Race, Ethnicity, and Income Inequality

Abstract

It is a fact of American life that income is not distributed evenly. Along with sex, race, and ethnicity are key determinants in income distribution. Myriad reasons are presented to explain this phenomenon. Many sociologists look to historic patterns of discrimination that are responsible for lower levels of wealth accumulation, leading to stunted cultural, human, and social capital. Also considered are group threat theory and failures of great society-based welfare programs. While there is little agreement on the cause, there is widespread agreement that lower income levels set up a cyclical pattern, making it equally difficult for the next generation to escape from poverty.

Overview

It has been said, "Logic dictates that if opportunities and resources were available equally and freely to all US residents, the proportional distribution of representatives of various ethnic cultures would be spread across economic levels, throughout occupations, across educational levels" (Cuyjet, 2006, cited in Strayhorn, 2008, p. 52). More than fifty years after the passage of the Civil Rights Act of 1964, which was designed to end discrimination in employment, Black unemployment rates remain almost twice as high as they are for White Americans: 3.7 percent versus 5.6 percent in May 2023 (US Bureau of Labor Statistics, 2023). In 2021, non-Hispanic White households had a median income of $77,999 and Asian American households, $101,418—nearly two times the median for Black households ($48,297). Hispanic households fell in the middle, with a median income of $57,981 ("Income and wealth," 2022). There is widespread agreement that income inequality among races exists; there is less agreement about the causes.

A net result of income inequality is that far more Black than White families live in poverty. Increasingly, there are calls for more federal spending to combat the effects of poverty. The term poverty is often used in a broad sense to describe deprivation, but the federal government has a specific definition—in 2023, an individual with an annual income of less than $14,580 was considered poor. Officially, an estimated 10.5 percent of Americans were considered poor in 2019, marking the lowest rate since 1959 (Semega et al., 2020), but by the end of 2022, the figure increased to 12.8 percent (Benson, 2022).

Glazer (2005) argues that American opposition to the welfare state and support for patterns of small government go back many generations and can be traced back to the end of the nineteenth century. This could be the result of the structure of the US economy, its political system, or other behavioral characteristics, which include uniquely American belief systems. One might be the idea that it is possible to achieve upward mobility. Multiple studies have found that Americans tend to overestimate the actual occurrence of upward socioeconomic mobility in their country (Alesina, Stantcheva, & Teso, 2018). One aspect that seems to separate Americans from Europeans in their views on economic mobility is 'racial fractionalization.' Comparing welfare benefits across states, there is a direct correlation between the percentage of the Black population and the size of the welfare benefit: "Race seems decisive in explaining indifference to inequality" (Glazer, 2005, p. 9).

Alesina, et al., puts it bluntly:

"Americans redistribute less than Europeans for three reasons: because the majority of Americans believe that redistribution favours racial minorities, because Americans believe that they live in an open and fair society, and that if someone is poor it is his or her own fault, and because the political system is geared toward preventing redistribution" (cited in Glazer, 2005, p. 10).

History. From the late 1970s onward, sociologists have employed various measures to determine whether class or race has the greater impact on life chances. Even a suggestion that class is the more salient factor is controversial (Wilson, 1980). What is clear though, is that there are still gaps between Black Americans and those of other races along many critical scales. In 2018–2019, for instance, public high school graduation rates showed that 93 percent of Asian Americans and 89 percent of White Americans graduated from high school, while 80 percent of Black Americans graduated. That same year, 62 percent of Asian Americans and 41 percent of White Americans were enrolled in accredited postsecondary institutions, while 37 percent of Black Americans were enrolled (National Center for Education Statistics, 2021). In 2020, 34.7 percent of Black Americans held professional or managerial positions compared with 43.4 percent of White Americans and 58.2 percent of Asian Americans (US Bureau of Labor Statistics, 2021). Median household income for Black Americans in 2021 was $46,400, about half of White median household income (Loh et al., 2022). Conley (2001) argues that one significant reason for the glacial pace of change concerns differing rates of accumulated family wealth.

Accumulated Wealth. Accumulated wealth is one of the most salient factors that determine socioeconomic status. Its impact ranges from family stability to educational options and all areas of employment as well as welfare dependency. The twentieth century witnessed a modest dispersal of wealth, but the Great Recession in the first few years of the twenty-first century widened the gap considerably. According to the US Census Bureau (2020), the median net worth for Black households in 2017 was $9,567, while that of non-Hispanic White households was $171,700.

Because accumulated wealth multiplies in a way that wages do not, the gap has continued to grow, even after the victories of the civil rights era (Conley, 2001). As a result, even Black Americans with similar incomes to White Americans are far less likely to own their home—a critical step for amassing wealth.

Conley looks to a history that deprived Black Americans of all ownership, even of their own bodies and labor. The stated goal of Reconstruction was to help Black Americans toward "economic self-sufficiency." Since plantations were never divided, this did not happen. Eventually, sharecropping forced many formerly enslaved people and their descendants into a vicious cycle of debt and dependency on White landholders. When Social Security was created in 1935, agricultural and domestic workers were excluded, thus ensuring that 42 percent of Black workers would be excluded from the system of pensions, compared to 22 percent for White Americans (Conley, 2001). Reflecting Glazer's argument, Contez (1992) contended that Franklin Roosevelt knew that the only way he could get the insurance plan past conservative southern Democrats was if a substantial portion of Black Americans were excluded. Without Social Security, Black Americans had to spend what little they might accumulate supporting themselves in their final years rather than passing on an inheritance. Even more frequently, older adults and destitute Black Americans were a financial drain on the next generation.

One of the landmark achievements of the civil rights movement was passage of the Civil Rights Act of 1964. The two most important segments of the law outlawed discrimination in public accommodations (Title II) and in employment (Title VII). In the two decades following its passage, the Supreme Court interpreted Title VII quite broadly, finding that along with intentional discrimination, practices that have a "racially disparate impact" were also banned (Hall, 2005, p. 172). This had the effect of invalidating many employment tests and requirements that kept minorities out of the workforce. The Equal Employment Opportunity Commission was created and charged with investigating possible cases of discrimination. As the composition of the Court changed during the Reagan Administration, increasingly, decisions in discrimination cases favored employers; none more so than Ward's Cove Packing Co. v. Atonio 490 US 642 (1989). As a result, Congress passed the Civil Rights Act of 1991. The goal of this legislation was to clarify Congress's support for consideration of disparate impact. Both laws helped to open up the employment playing field; yet neither has succeeded in creating a completely level field (Conley, 2001; King & Wheelock, 2007; Strayhorn, 2008).

Further Insights

Residential Segregation. Residential segregation between Black and White Americans, a legacy of housing policies and laws, has been a persistent problem that can be seen in many areas of the United States. Substantial research documents show that predominately Black communities provide very different social environments than their White counterparts, with higher levels of unemployment, single motherhood, dilapidated housing, and crime being more common in Black neighborhoods. In addition, these neighborhoods were marred by higher taxes and substandard schools (Peterson & Krivo, 1993).

Sociologists Blau, Blau, Logan and Messner (1987) describe how residential segregation limits opportunities:

"Racial segregation imposes a significant barrier to Black upward mobility and quality of life. Places of residence locates people not only in geographical space but also in networks of social opportunities—it influences prospects for employment, for public services, for educational advancement, . . . Residential segregation by race accordingly implies that opportunities for achievement are limited for certain groups, and it conflicts with basic American value commitments which encourage members of all groups to strive for socioeconomic success. Such a 'disjuncture' between structural arrangement and fundamental cultural values . . . tends to undermine the legitimacy of social norms" (cited in Peterson & Krivo, 1993, p. 1004). While formal residential segregation does not exist in the twenty-first century, informal segregation persists in the US, which causes barriers for minorities to healthcare, fresh food, quality education, and jobs (Loh et al., 2022).

Education Opportunities. One of the most immediate consequences of segregated housing patterns is schools that are further separated by race and poverty. Although racial-ethnic concentration in schools declined somewhat over the first two decades of the twenty-first century, by 2017–2018, just 16 percent of public K-12 schools, 17 percent of charter schools, and 13 percent of private schools had no racial-ethnic majority. Most public and private schools (57 percent and 72 percent, respectively) remained majority White, while charter schools had a more even breakdown among those with majority-White, majority-Black, or majority-Hispanic student populations (National Center for Education Statistics, 2021). Consistently, high poverty schools are connected with the problems of high turnover rates, less qualified teachers, and removal from mainstream society (Orfield & Eaton, 2003).

Employment Patterns. The implications of segregated housing patterns leading to diminished educational opportunities plays a role in income inequality at virtually all levels of employment. Since many Black and Hispanic families find themselves in the inner city, they have been particularly hard hit as industrial jobs, once the mainstay of the cities, have disappeared. This has had a devastating impact on the employment options for many men of color, indirectly contributing to an equally dramatic decline in the norm of a two-parent household (Woldoff & Cina, 2007). Children born to single parents have a significantly higher chance of living in poverty than do children born into two-parent households.

Occupational Segregation. Occupational segregation for Black and White men began moving in opposite directions in the 1980s. On one hand, more than ever before, Black men were entering elite professions that had long been dominated by White Americans; on the other, the wage gap was growing when measured for all men. A widely held belief has been that as more Black Americans enter higher-paid professions, the wage gap would decrease, but the trend appeared to be moving in the opposite direction by the early twenty-first century. Kaufman used the 1970 census to show that "Black men face the greatest disadvantage in labor market at the high end of the earnings hierarchy" (cited in Grodsky & Pager, 2001, p. 543). Thus, as Black men move into higher-paying professions, the wage gap stands to intensify rather than shrink. Grodsky and Pager found largely the same process at work with newer data, contradicting the long-standing principle that occupational selection is key to determining economic well-being.

Grodsky and Pager also draw on the work of Tomaskovic-Devey, who argues that as an occupation is selected either by more women or more racial-ethnic minorities, the composition of the workforce itself "becomes a fundamental aspect of the job, influencing the work done as well as the organizational evaluation of the worth of the work" (Grodsky & Pager, 2001, p. 544). As the percentage of women or racial-ethnic minorities shift upward, the prestige, and thus the pay, shifts downward. Wilson (1980) takes a notably different approach; he sees that as Black Americans enter the professions, new opportunities for Black Americans to gain the sorts of human capital necessary for intergenerational success accrue to them. While he acknowledges that high-income Black Americans still have a more difficult time finding housing than do their White counterparts, they do, nonetheless, have a way to escape the inner city, and the limited educational opportunities found there. By 2022, Black women made up only 6 percent of the American workforce, but 32 percent of the home health aides, exhibiting the overrepresentation of some ethnic groups in particular occupations. This career is traditionally low-paying, at just under $24,000 per year—another trend among Black women in the workforce. Nearly 20 percent of all Black women in the workforce in 2022 worked in five low-paying occupations (Zhavoronkova et al., 2022).

Gender. As the research on Black men shows, there remains a significant gap between employment rates based on race; this gap is not nearly as obvious for women. Historically, race has had minimal impact on employment levels for women. This, however, evolved in the late twentieth and early twenty-first centuries. In 1969, White and Black women with low levels of work experience were employed at the same rate; by 1991, these two groups faced divergent employment opportunities, with White women far outpacing Black women. Bleiweis (2020) reported that Black women's 2018 median earnings were 38 percent lower than those of White men, as compared to White women's median earnings, which were about 21 percent lower. This is a disturbing trend, given increasing numbers of Black women who have sole financial responsibility for their families (Reid & Padavic, 2005).

Hispanics. Hispanics are another group that has long faced difficult odds in the labor market. First- and second-generation Mexican immigrants have traditionally clustered in border cities along the Rio Grande and in the barrios of the Southwest border cities. As they have slowly moved from these traditional locations to newer venues in the Midwest, they still find that low educational levels leave them stranded in low-wage jobs, often depressing already inadequate wages. With restrictions aimed at noncitizens in the 1996 Welfare Reform Act, options became ever more limited (Crowley, Lichter & Qian, 2006). As Tomaskovic-Devey and their colleagues point out, cities with large concentrations of Hispanics, such as Los Angeles, California, have become more segregated with time, creating what has come to be called “browncollar jobs” (2006, p. 568). Beginning in the early 1990s, as low-wage jobs reached a saturation point at the same time that anti-immigrant sentiment was peaking in California, with Proposition 187, new opportunities were opening up in meat-packing plants in regions once outside the traditional destinations.

As demand for processed meat has increased, meat packers have looked to reduce cost by eliminating skilled jobs, replacing them with mechanized, low-skill operations, outside of cities that had high concentrations of unionized workers. White American workers have shown limited interest in these dangerous and generally unpleasant jobs. Year-round work with benefits appealed to Mexican workers, even if the wages were low, and allowed them to gain a standard of life that had not been easy to achieve elsewhere. Crowley, et al. (2006) note that meat packers actively pursued this labor source, seeing in Mexicans a willingness to "work hard, put in long hours, and endure unpleasant working conditions for low wages" (p. 347).

Viewpoints

Group Threat Theory. There are myriad possibilities to consider when attempting to discern why income inequality continues to exist. One explanation involves a theory called group threat. King and Wheelock explored the role this can play in shaping income inequality among races. The theory, first put forth by Blumer in 1958, holds that "prejudice and inter-group hostility are largely reactions to perceived threats by subordinate groups" (in King & Wheelock, 2007, p. 1256). For example, White Americans, historically the dominant group in the United States, may try to maintain their social advantages when they sense competition (such as for jobs) from a racial-ethnic minority population. The perception of threat increases in areas where the racial-ethnic minority population is relatively high. One way that the dominant group can preserve its control is through punitive measures, such as harshly punishing criminal behavior. High rates of incarceration have a significant impact on all other aspects of life, most notably in the areas of family stability, civil participation, and employment. States with larger Black populations tend to have higher rates of incarceration; this holds true when other variables such as crime and unemployment rates are held constant. Incarceration rates tend to increase as unemployment levels rise, especially in regions prone to income inequality (King & Wheelock, 2007).

Social Capital. Connected to the theory of group threat is Putnam's theory of social capital. He defines social capital as "connections among individuals—social networks and the norms of reciprocity and trustworthiness that arise from them," creating "civic engagement and levels of mutual trust among community members" (Weaver & Rivello, 2006, p. 21). In areas of the country with higher concentrations of Black Americans or Hispanics, for example, there tends to be less social capital, as groups of people who differ tend not to come together often across ethnic or racial lines. To change this, a history of racism would have to be acknowledged to build trust across groups. As group threat theory implies, building trust can be quite difficult. Weaver and Rivello argue that areas with low social capital tend to have high levels of income inequality. Importantly, this is also an impediment to effecting democratic action (Weaver & Rivello, 2007).

The Digital Divide. A divergent approach involves understanding how access to information technology is divided by race. Access to computers and to the knowledge required to adequately make use of them is yet another way to determine one's chances of educational and economic success. Servon and Nelson explain, ''access to information technology and the ability to use it [have] increasingly become part of the toolkit necessary to participate and prosper in an information-based society" (cited in Chakraborty & Bosman, 2005, p. 395). Yet, the United States faces a troubling digital divide between those who have access to information technologies and those who do not (Chakraborty & Bosman, 2005).

Larry Irving, assistant secretary of commerce for communications and information during the Clinton administration in the 1990s, believes that the 'digital divide' between Black and White Americans is "one of America's leading economic and civil rights issues and we have to take steps to redress the gap between the information haves and have-nots" (cited in Chakraborty & Bosman, 2005, p. 396). It is not simply a matter of all citizens gaining access as the price of the technology falls; there is also the issue of the price of network access, and equally critical, access to the skills necessary to make the technology a worthy investment. New technologies only intensify the divide, and the pace of new technology is always accelerating. It is important to note that this has implications that expand beyond income inequality, while at the same time reinforcing that inequality. One of the critically important uses of information technology is in the field of democratic action. Without adequate access, low-income Americans have a reduced opportunity to participate in this ever more important venue for political dialogue and action. Thus, they miss out on the option of organizing for political change that could affect their economic well-being (Chakraborty & Bosman, 2005).

Welfare & the Nonworking Poor. Finally, it is important to recognize that some scholars believe there is not a tie between race and income inequality. Mead (2007) argues that we only have a tenuous understanding of the roots of poverty and income inequality; thus, while there seems to be almost obligatory rhetoric about addressing the problems that stem from poverty, there are few fresh ideas, and less confidence that a solution can be found. He suggests that the 'solutions' of the War on Poverty were not really solutions at all; rather, a robust economy made work pay, at least for those who choose to work. His focus is on those who opted against working. He explains:

"In 1959, 68 percent of the heads of poor families worked, 31 percent of them full-time and year-round. By 1975, those figures had fallen to 50 and 16 percent respectively, and they have changed little since then. For the nonworking poor, a hot economy was no solution" (Mead, 2007, p. 46).

He blames welfare for this increase in the number of the nonworking poor, because the rolls exploded just as the economy boomed in the 1960s.

Mead outright rejects the notion that poverty and relatively higher unemployment rates for racial and ethnic minority groups are a result of racial bias in hiring. Although he acknowledges that the rates of Black and Hispanic Americans living in poverty are disproportionate to their populations, he contends that the most destructive forms of poverty—that marked by lower work levels and higher levels of crime and substance abuse—are a hallmark of the post-civil rights era. Although Daniel Patrick Moynihan's explanation for Black poverty, one that put the blame on the family, especially on women who took leadership roles within the family is no longer widely accepted (Contz, 1992), Mead agrees with him that it is the “dissolution” of the Black family that is the root cause of their poverty, noting that in 1965, the time of the Moynihan Report, 25 percent of Black children were born into single-parent households, whereas in 2007, 68 percent of Black children were born to unmarried parents. At the same time, Black male labor participation had declined, one-third of young Black men had criminal records, and half were not parenting their children (Mead, 2007).

Although civil rights–era legislation helped to narrow the gap between White workers and those of other racial-ethnic groups, most notably Black Americans and Hispanics, there remains a significant difference in the wages that each group earns. When one generation accrues less wealth than would be possible under more ideal circumstances, there is an intergenerational impact, as the family of origin's wealth plays a substantial role in determining its children's economic chances, as they pass on the human, social, and cultural capital necessary for success. Reasons for the gap abound, ranging from segregated neighborhoods and schools, to computer ownership and group threat theory.

Terms & Concepts

Civil Rights Act of 1964: Landmark legislation of the civil rights era, designed to end discrimination in public accommodations and in employment.

Cultural Capital: The beliefs, tastes, and preferences that come from one's family, helping to define class status (Strayhorn, 2008).

Equal Employment Opportunity Commission (EEOC): Collects yearly data on the sex by race/ethnic composition of private sector employment as part of federal efforts to monitor compliance with the Civil Rights Act and similar legislation (Tomaskovic-Devey et al., 2006).

Fragile Family: A family that is formed when the parents are not married, and their economic situation is precarious.

Group Threat Theory: "Prejudice and inter-group hostility are largely reactions to perceived threats by subordinate groups. Dominant groups seek to preserve their advantaged social position and view encroachments on their prerogatives by minority groups as disrupting to the existing social order" (King & Wheelock, 2007, p. 1256).

Poverty: The federal government uses a formula that considers the cost of basic housing, food and other essentials. It is this measure that determines eligibility for a host of social services.

Segregation: A policy in which residential areas, places of employment and schools that are separated by race. Segregation can be achieved through legal strategies (de jure) or through customs and norms (de facto).

Social Capital: "Connections among individuals—social networks and the norms of reciprocity and trustworthiness that arise from them," creating, "civic engagement and levels of mutual trust among community members" (Weaver & Rivello, 2006, p. 21).

Undocumented Workers: These are workers who entered the United States without proper immigration documentation. They cannot legally work, and they are subject to deportation.

War on Poverty: During the Johnson administration, there was a concerted effort made to combat the effects of long-term, intergenerational poverty. Included were Aid to Families with Dependent Children (AFDC), Medicare, and Medicaid. Eventually commitment to the Great Society programs of the War on Poverty gave way to funding for the Vietnam War.

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Zhavoronkova, M., Khattar, R., & Brady, M. (2022, March 29). Occupational segregation in America. American Progress. Retrieved June 25, 2023, from americanprogress.org/article/occupational-segregation-in-america

Suggested Reading

Kim, C., & Tamborini, C. (2006). The continuing significance of race in the occupational attainment of Whites and Blacks: A segmented labor market analysis. Sociological Inquiry, 76, 23–51. Retrieved July 22, 2008, from EBSCO online database, Academic Search Premier http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=19215698&site=ehost-live

Langdon, D., & Klomegah, R. (2013). Gender wage gap and its associated factors: An examination of traditional gender ideology, education, and occupation. International Review of Modern Sociology, 39, 173–203. Retrieved November 18, 2013, from EBSCO Online Database SocIndex with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=91746415

McVeigh, R. (2004). Structured ignorance and organized racism in the United States. Social Forces, 82, 895–936. Retrieved July 21, 2008, from EBSCO online database, Academic Search Premier http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=13069339&site=ehost-live

Rohde, N., & Guest, R. (2013). Multidimensional racial inequality in the United States. Social Indicators Research, 114, 591–605. Retrieved January 9, 2015, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=90560796&site=ehost-live&scope=site

Rosenfeld, J., & Kleykamp, M. (2012). Organized labor and racial wage inequality in the United States. American Journal of Sociology, 117, 1460–1502. Retrieved November 18, 2013, from EBSCO Online Database SocIndex with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=74458905

Trading action for access: The myth of meritocracy and the failure to remedy structural discrimination. (2008). Harvard Law Review, 121, 2156–2177. Retrieved July 22, 2008, from EBSCO online database, Academic Search Premier http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=32686459&site=ehost-live