The international Black Lives Matter protests that erupted during the middle of 2020 are a stark reminder of the racial injustice that many people across the world perceive. Ensuring the dignity of all groups in society is a long and complex process, but recently published studies on the issue of discrimination affirm the critical role that scientific research plays in helping us overcome prejudice and bigotry.
In particular, views regarding labor market policies are frequently based on perceptions regarding the economic impact of those policies. For example, proponents of minimum wages and positive discrimination, or affirmative action, claim that these policies provide racial minorities with relief from labor market discrimination. Meanwhile, opponents claim that they inadvertently – or sometimes malevolently – accentuate racial discrimination. While it may be tempting to resolve these debates with a series of hashtag-infused screaming matches on social media, the prudent option is to conduct rigorous research and disseminate it widely. Two recent papers are exemplary in this regard.
The first is a paper on the impact of the minimum wage on Black-white earnings inequality in the US, authored by University of California at Berkeley economists Ellora Derenoncourt and Claire Montialoux. The researchers sought to understand why it was that during the 1960s and early 70s, the Black-white earnings gap fell from the 25 percent earnings difference that had been reported previously.
Professors Derenoncourt and Montialoux demonstrated that the 1967 federal minimum wage extension that expanded the set of jobs qualifying for the $1 minimum wage accounted for over 20 percent of the decline in the racial wage gap. Black people, disproportionately to their white counterparts, saw their wages increase after the reform and experienced a much larger increase in income. Moreover, the authors were able to demonstrate that the higher wages did not come at the expense of jobs: Total employment for Black individuals held steady, contrary to the traditional narrative in economics textbooks.
These findings add to our collective knowledge regarding how best to tackle labor market discrimination. Prior to this paper, scholars emphasized the role of anti-discrimination laws and increasing education for the African American populations as the primary causes of the shrinking Black-white wage gap. This new paper suggests that such explanations are not as important as previously thought, helping policymakers fine tune interventions that tackle discrimination.
Moreover, this paper also highlights how the impact of a minimum wage can be quite sensitive to the structure of the economy when it is applied. In 2016, Princeton University economist Thomas Leonard published a book arguing that the minimum wages introduced in the US during the early 20th century had a much more sinister intent. They were part of a manifestly racist effort to disadvantage Black communities, by eliminating their ability to secure employment at wages lower than those of whites. This is because when wages are unrestricted, bigoted white employers might still consider employing Black workers because of their lower wages; however, when Black workers’ wages are forcibly equalized to those of white wages where bigotry and racism remains unaddressed, this allows bigoted white employers to favor white employees without suffering a financial penalty.
Why did Black people have lower wages? A variety of reasons including lower education levels and overt bigotry were assumed. But without a scientific understanding of these factors, we may make the error of prescribing a policy that hurts those it seeks to help. Clearly, a valuable extension to the paper by Professors Derenoncourt and Montialoux would be a study that definitively explains why minimum wages potentially accentuated the Black-white inequality in the early 20th century while closing it during the 1960s and 1970s.
While these papers examined the effect of minimum wage policies, another looks at how legislation designed to encourage minorities to apply for jobs may actually have the opposite effect.
This second paper is by Andreas Leibbrandt, an economist at Monash University in Australia, and John List, an economist at the University of Chicago in the US. The authors investigate the impact of equal employment opportunity (EEO) statements in job postings on the willingness of racial minorities to apply for jobs.
The overt goal of EEO statements – which innocuously declare that all job applicants will be given equal consideration regardless of race – is to enhance the pool of minority applicants, by indicating to them that they will not face the bigoted discrimination that they might otherwise face in the labor market. However, Professors Leibbrandt and List unexpectedly found that racial minorities become less likely to apply to jobs upon the inclusion of an EEO statement. Moreover, this effect is especially pronounced for educated job seekers in cities with white majority populations.
By gathering additional data, Professors Leibbrandt and List surmised that EEO statements apparently backfire because minority populations don’t want to fall victim to tokenism: “Racial minorities avoid environments in which they are perceived as regulatory, or symbolic hires, rather than being hired on their own merits.” These findings show how perception is a critical mediating variable in labor market interventions, and therefore help us to design affirmative action policies more effectively, lest they be counterproductive.
Eliminating discrimination is a worthy goal for society, and science plays a central role in realizing that goal. The new papers described above highlight the importance of dispassionate analysis of rigorously collected data in making us question prevailing narratives, as trial-and-error is the essence of science. Or, as Danish physicist Niels Bohr once remarked: “An expert is a person who has made all the mistakes that can be made in a very narrow field.”