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Rent Destruction, Social Class, and the Earnings of Black and White Males, 1982-2000

Over the last two decades, the persistence and slight decline of the population-level black-white earnings gap of men belies important heterogeneity found within. Using a mixture of traditional regression modeling and non-parametric weighting estimators, we adopt a consistent social class schema for March CPS data and analyze trends in the black-white earnings gap of men between 1982 and 2000. We show that the steady decline in the gap among full-time, full-year workers is concentrated among semi-skilled and unskilled workers (classes VI and VIIa) and is particularly pronounced among supervisors of manual workers (a large proportion of class V). Three explanations combine to produce this pattern. First, in the context of growing wage inequality in general, white men at the bottom of the class distribution have been unable to maintain their wage advantages over their black counterparts to the same degree that white men at the top of the class distribution have. Second, rates of labor market nonparticipation among low-skilled black men increased in the 1980s and 1990s (though not as much as they increased in the 1960s and 1970s), and this selection out of the labor force has accentuated the decline in the relative earnings gaps observed for classes V, VI, VIIa. Third, the tight labor market of the 1990s has disproportionately helped the same low-skilled black men. The relative weighting of these three explanations cannot be determined definitively with any available data, but the first explanation deserves as much attention as the latter two, has not been sufficiently developed in the literature on the black-white gap, and is consistent with Sorensen's rent destruction explanation for increases in inequality.

Joint work with Mark W. McKerrow