U.S. racial wage gap shaped by geography, says new study

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U.S. racial wage gap shaped by geography, says new study

Being In The Minority Can Cost You And Your Company

The racial wage gap in the United States — the gap in salary between whites and blacks with similar levels of education and experience — is shaped by geography, according to new social science research.

The larger the city, the larger the racial wage gap, according to researchers Elizabeth Ananat, Shihe Fu and Stephen L. Ross, whose findings were recently published by the National Bureau of Economic Research.

"The average racial gap in metropolitan areas of around 1 million people — and you can think of a place like Tulsa, Okla. — is about 20 percent smaller than the gap in the nation's largest metro areas of Chicago, L.A. and New York," Ananat says.

Ananat's research suggests that the racial gap is not directly the result of prejudice or, at least, prejudice conventionally defined. Rather, it has to do with patterns of social interactions that are shaped by race — and a phenomenon that economists call spillovers....

Ananat explains the findings with a hypothetical example: "Say there are 1,000 black engineers in Silicon Valley, compared to 20 in Topeka, and there are 10,000 total engineers in Silicon Valley, compared to 500 in Topeka. Then blacks make up 10 percent of engineers in Silicon Valley, compared to 4 percent in Topeka."

"A black engineer in Silicon Valley has 980 more black engineers to get spillovers from than does a black engineer in Topeka," she writes in an email. "Meanwhile, a white engineer in Silicon Valley has 8,500 more white engineers to benefit from than a white engineer in Topeka. Thus, while both white and black engineers' wages will be higher in Silicon Valley than in Topeka, the white engineer's wages will increase more than the black engineer's do — in effect, the white engineer is living in a much bigger city (of engineers) than the black engineer is, if only people within one's own race matter for urban spillovers."

Obviously, in the real world, social encounters are not totally segregated and other factors — including out-and-out prejudice — could play a role. But what seems to be happening, Ananat says, is that minority groups often miss out on the valuable tips and mentoring that make these ecosystems so productive and profitable. The same thing happens with other ethnic minorities, and even with whites — when they are in a minority.

 

 

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