The Labor Market Effects of Sex and Race Discrimination Laws
Neumark, David, Stock, Wendy A., Economic Inquiry
Public policies to narrow the gaps in labor market outcomes between men and women and between whites and minorities have a long and controversial history. Two pieces of federal legislation stand out as perhaps the most significant such policies. The first was the Equal Pay Act of 1963, which requires equal pay for equal work, noting some exceptions but explicitly prohibiting a worker's sex as one of them. The second was Title VII of the Civil Rights Act of 1964, making it illegal to discriminate in hiring, discharge, compensation, and so on, on the basis of race, color, religion, sex, or national origin. Two other important landmarks in the evolution of these policies at the federal level were amendments to Title VII embodied in the Equal Employment Opportunity Act (EEOA) of 1972, which expanded coverage and increased the enforcement powers of the Equal Employment Opportunity Commission (EEOC), and Executive Orders 10925 (1961), 11246 (1965), and 11375 (1967), which laid the groundwork for affirmative action, although the phrase has its origins in Title VII. (1)
There are three broad controversies regarding these public policies. The first concerns the need for any government attack on labor market discrimination, hinging on questions of whether the observed group differences in labor market outcomes reflect discrimination and whether competition in labor markets and product markets will undermine discriminatory behavior. (2) The second concerns the fairness and social efficiency of affirmative action, which many, such as Steele (1990) and Carter (1991), regard as distinct from nondiscrimination policies in advocating preferential treatment of particular groups. (3) The third, with which this article is concerned, is the effectiveness of these policies, asking in particular whether antidiscrimination policies contributed to relative improvements in labor market outcomes for women and minorities (and presumably continue to contribute if discrimination persists). Failure to find evidence of these effects can reflect either ineffectiveness of the antidiscrimination laws, or no prior discrimination.
We focus much of our attention on the effects of laws prohibiting sex discrimination in pay, unlike most of the previous research on the impact of antidiscrimination legislation, which focuses on the effects of race discrimination laws on race differences in earnings. Much of the earlier work tries to infer the effects of federal legislation by asking whether, concurrent with the passage of federal antidiscrimination legislation, there was a jump or acceleration in, for example, the relative promotion rates of women or the relative earnings of blacks. The fundamental problem with such time-series analyses of the impact of federal antidiscrimination laws is that the laws have nearly universal applicability, which prevents identification of an appropriate comparison group that can be used to control for changes in the relative outcomes under study that are unrelated to the policy innovation. For example, if the black-white wage gap was narrowing prior to the passage of Title VII of the Civil Rights Act, then testing whether Title VII narrowed the gap requires a comparison of changes in the black-white gap for workers covered by Title VII and workers not covered in the same period. (4) Researchers have of course considered other ways to bring complementary evidence to bear, including efforts to identify control groups and use of auxiliary data.
This article takes an alternative approach to the problem of inferring the effects of laws prohibiting sex and race discrimination to those taken in most previous research. In particular, prior to the enactment of the federal legislation, many states enacted similar laws or practices barring discrimination in wages (for women) and employment (for blacks, although those laws covered wage discrimination as well). Because these laws or practices were passed at different times in different states, a more natural control group is provided. …