Firm Segregation and the Structure of American Racial Earnings Inequality

• In Event: 20212 - Labor Market and Social Mobility

Abstract

In the last forty years, one's earnings have increasingly come to depend on where one works. How has this reshaped racial and ethnic earnings inequality? I draw on American establishment microdata and linked employer-employee records to analyze the role of this 'between-firm' racial inequality from the 1970s to the present. I establish a series of findings. First, black and Hispanic workers have become increasingly siloed into especially low-paying firms. Second, this de facto segregation directly exacerbates the black-white and Hispanic-white pay gaps by roughly 15% and 25%, respectively, in recent years. Third, about half of this trend has been driven by the relocation of poorly-compensated occupations to low-paying establishments; this is consistent with descriptions of workplace fissuring and narrowing. Fourth, these patterns have relegated black and Hispanic workers into low-revenue firms, which pay less. These results establish that racial segregation into marginal establishments -- though already identified in the 1980s -- has become much more significant in an era of workplace fissuring and widening between-firm inequalities. Workplace segregation is a key motor of racial and ethnic disparities today.

Author

• Clem Aeppli, Harvard University