Separate and Unequal in the Labor Market: Human Capital and the Jim Crow Wage Gap

Abstract

The gap between black and white earnings is a longstanding feature of the United States labor market. Competing explanations attribute different weight to wage discrimination and access to human capital. Using new data on local school quality, we find that human capital played a predominant role in determining 1940 wage and occupational status gaps in the South despite the effective disenfranchisement of blacks, entrenched racial discrimination in civic life, and lack of federal employment protections. The 1940 conditional black-white wage gap coincides with the higher end of the range of estimates from the post-Civil Rights era. We estimate that a truly “separate but equal” school system would have reduced wage inequality by 40 - 51 percent.