Posted on June 21, 2023

The Racial Wage Gap Is Shrinking

David Leonhardt, New York Times, June 19, 2023

In the early 2000s, the wage gap between Black and white workers in the U.S. was as large as it had been in 1950.

That is a shocking statistic and a sign of the country’s deep racial inequality. Over the past five years, however, the story has changed somewhat: The wage gap, though still enormous, has shrunk. “It’s a pretty meaningful reversal,” Elise Gould, a senior economist at the Economic Policy Institute, told me.


1. A strong economy

There appear to be three main causes of the recent trend, and the most significant is the country’s tight labor market. The unemployment rate has been falling for most of the past decade and has recently been near its lowest levels since the 1960s.

Tight labor markets help almost all workers, and they tend to help disadvantaged workers the most. As Gould put it, “When employers can’t be quite as choosy — when employers have to look beyond their network — that can provide more opportunities for historically marginalized groups.”

This dynamic helps close the Black-white wage gap because Black workers are overrepresented among low-wage workers. (A Times story set in Philadelphia went into more detail, focusing on Markus Mitchell, a worker there.) The Hispanic-white wage gap has also declined recently.


2. The Fight for $15

More than a decade ago, a group of fast-food workers in New York City began agitating for a higher minimum wage. They attracted the support of Senator Bernie Sanders, the leaders of the Service Employees International Union and other high-profile allies. The movement became known as the Fight for $15.


Minimum-wage increases tend to shrink the racial wage gap for the same reason that tight labor markets do: Black workers disproportionately work in low-wage jobs. As a result, one powerful way to reduce racial inequality is to reduce economic inequality.


3. Black Lives Matter

After a Minneapolis police officer murdered George Floyd on May 25, 2020, racial inequity became a focus of intense national attention. Many companies promised to diversify their work forces and leadership ranks, and some took concrete action.

At Fortune 500 companies, for example, Black board members occupied less than 9 percent of all board seats in 2020, according to Deloitte. By last year, the number had risen to 12 percent (compared with 14 percent of the U.S. population). It remains unclear how widespread the changes in corporate America have been; corporate boards obviously make up a tiny share of jobs. But the recent emphasis on diversity has probably played at least a modest role in narrowing racial gaps.