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Contrasting Compensation: Wage Disparities by Race

6/21/2017 4:00:00 PM

Disparities in employment, income and family wealth between black and white Twin Cities residents are some of the largest in the US. Portland and Boston, among other metropolitan regions, have a similar proportion of people of color, but do not experience equally substantial gaps in their ability to thrive.

In 2016, the regional policy-making Metropolitan Council asked: Are these disparities, in fact, based on race at all?

Their research says demographic differences don’t completely explain disparities. If black residents had the same demographic profile – age, disability status, English language skills, education – as white residents, they would still likely have lower employment rates and homeownership rates.

DEED’s Performance Management Office conducted their own study by accessing wage data from DEED and using Met Council methods. DEED sampled Dislocated Worker Program participants to measure wage disparities among participants. The study included all reported racial categories: White, Asian (includes Pacific Islander), Black, Native American, Latino, and Two or More Races.

Race remains a significant predictor of lower wages for black, Latino and Native American workers, even after controlling for a range of demographic factors, the study found. For example, the average black worker earns $7.52 dollars less an hour than the average white worker with the same profile.

Controlling for age, gender, offender status, immigrant status, English-language competency and number of dependents mitigated the wage disparity for blacks and Latinos, but barely affected that of Native Americans. Wages remained significantly lower for black, Latino and Native American workers compared to white workers, even after removing the influence of these demographic variables.

Educational attainment further explained some of the disparity for all three racial groups. Workers with any years of college completed, a bachelor’s degree, or post-bachelor’s degree have significantly higher wages, and people of color are less likely to reach this level of education.

There are significantly lower wages in the Northeast, Northwest, Central, Southeast and Southwest parts of the state compared to the Twin Cities Region for all workers. Since a majority of people of color are located in the Twin Cities region, disparities are even higher.

Although there are differences between the Dislocated Worker Program participants and the general population, DEED’s analysis finds that demographic differences by race alone likely don’t drive disparities in wages by race.

Shifting the demographics by increasing education, lowering contact with the criminal justice system, raising English-language proficiency and relocating to regions with a stronger job market will help close the gap, but DEED’s analysis suggests many workers will still see lower wages associated with their race.

Educating employers about diversity and encouraging them to hire and pay Minnesotans who have equal proficiency equally are needed to reverse wage differences by race.

Contributing writer Maria Paschke recently completed an internship with the Performance Management team at DEED. She’s currently a graduate student at the Humphrey School of Public Affairs. Reach her at Maria.Paschke@state.mn.us.

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