Shrinking Black-White Wage Gap Mainly Due to “Tight Labor Market”

A tight labor market is a key feature of what I call a “robustly redundant labor market” in my Openness to Creative Destruction book.

(p. A13) 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.

. . .

The wage gap, though still enormous, has shrunk.

. . .

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. The Hispanic-white wage gap has also declined recently.

For the full commentary, see:

David Leonhardt. “The Morning; Why There’s Progress, Finally, on Closing the Black-White Pay Gap.” The New York Times (Monday, June 19, 2023): A13.

(Note: ellipses added.)

(Note: the online version of the commentary also has the date June 15, 2023, and has the title “The Morning; The Racial Wage Gap Is Shrinking.” The online version of the passages quoted above includes an illustrative parenthetical sentence that I do not include above.)

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