Across the country in big cities, suburbs and rural areas, Blacks and Hispanics earn less in comparison to Whites. The prevalence of the wage gap for racial and ethnic minorities is widely known though the composition of that gap has been up for debate. Using empirical analysis, this paper first investigates the relationship between race and wages then, using Oaxaca Decomposition, decomposes the wage gap for these groups. Weighted regression analysis confirms previous research that indicates Blacks and Hispanics earn significantly less than Whites however decomposition results indicate alternate theories as to the basis of the wage differential. In metro and rural areas, the coefficient effect is largely responsible for the wage gap between Blacks and Whites while for Hispanics in the same areas the endowment effect is largely responsible. Results suggest that different policies are necessary in order to reduce the income gap between these groups and promote income mobility. Specifically for Blacks policies targeting systemic discrimination and for Hispanics, an emphasis on market-valued skills is necessary to promote income equality.
"Decomposing the Wage Gap: Analysis of the Wage Gap Between Racial and Ethnic Minorities and Whites,"
Pepperdine Policy Review: Vol. 8
, Article 1.
Available at: http://digitalcommons.pepperdine.edu/ppr/vol8/iss1/1