the wage gap between them would decline significantly, to 93 cents per dollar for both men and women. If Latinos worked in the same occupations as whites, the difference would be eliminated altogether.

For African Americans, however, relative wages would improve by only a few cents per dollar if their education level matched that of whites. And sharing the same occupations as whites would not eliminate the inequality: African American women would still earn 95 cents for every dollar earned by white women, and African American men would earn just 84 cents per dollar earned by white men. The authors note that many factors may contribute to the earnings gap for African Americans, including less labor market and professional experience, discrimination, and a mismatch between place of residence and the location of high-paying employment opportunities.

“Improving educational opportunities will reduce racial and ethnic wage gaps in the long run but is unlikely to resolve the problem entirely, especially for African Americans,” says Reed. The report suggests a number of general policy directions the state might consider, including programs to improve educational outcomes through greater access to early childhood development, improved quality of public schools in low-income neighborhoods, and workforce development for lower-skilled workers. The mismatch in residential and employment locations might be addressed through affordable housing, transportation, or economic development programs.

The analysis also finds that the wage gap between whites and U.S.-born Asians has remained steady since the late 1970s, but in this case the disparity favors Asians. Asian men earned $1.04 for every dollar earned by white men and Asian women earned a relative wage of $1.15.

The Public Policy Institute of California is a private, nonprofit organization dedicated to improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett.