2023 NEA Presidential Address: Economic Research and Policy as Tools for Racial Economic Justice

I was not at the ASSA meetings in 2020, but I think I can safely say that a lot has changed since we last met in person. We have experienced a global pandemic that has forever changed how we live, travel, and interact with one another. There has been a greater acknowledgment of the reality of systemic racism in the wake of a seemingly unending stream of public, brutal, and blatantly unjust killings of Black Americans—we now all know the names of George Floyd, Breonna Taylor, and Ahmaud Arbery, just to name a few. The outrage over their murders led to protests in cities across the world, the growth of the Black Lives Matter movement, and a flurry of public statements about the evils of racism and the need for racial justice from corporations, universities, government agencies, and countless other institutions and public figures.

In the economics field, we witnessed the history-making appointments of Lisa Cook and Philip Jefferson to the Federal Reserve Board of Governors and Susan Collins as President and chief executive officer (CEO) of the Federal Reserve Bank of Boston. Just this evening, the AEA posthumously recognized Sadie Tanner Moselle Alexander as a Distinguished 2022 Fellow. Finally, there have been countless convenings, meetings, and working groups formed on race and the economy or race and the economics profession that many of us have been involved in.

There is no question that a lot has happened in the last two years. But, even as we reflect on all that has changed, we also recognize that a lot of things have not changed with respect to racial economic inequality. In the time remaining, I’m going to talk about some of the work I’ve built my career on while standing on the shoulders of the Cornerstone economists we heard from this morning, including this year's Samuel Z. Westerfield Award recipient, James B. Stewart. Most of my remarks are drawn from the keynote I gave for the Focus on Employment session of the Federal Reserve Symposium on Racism and the Economy (Wilson, 2021), a paper on race and unequal bargaining power in the labor market that I coauthored with Sandy Darity for EPI's Unequal Power Project (Wilson & Darity, 2022), and Congressional testimonies I’ve delivered on race and economic inequality (Wilson, 2020, 2022).

I’m going to begin with a definition. According to the Center for Assessment and Policy Development (n.d.), racial equity is the condition that would be achieved if one's racial identity no longer predicted, in a statistical sense, how one fares.

I like to open with that because it gets right to the core of what economists do—we use data and statistical methods to describe, model, and interpret economic outcomes and to evaluate the effects of policy decisions. So, we know that statistical analysis often reveals that racial identity is a measurable, significant, and persistent predictor of economic outcomes. Since this nation's inception, race has been used to systematically exclude, marginalize, exploit, and generate unequal economic outcomes, while also being used to justify and normalize those unequal outcomes.

Those statistical and historical relationships make the issue of race central to all economic research and policymaking, but I would argue that persistent racial disparities in unemployment and wages are defining features of the U.S. labor market and as such, provide some of the most compelling evidence of structural racism in this country. Because labor income is the main source of household income among nonelderly households, those disparities are extremely consequential to the overall well-being of Black households.

I want to share a few graphical examples of what this looks like in the specific context of Black–White inequality in the labor market. These images and statistics are probably familiar to many of you, so I’m going to run through them quickly to highlight the main points I plan to address.

First, Black workers are far more likely to be unemployed than White workers—typically twice as likely. Even at the historically low rates of unemployment reached in 2019, this was the case overall and at nearly every level of education. In practical terms, this means that Black workers are not just twice as likely to be unemployed as similarly educated White workers but are often more likely to be unemployed than less-educated White workers (Figure 1).

OPEN IN VIEWER

Figure 1.

Black workers are far more likely to be unemployed than white workers at every level of education.

Second, among the employed, Black workers face large pay disparities relative to White workers. These Black–White wage gaps have grown over the last 40 years (1979–2019) and are largely unexplained by factors associated with individual productivity. In 2019, the average hourly wage of Black workers was 26.5% less than that of White workers. Relative to White workers with the same education, of the same age and gender, and living in the same geographic division, the gap was 14.9%. In other words, less than half the observed Black–White difference in average hourly wage is explained by the main factors presumed to determine pay (Figure 2).

OPEN IN VIEWER

Figure 2.

Black–White wage gaps are wider now than 40 years ago and largely unexplained by factors associated with individual productivity.

Third, the intersection of race and gender imposes a dual wage penalty on Black women. Holder (2020) has defined this as the “double gap.” In 2019, Black women were paid 33.7% less than their White male counterparts, which was a much larger gap than that faced by either White women (25.7%) or Black men (22.2%). This is even after the sharp downward trend in the gender wage gap that occurred throughout the 1980s and essentially stopped in the mid-1990s (Figure 3).

OPEN IN VIEWER

Figure 3.

The intersection of race and gender imposes dual wage penalties on Black women.

Fourth, there has been insufficient vigilance in fighting unemployment since the late 1970s—the same period that we have observed growing wage inequality overall and widening wage gaps between Black and White workers. Between 1979 and 2019, the actual unemployment rate exceeded the Congressional Budget Office's estimates of the “natural rate of unemployment” (or NAIRU: nonaccelerating inflation rate of unemployment) by an average of roughly 0.8 percentage points each year (Bivens & Zipperer, 2018). The monthly unemployment rate has been below 6% for approximately just half of that time, while the Black unemployment rate only fell below 6% for a brief five months preceding the Covid-19 pandemic (Wilson & Darity, 2022) and then six months in 2022 due to the big fiscal policy response and relatively rapid economic recovery (Figure 4).

OPEN IN VIEWER

Figure 4.

There has been insufficient vigilance in fighting unemployment since the late 1970s.

I want to take a moment here to connect Black–White wage inequality with the Fed mandate to maximize employment. In 2019, the median Black worker was paid 32.2% less in hourly wages than the median White worker, up from 28.6% in 1973. According to Phillips wage curve to estimates in Bivens (2021), had the unemployment rate averaged 1 percentage point less annually from 1973 to 2019, the median Black–White wage gap could have declined to 18.0%. If the unemployment rate had averaged a more ambitious 2 percentage points less, the median Black–White wage gap could have fallen to just 5.4%. In other words, overly contractionary monetary policy decisions can and have had an adverse effect both on Black unemployment and the Black–White wage gap.

Persistent Racial Disparities in Unemployment

One of the most defining features of the U.S. labor market is the large and persistent disparity in unemployment that exists between Black and White workers. This disparity is well-documented in decades of official estimates from the Bureau of Labor Statistics, dating back to 1972, when the agency began disaggregating the non-White unemployment rate and reporting an unemployment rate for Blacks alone. More than 45 years’ worth of data can be summed up in one simple ratio 2:1. It means Black job seekers are about half as likely to secure employment during a consecutive four-week period as White job seekers. This has been true across multiple periods of economic expansion and recession and is observed for all age cohorts, at every level of education, and for men and women alike (Wilson & Darity, 2022). Over the last four and a half decades, only the most highly educated and most experienced Black workers have approached anything near unemployment rate parity with their White counterparts, and only during periods of exceptionally low unemployment.

These empirical data are consistent with various field experiments revealing that Black job applicants with equivalent, and sometimes superior, credentials to White applicants are less likely to receive job callbacks (Bendick et al., 1994; Fix et al., 1993; Turner et al., 1991). Among the starkest findings in this regard is Pager's (2003) audit study demonstrating that employers treated Whites with criminal records more favorably than Blacks without criminal records.

Although audit and correspondence studies have been criticized for not adequately capturing unobserved characteristics that might influence hiring decisions, Neumark (2012) has shown how robust these findings can be to such considerations. Quillian et al. (2017) show that subsequent field experiments reveal a pattern of discrimination experienced by Blacks in particular that has remained constant over time.

Persistent Racial Wage Inequality

Another defining feature of racial inequality in the labor market is the large disparities in pay between Black and White workers. Racial pay gaps persist even after accounting for factors commonly associated with individual productivity (education or skills) and have in fact gotten worse over the last 40 years (Wilson & Rodgers, 2016). One of the most troubling aspects of growing Black–White wage gaps is the fact that they have grown most among college-educated workers; those presumed to have done all the “right” things, yet still receive lower returns on their investment in higher education than their White counterparts.

In 1979, Black bachelor's degree holders were paid an average hourly wage that was 86.4% of what White bachelor's degree holders were paid. The ratio between Black and White advanced degree holders was 89.9%. Fast forward to 2019, and the ratio between Black and White bachelor's degree holders was down to 77.5% (decline of 8.9 percentage points); the ratio for those with advanced degrees was down to 82.4% (decline of 7.5 percentage points).

These patterns are consistent with the fact that relative to their White counterparts, college-educated Black workers are less likely to be employed in positions and industries that have seen the most wage growth in recent decades. Only 3% of all chief executives are African American, and a disproportionate number of them are employed in the public or private nonprofit sectors, where salaries are lower and more likely to be capped than they are in the private for-profit sector where CEO pay has soared in recent decades (Wilson & Rodgers, 2016). Moreover, in 2019, Black workers with a college or advanced degree were more likely than their White counterparts to be underemployed based on their education level—almost 40% were in a job that typically does not require a college degree, compared with 31% of White college graduates (Williams & Wilson, 2019).

Unlike unemployment rates that are characterized by a nearly constant 2-to-1 ratio, there have been four distinct periods of change in Black–White wage inequality (Wilson & Rodgers, 2016). These periods of change have often been consistent with distinctive shifts in policy. For example, the narrowing of the gap from the late 1960s through the 1970s can be traced to the passage of important Civil rights legislation (Bound & Freeman, 1989; Card & Krueger, 1992; Donohue & Heckman, 1991), combined with the 1960s economic boom, active enforcement of antidiscrimination and affirmative action policy (Betsey, 1994; Fosu, 1992; Heckman & Payner, 1989; Leonard, 1990), and the narrowing of the educational attainment gap between Blacks and Whites (Carlson & Swartz, 1988; Cunningham & Zalokar, 1992; Zalokar, 1990).

On the other hand, the widening of the gap since the 1980s is associated with retrenchment on antidiscrimination policy (Leonard, 1990), in combination with policies and practices that fueled growing wage inequality (Blau & Beller, 1992), including failure to increase the federal minimum wage as the cost of living rose, a decline in union representation (Bound & Freeman, 1989; Wilson & Rodgers, 2016), and weaker macroeconomic conditions.

The expansion of the Black–White wage gap since the 1980s, and certainly during the post-2000 period, is also consistent with the structural trends contributing to greater wage inequality. These include: (1) limited wage growth among middle- and low-wage workers (Gould, 2020); (2) above-average growth among the highest-wage workers, particularly CEOs and the top 1% (Mishel & Kandra, 2021); and (3) racial inequality in hiring, pay, and opportunities for promotion that results in overrepresentation of Black workers among low- to middle-wage occupations and underrepresentation among high-wage occupations (Abayomi et al., 2009; Hamilton et al., 2011).

The COVID-19 crisis popularized the term essential worker, drawing attention to the fact that Black and brown workers, and women in particular, occupy a disproportionate share of lower-wage jobs in major frontline industries, often with unpredictable work hours (thus, unpredictable pay) and without paid leave, employer-provided health coverage or other important benefits and protections.

Since the 1980s, there has only been one very brief period of when the gap narrowed and that occurred during the last five years of the 1990s economic boom. Notably, the unemployment rate was consistently lower than the natural rate of unemployment for almost four years during that time, and without runaway inflation.

Since 2000, the Black–White wage gap has widened amid sluggish economic growth, two jobless recoveries, the Great Recession and subsequent recovery that was needlessly hampered by premature fiscal austerity. Fiscal austerity has been especially harmful to Black workers who are a disproportionate share of those employed in the public sector where they have historically been drawn by better job opportunities and greater pay equity. Based on my own analysis of wages among public- and private-sector employees, Black workers in the public sector face smaller unexplained wage gaps than their counterparts in the private sector—6.9% versus 16.9%, respectively. ¹ The relatively smaller public sector pay gaps are due in part to the fact that a larger share of the workforce is covered by a union contract: 39% of public-sector employees are in a union or covered by a union contract, compared to only 7% of private-sector workers. Historically, Black workers have had the highest rates of union membership and even after decades of declining union membership among all workers, in 2019 Black workers remained the most likely to be represented by unions: 13.5% of Black workers are covered by a contract, compared with 12.2% of White workers, 10.5% of AAPI workers, and 10.2% of Hispanic workers (McNicholas et al., 2020).

Conclusion

These patterns of persistent unexplained racial economic disparities are symptoms of structural racism. Although nothing matches the gravity of the loss of life, in some ways, the racial economic injustice that can be revealed and documented in economic research is analogous to footage of racial violence captured by body cameras and on smartphones that sparked national and international protests during the summer of 2020. In both instances, however, the interpretation of that evidence dictates the response. Unfortunately, what should be overwhelming evidence of racial injustice can lead some to question the character or actions of the person being subjected to violence or economic deprivation.

As economists who center race in our research, we aim not to simply recite the problem of racial inequity but to question its causes, expose its consequences, and propose ways to resolve it. We do that by using the tools of statistical analysis to provide the figurative bodycam footage to expose how race is used to systematically assign access, opportunity, power, and economic resources exclusive of individual skill, ability, effort, or merit.

I started with a definition of racial equity as the condition that would be achieved if one's racial identity no longer predicted economic outcomes. I want to end with this definition of racial justice: racial justice is the proactive advancement and reinforcement of policies, practices, attitudes, and action that produce equitable power, access, opportunities, treatment, impacts, and outcomes for all (Lawrence & Keleher, 2004).

Phrases such as antiracist, racial equity, racial justice, and structural racism have quickly become part of the standard lexicon of the growing number of people and institutions grappling with what it really means to be just, diverse, equitable, and inclusive. I am proud to say the NEA and its members have always been at the forefront of challenging the conventional wisdom about how the economy works and pushing for sustained and meaningful changes that help to dismantle social, economic, and political structures that perpetuate racial inequality. This includes using our presence, our research, and our voices to hold our government, institutions, and individuals accountable for the role they must play in facilitating racial justice. I’ve already mentioned several of those institutions, but in closing, I want to highlight the influence of NEA members in many of those spaces.

The Federal Reserve has the power to create a robust, more stable labor market through consistent full employment. It is true that exceptionally high inflation imposes a greater burden on many Black households with low incomes and limited savings. However, the timing and scale of interest rate hikes must be informed by metrics that account for persistent racial disparities and weighed against the risk of triggering a recession that will fall disproportionately hard on Black households and communities. Two former NEA presidents are currently seated on the Board of Governors with a vote on those decisions. Further, the NEA's Committee on Macroeconomics, Policy, and Race publishes the New Economic Analysis Newsletter where contemporary macroeconomic policy issues are weighted in light of their impact on African Americans and other people of color who have been historically overlooked in macroeconomics and its policy development and implementation. The Black Economic Research Center for the 21^st Century (BERC 21), NEA's think tank, also has plans to publish a research brief this spring on the anticipated consequences of current high inflation and possible recession on Black households.

Institutions, such as labor unions, can help workers to have a stronger, collective voice with which to advocate for higher pay, better benefits, training, and promotional opportunities, as well as protections against discrimination and harassment. In a unionized workforce, for example, collective bargaining results in labor contracts that help to create greater transparency and consistency through clearly defined policies and pay structures. Former NEA President, Bill Spriggs, and current NEA board member, Janelle Jones, hold positions as Chief Economists for two of the nation's largest labor unions—AFL-CIO and SEIU. Both have also formerly held influential positions at the U.S. Department of Labor.

Lawmakers can pass a robust set of labor standards that supports the empowerment of workers, and advance fiscal policy that centers racial equity in employment. The proposal of a federal job guarantee, presented by former NEA Presidents, William Darity and Darrick Hamilton, along with Mark Paul has garnered attention among policymakers and support from advocates in recent years (Paul et al., 2018). Through her research and book on the writings and speeches of Sadie Alexander, former NEA President, Nina Banks, revealed that Dr. Alexander, the first African American to earn a PhD in economics, was an early proponent of such a policy for addressing chronically high rates of Black unemployment (Alexander, 2021).

Finally, the fact that labor market discrimination has persisted well beyond the passage of Title VII of the Civil Rights Act of 1964 and the Equal Pay Act cannot be overlooked. As outlined in Yang and Liu (2021), meaningful accountability for discrimination requires solutions that confront the power and information asymmetries that weaken our enforcement system. This includes policies that encourage employer transparency, funding of federal, state, and local EEOC enforcement agencies that are consistent with the tens of thousands of discrimination charges filed annually. This past year, former NEA President, William Rodgers, and I served on a panel convened by the EEOC to evaluate the quality of compensation data collected from U.S. employers through the EEO-1 Form and its usefulness in supporting the EEOC's enforcement responsibilities (National Academies of Sciences, Engineering, and Medicine, 2022). Bill was the Chair of that panel.

I know there are many more examples of NEA economists leading and working in lots of different ways to advance our mission of producing and distributing knowledge of economic issues central to promoting economic growth among African Americans and other people of color. The impact of this nation's long history of racial exclusion is not something that will be easily undone, and representation in influential positions is just the first step. For that reason, the work of the NEA and its members is and will continue to be necessary to achieving racial economic justice.

In closing, it has been one of the highest honors of my career to be a steward of the mission and legacy of the NEA as its president this past year. I owe a huge debt of gratitude to the brilliance, commitment, and support of the NEA Board of Directors and officers. I also want to specifically thank Rhonda Sharpe and Nina Banks for your belief in my ability to lead and nudging me to accept the nomination in the first place. I confidently pass the gavel over to the very capable hands of our 2023 President, Angelino Viceizsa, and President-Elect, Nzinga Broussard. Thank you.