The Differing Nature of Black-White Wage Inequality Across Occupational Sectors

Abstract

The nature of racial wage inequality appears to differ across occupation sectors. Specifically, I find that all of the racial wage inequality in the white-collar job sector can be accounted for by controlling for the academic skill level of each worker, but almost half of the overall racial wage inequality remains in the blue-collar sector after controlling for each worker's academic skill. Relatedly, after controlling for academic skill, I find that black workers are actually more likely to work in the white-collar sector than white workers. I show that these findings are consistent, and arguably directly implied by, both preference based and statistical based models of discrimination. However, omitted variable bias and measurement error also cannot be ruled out as possible explanations.

Keywords: Discrimination, racial wage inequality, signaling

JEL Classification: J15, J71, J31