Cohort, Signaling, and Early-Career Dynamics: The Hidden Significance of Class in Black-White Earnings Inequality
chunhui ren

Despite the rich literature on racial economic disparities, the role of class in the post-Civil Rights black economic progress remains unclear. Using the Panel Study of Income Dynamics (PSID), this study conducts a multi-cohort examination on how black-white inequality in early-career earnings varies across different rungs of the socioeconomic ladder. The results indicate that, as a general trend, black workers narrow their earnings gaps with equivalent Whites as they move up the socioeconomic ladder, though an exception is found for the cohort who entered labor markets in the 1980s and early 1990s. Moreover, African Americans are found to receive higher returns to education than Whites, which are realized through racially differential effects of signaling – black workers’ elevated earnings premiums associated with the completion of education degrees. These findings reconcile the conflicting evidence in the race-vs-class debate and provide new policy guidance for closing the persistent black-white earnings gap.