Why Did Black Relative Earnings Surge in the Early 1990s?

Article excerpt

The decade of the 1990s represents one of the longest periods of sustained prosperity in the post-World War II era. Unemployment rates have fallen to unprecedented sustained lows. A "New Economy" of highly technical occupations relies heavily on a virtual world where paper transactions increasingly are becoming obsolete. This has contributed to phenomenal growth in the traded value of Internet businesses and "dot.com" companies, leading to an incredible accumulation of wealth among young entrepreneurs and those who have invested in the New Economy.

This paper argues that black families have not shared in these improvements. Whereas the ratio of black to non-Hispanic white family incomes was .61 in 1990, it was .59 in 1999. The ratio rose in the early 1990s, peaking at .64 in 1995, and fell thereafter. The timing of the peak and decline curiously parallels the timing of the rapid rise in dot.com companies, increased salaries for recent graduates in "high tech" areas, and the general take-off of the New Economy.

While conventional wisdom states that a rising tide lifts all ships, on the basis of virtually every available measure of relative income and earnings position, blacks were worse off at the end of the 1990s than they were at the beginning. This empirical evidence, largely ignored in recent debates about black-white convergence of earnings and incomes, stands in stark contrast to the 1980s, when the deteriorating relative position of blacks was recognized and acknowledged. During that decade, discussion about the declining fortunes of black families, often cast within the rubric of the "black underclass debate," pointed largely to problems of racial differences in family formation. The declining relative position of black families was attributed to the rising proportion of black families headed by females. This was a plausible explanation given that the number of families with women at their head had grown almost exponentially from the 1960s to the 1980s. However, when we tested this hypothesis, we found that only a small portion of the widening of the earnings gaps could be attributed to rising black female family-headship (Darity and Myers 1998).

Neither can the more recent widening of racial earnings gaps be blamed on increases in the share of black families headed by females. Earnings gaps widened, but female-headship did not increase significantly. We reject the contention that changing family structure is at the root of growing earnings disparities.

This paper summarizes our analysis and results, and provides graphic representations of some of our findings. The full set of computations appears as tables and appendix to "The Relative Decline in Black Family Incomes During the 1990s," an earlier version of this paper, which is available on the Internet at [less than]http://www.hhh.umn.edu/centers/wilkins/pubs.htm[greater than].

Evidence of the Rise and Decline of Black Earnings and Incomes Relative to Non-Hispanic Whites'

Figure 1 provides visual evidence for the core of our argument. Using the annual demographic (March Supplement) Current Population Survey (CPS) files, we have compiled data on mean family incomes by year and by race from 1990 to 1999. The income figures refer to incomes in the previous year. Thus, 1995 income, reported on the March survey, refers to income from January 1994 through December 1994. The comparison is between black and non-Hispanic white families. [1] From 1990 to 1993, mean black family money income (in current dollars) remained stable at around $26,000 to $27,000. It rose to $29,000 in 1994, jumped to $32,000 in 1995, and reached $38,000 by 1999. Mean white family money income started at $43,000 in 1990, rose to $48,000 by 1994, climbed again to $50,000 in 1995, and by 1999 had soared to $65,000. Figure 1 shows the relative pattern. The ratio of black to white incomes fell not because black incomes were falling but because white incomes were rising faster than black incomes. …