A Comparative Analysis of the Determinants of Black-White and Mexican-American-White Male Wage Differentials.

Abstract

This dissertation is a comparative analysis of the factors that determined wage differentials among black, Mexican-American, and white males in the Midwest and Southwest during the period of 1973-1978. The objective of the study is to ascertain which of these factors differed in the way they affected black and Mexican-American wages, and whether there were any changes in these effects during the period under study. Cross-sectional data from six Current Population Surveys for 1973 through 1978 were used in this analysis. A model of the wage determination process was constructed and tested, and separate wage equations were estimated for the three groups in each of the study years. The dependent variable was the natural log of the hourly wage, and the independent variables represented human capital and other productivity-related characteristics. Wage differentials were decomposed into a component that is explained by differences in productivity characteristics between whites and the other two groups, and a component that cannot be explained by such differences and may be due, among other things, to differential labor market treatment. The major findings are: (1) More of the Mexican-American-white than black-white wage differentials were explained by productivity differences and , conversely, more of the black-white than Mexican-American-white differentials were unexplained. (2) Differences in years of school completed were the major cause of wage differences between whites and both groups and explained as much of the black-white as Mexican-American-white wage differential although the latter was twice as large as the former. (3) There was a slight increase in the black-white, and a slight decrease in the Mexican-American-white differential over the years of the study. (4) The differences in productivity characteristics and wages of young blacks and whites were much smaller than those between the other racial and ethnic age cohorts. The general policy conclusions are to continue to encourage human capital investments for blacks and Mexican-Americans, particularly the younger workers, and discourage differential labor market treatment.