Overview
While we acknowledge that wages are not the only source of household income, we will here dive deeper into individual-level wages.
Wages from employment are the primary way individuals and households accumulate the financial resources to be able to both cover their regular expenses and purchase assets to build wealth.
Stark wage differences across racial/ethnic groups in Michigan
The figure below shows the median wage for each ethno-racial group in Michigan. The median wage is the wage separating the wealthier half from the less wealthy half within each group.
White workers have a substantially higher median wage than Black, Hispanic, or workers from other ethno-racial groups in Michigan. Asian wage earners have a higher median wage than white wage earners.
Source: Calculations using data from the 2022 ACS survey.
Notes: The ethno-racial groups shown here are mutually exclusive and collectively exhaustive. Whenever a given ethno-racial group is too small for reliable statistical analysis, it is grouped with “Other” (see Methodology for more detail). The grey bars represent the margin of error around the estimated median. Wider bars mean that there is more uncertainty around the exact value of the median. The black dashed lines show the national median wages by ethno-racial group.
Educational attainment disparities account for a substantial amount of the disparities in wages in Michigan
In this figure we compare workers with similar demographic characteristics (the sex, age, and marital status of each worker along with if there are children in their household). The squares in the graph below show the differences in median wages when comparing workers with similar demographics. We find that there are still disparities in median wages across ethno-racial groups, suggesting that underlying household characteristics are not the only reason for the large disparities.
When comparing workers with similar demographics, the Black-white wage gap decreases from approximately $15,000 to $8,000. For Hispanic workers, the gap with white workers decreases from about $12,000 to $9,000 when comparing workers with similar demographics.
Source: Calculations using data from the 2022 ACS survey.
Notes: The ethno-racial groups shown here are mutually exclusive and collectively exhaustive. Whenever a given ethno-racial group is too small for reliable statistical analysis, it is grouped with “Other” (see Methodology for more detail). The grey bars represent the margin of error around the estimated median. Wider bars mean that there is more uncertainty around the exact value of the median. The diamonds represent the differences in median wages without taking other factors into consideration while the squares represent the model with the controls noted above.
Policy Recommendations
Quality early childhood education access
High-quality early childhood education (ECE) has the potential to improve academic performance and educational attainment and ultimately influence achievements and wages later in a child’s life.1 However, factors such as funding 2 and teacher quality3 for early childhood programs can exacerbate racial disparities if not distributed equitably.
Primary and secondary academic achievement
Academic achievement as early as primary and secondary education directly influences longer-term educational attainment. Racial academic achievement gaps are well-documented4 and set students of color, particularly Black students, up for less optimal workforce outcomes from an early age. Change can be propelled through state task forces or other state-level initiatives focused on racial equity in academic outcomes that set standards or goals for schools and teachers.
College and career readiness
An important aspect of promoting educational attainment is supporting the transition from secondary education to postsecondary education by exposing students early on to education and career steps, ultimately impacting wages and general success in the workforce. College and career readiness programs often target low-income, first-generation college students, which are disproportionately students of color.
Postsecondary education enrollment and completion
The disparities we see in educational attainment are due to both disparities in college enrollment5 as well as completion rates.6 In other words, not only do students need support in getting to college but also in making it to graduation. Barriers to enrollment and completion range from academic unpreparedness, to lack of information about the enrollment process, to prohibitive attendance costs, among others.
When additionally comparing workers with similar occupation, the gap in wages becomes quite small
When we compare workers in similar occupations (and similar demographics and education), the difference from white workers’ wages becomes small. The squares below represent median wages when comparing workers with similar characteristics, education, and occupation (thereafter, we group these characteristics under “socio-demographics”).
When we don't account for socio-demographics, Hispanic workers in Michigan earn about $12,000 less in median wages than white workers. However, when we compare workers with similar socio-demographics, the difference in wages reduces to only about $3,000.
When we compare workers with similar socio-demographics, Asian workers earn about $5,000 less than white workers. By contrast, when we don't make those comparisons, Asian workers out earn white workers by about $13,000. This suggests that differences in demographics, education, and occupation are largely, though not totally, responsible for differences in wages between ethno-racial groups in Michigan.
Source: Calculations using data from the 2022 ACS survey.
Notes: The ethno-racial groups shown here are mutually exclusive and collectively exhaustive. Whenever a given ethno-racial group is too small for reliable statistical analysis, it is grouped with “Other” (see Methodology for more detail). The grey bars represent the margin of error around the estimated median. Wider bars mean that there is more uncertainty around the exact value of the median. The diamonds represent the differences in median wages without taking other factors into consideration while the squares represent the model with the controls noted above.
Policy Recommendations
Affordable pathways to a variety of careers
Costs (both direct financial resources and the opportunity costs of training time) and lack of clear career steps can prohibit individuals of color from obtaining their career goals. Providing access to high-wage occupations for individuals of color requires comprehensive workforce development that covers both traditional college degree attainment routes as well as other certification and licensure routes. Under the federal Workforce Innovation and Opportunity Act (WIOA), states provide an array of employment and job training services through local “one-stop” centers. State Workforce Investment Boards have broad discretion in directing funding to their workforce centers and services, and in establishing the eligibility requirements to move through the sequence of services. States can prioritize training services in funding allocations and make it easy for individuals to move quickly through the sequence of services.
Diversity in STEM fields
STEM occupations present an opportunity for higher earnings as they tend to pay more than other occupations, yet Black and Hispanic workers are underrepresented in this field. These disparities start before the workforce, with differences in STEM degree attainment and majors while still in school.7
Differences in employed hours does not significantly affect the wage gap
When we compare workers with similar number of hours worked and socio-demographics (i.e., sex, age, marital status, household composition, education and occupation), the difference in median wages from white workers is small. For example, when comparing workers with similar demographics, education, occupation, and hours worked, "other" households earn about $4,000 less than white workers. By contrast, when socio-demographics and hours worked are not taken into consideration, that gap is around $10,000.
Source: Calculations using data from the 2022 ACS survey.
Notes: The ethno-racial groups shown here are mutually exclusive and collectively exhaustive. Whenever a given ethno-racial group is too small for reliable statistical analysis, it is grouped with “Other” (see Methodology for more detail). The grey bars represent the margin of error around the estimated median. Wider bars mean that there is more uncertainty around the exact value of the median. The diamonds represent the differences in median wages without taking other factors into consideration while the squares represent the model with the controls noted above.
Policy Recommendations
Pay for non-working time
Workers of color can be more susceptible to going through periods without pay. Due to things such as employer-based paid leave policies and occupational disparities, workers of color tend to have less access to paid leave through their jobs.8
Childcare access
Policies facilitating childcare access include sufficient public funding to make childcare affordable for all families, first and foremost for families struggling to make ends meet and those who report it the most challenging to find affordable, high-quality care–particularly Black and Latinx families. States can work toward guaranteeing universal childcare access by providing financial assistance based on family need. Increased access to childcare can impact the duration of labor force participation and employment.9
Unexplained differences
Workers of color of the same age, with the same marital and child status, with the same educational attainment, in the same types of occupations, and working the same hours still earn less than their white counterparts. Remaining disparities could be due to other influencing factors that we did not account for, such as the role of social networks in the job-search process,10 or due to discrimination and implicit biases in hiring and wage setting, 11 12 13 or a combination of both.
Policy Recommendations
Minimum wages
States and localities are empowered to index their minimum wage increases to keep pace with inflation and extend minimum wage increases to traditionally excluded workers like tipped, agricultural and domestic workers. Increasing the minimum wage from its low rate of $7.25 has the potential to decrease the racial wealth gap by boosting the incomes of many of the lowest paid Black and Latinx/Hispanic workers.14
Equitable wage setting
Many states have responded to ongoing challenges of equitable wage setting with specific bills related to salary histories, retaliation, and annual pay data reporting to help enforce equal pay practices and eliminate discrimination. Collective bargaining can also play a critical role in advocating for equitable wages for all employees.
Taxes
Tax systems can perpetuate disparities in wages. Particularly below the federal level, taxes such as property and consumption taxes tend to be regressive, requiring low- and middle-class households to pay a much higher proportion of their income than what wealthier households are asked to pay and disproportionately affecting households of color. Tax credits are one way to alleviate tax burdens on those populations.
Ability to unionize
States can expand collective bargaining for agricultural workers, domestic workers and other independent contractors who are excluded from federal protections. While states do not regulate collective bargaining for private sector workers, they can play a role in supporting efforts by unions in the private sector to promote good jobs. Governors and legislatures can use their executive and legislative powers to reverse any attacks that restrict public sector workers’ ability to bargain collectively for fair pay, benefits, and treatment on the job.
Pay equity, transparency, and wage history
Many states have responded to ongoing challenges of pay inequity with specific bills related to pay transparency, retaliation and annual pay data reporting to help enforce equal pay practices and eliminate discrimination. States can mandate equal pay across gender and race and prohibit pay secrecy practices in the workplace.
Other income sources
As seen in the data analysis throughout this section, workers of color tend to have lower expected wages either due to unemployment, underemployment, or simply working in jobs that do not pay well. Other income supports can help bridge some of those gaps when wages are not enough to cover living expenses, however they should not be taken as solutions to close the racial earnings gap by themselves.
References
- Georgia Family Connection Partnership. “Long-Term Effects of Early Childhood Education: Beyond Academics.” Georgia Family Connection Partnership, (2021).
- Babbs Hollett, Karen and Erica Frankenberg. “A Critical Analysis of Racial Disparities in ECE Subsidy Funding.” Education Policy Analysis Archives 30, no. 14, (2022).
- Latham, Scott, Sean P. Corcoran and Jennifer L. Jennings. “Racial Disparities in Pre-K Quality: Evidence From New York City’s Universal Pre-K Program.” Educational Researcher 50, no. 9, (2021).
- National Assessment of Educational Progress. “Achievement Gaps Dashboard.” The Nation’s Report Card. National Assessment of Educational Progress, (Accessed 2023).
- Reber, Sarah and Ember Smith. “College Enrollment Disparities: Understanding the Role of Academic Preparation.” Center on Children and Families at Brookings, (2023).
- National Center for Education Statistics. “Indicator 23: Postsecondary Graduation Rates.” Status and Trends in the Education of Racial and Ethnic Groups. Institute of Education Sciences, (2019).
- Fry, Richard, Brian Kennedy, and Cary Funk. “STEM jobs see uneven progress in increasing gender, racial and ethnic diversity.” Pew Research Center 1 (2021).
- Bartel, Ann P., Soohyun Kim, Jaehyun Nam, Maya Rossin-Slater, Christopher Ruhm and Jane Waldfogel. “Racial and Ethnic Disparities in Access to and Use of Paid Family and Medical Leave: Evidence from Four Nationally Representative Datasets.” Monthly Labor Review. U.S. Bureau of Labor Statistics, (2019).
- Kaugmann, Susan W., Sally Sharp, Jeanne E. Miller, and Jean Waltman. “Michigan: A Smart State for Women? Women and Higher Education.” Center for the Education of Women, University of Michigan, (2000).
- Pedulla, David S., and Devah Pager. “Race and networks in the job search process.” American Sociological Review 84.6 (2019): 983-1012.
- Bertrand, Marianne and Sendhil Mullainathan. “Are Emily and Greg More Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination.” National Bureau of Economic Research, (2003).
- Quillian, Lincoln, Devah Pager, Ole Hexel, and Arnfinn H. Midtboen. “Meta-Analysis of Field Experiments Shows No Change in Racial Discrimination in Hiring over Time.” Proceedings of the National Academy of Sciences of the United States of America 114, no. 41, (2017).
- Wilson, Valerie and William Darity Jr. “Understanding Black-White Disparities in Labor Market Outcomes Requires Models That Account for Persistent Discrimination and Unequal Bargaining Power.” Economic Policy Institute, (2022).
- Traub, Amy, Catherine Ruetschlin, Laura Sullivan, Tatjana Meschede, Lars Dietrich and Thomas Shapiro. “The Racial Wealth Gap: Why Policy Matters.” Institute for Assets & Social Policy, Brandeis University, (2015).