Panel Paper: Income Inequality and Persistence of Racial Economic Disparities

Friday, November 9, 2018
8216 - Lobby Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Robert Allen Manduca, Harvard University

More than 50 years after the Civil Rights Act, black–white family income disparities in the United States remain almost exactly the same as what they were in 1968. In this paper I argue that a key and underappreciated driver of the racial income gap has been the national trend of rising income inequality. From 1968 to 2016, black–white disparities in family income rank narrowed by almost one-third. But this relative gain was negated by changes to the national income distribution that resulted in rapid income growth for the richest—and most disproportionately white—few percentiles of the country combined with income stagnation for the poor and middle class. But for the rise in income inequality, the median black–white family income gap would have decreased by about 30 percent. Conversely, without the partial closing of the rank gap, growing inequality alone would have increased the racial income gap by 30 percent.
This finding highlights the potential of universal policies aimed at reducing economic inequality to simultaneously reduce racial disparities. Efforts to reduce discrimination, ensure that blacks and whites are equally prepared for the labor market, and more broadly to ensure that there is a level playing field for all Americans should be continued: they appear to have had some effect at reducing racial inequality but can be nowhere near complete because blacks at every level of the skill and occupational hierarchy have economic outcomes similar to whites who are one or several notches below them. But such efforts should be paired with universal efforts to unskew the income distribution and reverse the “winner-take-all” nature of the current U.S. economy. A reorientation of the economy back to the needs of ordinary Americans will help the poor and middle class of all races while reducing economic disparities between blacks and whites.