This file was prepared for electronic distribution by the inforM staff. Questions or comments should be directed to inform-editor@umail.umd.edu. The Economic Status of Black Women: An Exploratory Investigation Staff Report United States Commission on Civil Rights October 1990 Part III Employment, Unemployment, and the Economic Status of Black Women Chapter 8 The Economic Status of Black Women: Overview This chapter compares black women's economic status with that of white women and shows the relationship between employment and economic status for black women. For this purpose the primary source is the Survey of Income and Program Participation (SIPP) which contains monthly data on persons' employment, marital status, family income, and many other characteristics over a 32-month period beginning in October 1984. To obtain information on husband's income, married women were matched with their husbands. In addition to this monthly data, the SIPP also provides rich data on household assets at one point in time and retrospective information on education and work experience. Overview To provide an overview of racial differences in economic status among women, this section contrasts various measures of economic status for black and white women both as a group and separated by marital status. Table 8.1 compares the family income of black and white women. A woman's family income includes her own labor market earnings, the labor market earnings of her husband (if she is married), the labor market earnings of other family members, and the unearned income (such as interest on bank accounts, rent on investment properties etc.) of all family members. Overall, the average family income of black women is roughly three-fifths that of white women. Married black women fare relatively better than un- married black women: their average family income is almost three-quarters as much as that of married white women, whereas unmarried black women's average family income is less than two-thirds that of unmarried white women.(1) Black women are 3 times more likely to have family incomes of less than $10,000 and 7 times less likely to have family incomes over $60,000. These disparities are partially due to racial differences in marital status, but the same general pattern holds within marital status groups: black women are overrepresented among women with low family incomes and underrepresented among women with high family incomes. Table 8.2 compares the annual earnings of black and white women. Both working and nonworking women are included in table 8.2. On average, black women earn somewhat less than white women, and white women are considerably more likely than black women to earn more than $20,000 a year. Overall, however, the earnings distributions of black and white women are much more similar than their family income distributions. When black and white women are compared within marital status groups, a slightly different pattern emerges. Overall, when earners and nonearners are considered together, married black women earn 12 percent more than married white women, but unmarried black women earn substantially less than their white counterparts: roughly two-thirds as much. Married white women are slightly more likely than married black women to earn less than $5,000 a year, primarily because fewer married white women work. On the other hand, married white women are also more likely than their black counterparts to earn more than $20,000 a year. Among unmarried women, blacks are much more likely to earn under $10,000 a year, and whites are much more likely to earn over $20,000 a year. A particularly striking racial difference is that approximately one-quarter of unmarried black women have no annual earnings (i.e., they do not work), compared with 14 percent of unmarried white women. On average, black women's earnings constitute approximately one-third of their family income, whereas white women's earnings constitute roughly one-quarter of their family income. Married black women contribute a substantially higher percentage of their family income than married white women, but unmarried black women actually contribute a smaller percentage than unmarried white women. Table 8.3 compares the family wealth of black and white women by marital status. Overall, black women's families have considerably less wealth than white women's families. For instance, 62 percent of white women's families own their own homes, compared with 43 percent of black women's families. The average equity in homes is also less for black women's families if they own a home: $33,000, compared with $52,000 for white families. Just over one-half of black women's families have any savings other than in their homes, business, or vehicles, compared with almost four-fifths of white women's families. The median net worth (wealth minus debts) of black women's families is less than one-fifth that of white women's families. Within marital status groups, black women's families are also less wealthy than white women's families. However, married black women fare relatively better than unmarried black women. For instance, the median net worth for married black women's families is almost 30 percent that of married white women's families. whereas the comparable figure for unmarried black women is just over 15 percent. Besides family income and earnings, other indicators of a group's economic status include their unemployment, poverty, and welfare rates. Table 8.4 shows that, overall, black women are slightly more likely than white women to be in the labor force at a given point in time, but because they experience unemployment at twice the rate of white women, they are less likely than white women to be employed. Married black women are more likely to be in the labor force and, despite higher unemployment rates, more likely to be employed than married white women. Unmarried black women, on the other hand, are less likely to be in the labor force and less likely to be employed than their white counterparts. They also have a much higher unemployment rate. Over one-quarter of black women had mean family income below the poverty cutoff for their family type, and more than one-fifth of black women were on welfare (Aid to Families with Dependent Children or general assistance) at some point during the 32-month period covered by SIPP. For both races, unmarried women are more likely to be in poverty and on welfare than married women, but poverty and welfare rates are three times higher for black women regardless of marital status. The above results indicate that black women have considerably lower economic status than white women. In particular. their family income and wealth are much lower, and they have much higher unemployment, welfare, and poverty rates than white women. Although the earnings distributions of black and white women are similar overall, married black women earn more than married white women--primarily because many married white women do not work; and unmarried black women earn less than unmarried white women. The earnings of black women make up a much larger fraction of their family income than do those of white women, especially among married women. Employment and the Economic Status of Black and White Women These results suggest that work may be crucial to elevating black women's economic status. This section compares the economic status of black and white women by employment status (whether or not they are employed). Table 8.5 compares the family income of employed and unemployed women for each race and marital status. Generally, employed women of both races have higher family incomes than women who are not employed. However, being employed increases black women's family incomes more than white women's family incomes, both overall and within marital status groups. As a result, the family incomes of employed black women are two-thirds as high as the family incomes of employed white women, whereas the average family income of black women who are not employed are barely half that of white women who are not employed. Employed black women also have higher family incomes relative to their white counterparts within marital status groups than do black women who are not employed. Table 8.6 compares the earnings of black and white women who are employed. Thus table 8.6 is similar to table 8.2 except that table 8.6 includes only working women in the sample. Overall, employed black women earn 90 percent as much as employed white women and contribute a larger fraction of family income (over one-half). Among married employed women, blacks earn more than whites and contribute a much larger percentage of family income. Among unmarried employed women, however, blacks earn less than whites and contribute roughly the same percentage of family income. Table 8.7 compares the family wealth of black and white women by employment status. Black women who work have higher family wealth than those who do not. For white women, on the other hand, the relationship between work status and family wealth is the reverse. For instance, a considerably higher percentage of working than of non-working black women own their own homes (46 compared with 39 percent), whereas for white women roughly the same percentage own their own homes whether or not they work. Similarly, the median family net worth is higher for working than for nonworking black women ($9,236, compared with $7,134). Among white women, on the other hand, it is those who are not working who have the higher family net worth. These results also hold within marital status groups: black women who work have greater family wealth than those who do not. Table 8.8 shows that, both across and within marital status groups, working black women are also much less likely to be in poverty or to receive welfare (Aid for Dependent Children or general assistance) than their counterparts who are not working. This discussion highlights the importance of working for black women. Much more than for white women, the economic well-being of black women and their families depends on whether or not they work. Working black women have higher family incomes than those who are not working. Black women's earnings constitute a substantial proportion of their family income. As a consequence, it is important to understand the factors that affect black women's chances of working. A preliminary investigation of factors affecting black women's decision to participate in the labor force and ability to find work is undertaken in the next chapter. In particular, the chapter considers whether racial discrimination in the labor market directly or indirectly reduces black women's chances of working. ENDNOTES (1) Black women have higher average family income relative to white women when marital status is controlled for than when t is not, because unmarried women generally have lower family incomes than married women and more black women are unmarried. (2) Since employed black and white women work roughly the same number of hours, this result is consistent with the result in chapter 7 that the black-white hourly wage ratio is roughly 90 percent. Chapter 9 Employment and Unemployment Patterns of Black Women This chapter seeks to determine whether differences in the work status of black and white women--the higher labor force participation rates of married black women, the lower labor force participation rates of unmarried black women, and the generally higher unemployment rate of black women--can be accounted for by such factors as age, education, husband's earnings, and the number of young children at home. The data source used is the March 1988 Current Population Survey, which provides up-to-date information on the labor force status of black and white women and has sufficient sample size to undertake an analysis that considers the combined effect of marital status, age, education, husband's earnings, and children on women's work status. Racial Differences in Employment and Unemployment Patterns Black and white women have very different labor force participation, employment, and unemployment rates, as shown in table 9.1. Overall, black women's labor force participation rate is very close to white women's: 68 percent compared with 69 percent. Black women experience a much higher unemployment rate, however (11 percent versus 4 percent). As a result, the proportion of women who are actually working is less for blacks than for whites: 60 percent compared with 66 percent. Among employed black women, however, the proportion working full time is higher than for their white counterparts. Overall, three-quarters of employed black women work full time, compared with two-thirds of employed white women. The similarity of the labor force participation rates of black and white women overall disappears when women are compared within marital status groups (see table 9.1). Married black women have much higher labor force participation rates than their white counterparts (73 percent versus 64 percent). Unmarried black women, on the other hand, have much lower labor force participation rates than their white counterparts (56 percent versus 73 percent). Moreover, among whites, married women are less likely than unmarried women to participate in the labor force, but among blacks, the reverse is true. Although they have higher unemployment rates than their white counterparts, married black women are more likely to be employed than married white women. Unmarried black women have extremely high unemployment rates (14 percent) and are much less likely to work than their white counterparts. Whereas roughly three-quarters of unmarried white women work, just over one-half of unmarried black women work. Among married women, working black women are much more likely to work full time than their white counterparts. Among un- married women, the black and white proportions working full time are almost identical, however. Black and white women also have very different employment and unemployment patterns by age. Up until age 50, black women's labor force participation and employment rates increase sharply with age, compared with a much more gradual increase for white women. Both groups exhibit similar drops in labor force participation and employment rates after age 50. Differences are greatest for black and white women under the age of 24. Young black women have a much lower labor force participation rate (59 percent versus 72 percent) and a much higher unemployment rate (24 percent versus 7 percent) than young white women. Young black women's lower labor force participation rate combined with their higher unemployment rate means that only 44 percent of black women 24 years old and younger work, compared with 66 percent of white women. Like their labor force participation and employment rates, black women's overall proportion working full time increases much more with age than white women's. The same is true for married women. Among working women who are not married, however, the proportions of blacks and whites working full time are almost identical at every age. In sum, young and unmarried black women are much less likely to work than their white counterparts. Married black women are much more likely to work than married white women. Black women of all ages and all marital statuses, especially young and unmarried black women, experience higher unemployment rates than white women. Accounting for Racial Differences in Employment and Unemployment Patterns This section seeks to determine whether the racial differences in employment and unemployment patterns documented above can be accounted for by differences in background characteristics, such as education, husband's earnings, or number of young children. Separate analyses are undertaken for married and unmarried women. Married Women Table 9.2 shows that married black and white women differ in several ways that could affect their relative labor force participation and unemployment rates. Married black women are on average slightly younger than their white counterparts. A larger proportion of black wives than of white wives are between the ages of 25 and 50, the ages for which women's labor force participation rates are the highest. Thus, differences ln the age distributions of black and white women might contribute to black wives' higher labor force participation rates. Black wives have about half a year less education on average than their white counterparts. They are considerably more likely not to have graduated from high school and somewhat less likely to have graduated from college. Since women's labor force participation rates generally increase with their education, the educational differences between married black and white women cannot account for black wives' higher labor force participation rate. On the other hand, they might contribute to black wives' higher un- employment rate, since less-educated women generally have higher unemployment rates. Black women's husbands earn an average of $18,013 per year, much less than white women's husbands, who earn $26,417 on average. Forty-five percent of black wives have husbands earning less than $15,000 per year, compared with 29 percent of white wives. Fewer than 8 percent of black wives have husbands earning over $40,000 per year, compared with over 20 percent of white wives. The lower average husband's earnings for black women might contribute to their higher labor force participation rate, since, other things being equal, women's labor force participation rates decline as their husbands' earnings increase. Married black women have more children on average and are more likely to have at least one child than their white counterparts. Since women with more children are generally less likely to participate ln the labor force, black women's greater number of children is unlikely to account for their higher labor force participation rate. However, black wives are more likely only to have children who are school age or older, ages at which children deter women's working less. None of these factors can by itself explain differences in married black and white women's employment and unemployment patterns. Table 9.3 shows that married black women have higher labor force participation rates and are more likely to work full time than their white counterparts even when they are grouped by age, education, husband's earnings, or age of their youngest child. Similarly, they also have higher unemployment rates within age, education, husband's earnings, or age of youngest child categories. Several important differences ln the labor force participation patterns of black and white married women should be noted. First, black wives' labor force participation rate is much less sensitive to their husbands' earnings levels than white wives'. Where white wives' labor force participation rate falls steadily as their husbands' earnings rise above $25,000 a year. black wives' rate continues to increase until their husbands' earnings reach $40,000 a year and declines only slightly at income levels above $40,000. Second, in contrast to white wives, who are less likely to be in the labor force if they have children under 3 than if they have no children, black wives are more likely to be in the labor force if they have very young children than if they have none at all. Black wives with very young children have a very high unemployment rate, however, so they are equally likely to be employed as black wives without children. Also, white wives' labor force participation rates rise continuously as the age of the youngest child increases, but black wives' do not. To determine whether racial differences in employment and unemployment patterns among married women result from differences in all these characteristics taken together, table 9.4 presents hypothetical labor force participation rates, employment rates, unemployment rates, and percentages working full time for married black and white women assuming that each group had the other group's distribution across the age, education, husband's earnings, and age of youngest child categories shown in table 9.3. For comparison, the actual figures for each group are also shown. The differences between black and white women's employment and unemployment patterns do not narrow when differences in characteristics are taken into account. The hypothetical and the actual figures are extremely close for both black and white women. In fact, the hypothetical labor force participation and employment rates for married black women are higher than their actual rates. These results indicate that differences in characteristics cannot account for the racial differences in employment and unemployment patterns among married women. Unmarried Women The background characteristics of unmarried women are shown in table 9. 5. The table distinguishes never-married women and women who are married spouse absent. separated, divorced, or widowed, termed "previously married." Black women who have never been married are a year and a half older on average than their white counterparts. Previously married black and white women are roughly the same average age. Where married black women have half a year less education than their white counterparts, the education gap between unmarried black and white women is over 1 year. Unmarried black women are considerably more likely to have children than their white counterparts. Forty-four percent of black women who have never been married have at least one child under 18, compared with 6 percent of white women. Never-married black women are over five times as likely to have a child under the age of 3. Similar, but less pronounced, differences exist between previously married black and white women. The lower educational levels and greater frequency of children for unmarried black women could contribute to both their lower labor force participation rates and their higher unemployment rates. To see whether they do, tables 9.6 and 9.7 compare the labor force participation rates, employment rates, and unemployment rates of never-married (table 9.6) and previously married (table 9.7) black and white women by age, education, and age of youngest child. Like for married women, racial differences in background characteristics cannot individually account for black-white differences in labor force status. Black women generally continue to have lower labor force participation rates and higher unemployment rates than their white counterparts even when grouped according to separate characteristics. Highly educated unmarried women are an exception to this generalization: the racial gap in labor force participation and unemployment rates is quite small among highly educated unmarried women. Among the highly educated, unmarried black and white women have almost identical labor force participation rates. Although unmarried black women's unemployment rates are higher at all educational levels (considerably higher at low educational levels), the racial employment gap among highly educated unmarried women is not large. It should be noted, however, that the highly educated make up only 9 percent of unmarried black women. As was done for married women in table 9.4, table 9.8 presents hypothetical labor force participation rates, employment rates, unemployment rates, and percentages working full time for unmarried black and white women assuming that each group had the other group's distribution across age, education, and age of youngest child categories. Table 9.8 also assumes that each group had the other group's distribution across the two marital status categories, never-married and previously married. For comparison, the actual figures for each group are also shown. Unlike for married women, for unmarried women racial differences in characteristics appear to account for a large part of the black-white differences in employment and unemployment patterns. If unmarried black women had white women's distributions across age, education, age of youngest child and marital status categories, their labor force participation rate would be 73 percent as opposed to their actual rate of 65 percent, or 8 percentage points higher. Thus, almost three-quarters of the 12.5-percentage-point gap in the labor force participation rates of unmarried black and white women can be accounted for by differences in their characteristics. Less of the gap in unmarried women's unemployment rates is accounted for.(1) Conclusion This chapter has considered whether differences in the employment and unemployment patterns of black and white women can be accounted for by differences in their background characteristics. Taking racial differences in characteristics into account does not narrow the racial gap in labor force participation rates, unemployment rates, employment rates, and the proportion working full time for married women. For unmarried women, taking racial differences in characteristics into account narrows the gap ln labor force participation rates substantially but has only a slight effect on the unemployment gap. Thus, it appears that, especially for married women, black and white women's decisions about whether to work and how much to work follow different patterns that cannot be explained by simple differences in background characteristics. Similarly, black women's considerably higher unemployment rates cannot be explained by their characteristics. The only exception to this general pattern of racial differences in work status is highly educated single women. Among these women, blacks and whites have indistinguishable labor force participation rates. Highly educated black women do have slightly higher unemployment rates, however. This chapter highlights three major racial differences ln work patterns. First, regardless of age, educational level, husband's earnings, or age of youngest child, married black women are much more likely to work and to work full time than married white women. Unlike white mothers, black mothers of very young children are actually more likely to participate in the labor force than black wives with no children. Second, unmarried black women, particularly those who have never married, are much less likely to participate in the labor force than their white counterparts. On the other hand, if they do work, they are equally likely to work full time. Black-white differences in the educational levels, marital statuses (never- married versus previously married) and age (and existence) of youngest child do account for a large portion of the difference in labor force participation rates. Even when racial differences in characteristics are taken into account, however, unmarried black women are less likely to participate in the labor force than their white counterparts. Third, black women experience much higher unemployment rates than white women with comparable characteristics. Young black women and black women who have not graduated from high school, particularly unmarried mothers, have extremely high unemployment rates compared to their white counterparts. Over one-third of never-married black mothers of children under 2 who are in the labor force are unemployed, compared with just under 20 percent of comparable white women. In general, black-white differences in characteristics do not account for black women's higher unemployment rates. For unmarried women, however, the higher proportion of black women with children does account for part of the gap in unemployment rates. Given chapter 10's finding that working leads to significant improvements in black women's economic status, the lower labor force participation rates of unmarried black women and the higher unemployment rates of all black women are cause for concern. From the perspective of the U.S. Commission on Civil Rights, the across-the-board higher unemployment rates of black women are especially disturbing. since they could be caused by discriminatory hiring practices. It should be noted that the lower labor force participation rates of unmarried black women could themselves be the indirect result of labor market discrimination. For instance, their greater difficulty in finding,jobs might cause unmarried black women to become "discouraged workers" and drop out of the labor force. Unfortunately, the research reported in this chapter is insufficient to pinpoint the underlying causes of racial differences in work patterns. That simple differences in background characteristics cannot explain married black women's higher labor force participation rates and can only partially explain unmarried black women's lower labor force participation rates suggests that the economic circumstances of black and white women with similar background characteristics may be somewhat different. Although the failure of racial differences in background characteristics to account for black-white differences in unemployment rates is suggestive, it does not allow the determination of whether black women's higher unemployment rates are the result of discriminatory hiring practices or of some other cause. Other researchers have not resolved these issues either. For instance, economists have paid much attention to the greater labor force participation rates of married black women in comparison to their white counterparts.(2) Despite their interest, the reasons why black wives work more than white wives are poorly understood. Some have suggested that one reason for black wives' high labor force participation rates may be the greater variability of their husbands' earnings.(3) Black wives may participate in the labor force to cushion their families when their husbands' earnings take unexpected dips. Alternatively, extreme economic necessity may have impelled black wives to work in the past and this may have led to a culture of work among black wives.(4) The lower labor force participation rates of young and unmarried black women are not the comparatively recent phenomena assumed by many. The historical analysis in chapter 2 shows that young and unmarried black women had lower labor force participation rates than their white counterparts as early as 1950.(5) Despite this long-standing trend, the question of why young and unmarried black women choose not to work has not been addressed adequately in the social science literature. The most common hypothesized explanation, the ease of obtaining welfare, seems at odds with the finding here that young and unmarried black women had lower labor force participation rates than their white counterparts long before most welfare programs were instituted. The possibility that labor market discrimination causes young and unmarried black women to become discouraged and drop out of the work force remains. Finally, the social science literature's treatment of black women's higher unemployment rates has been extremely limited. Black women's unemployment rates have most often been discussed secondarily to black men's, and the discussions are almost completely confined to descriptive analyses. Little research has been undertaken into the reasons for black women's high unemployment rates. One exception is Ehrenberg, who suggests that black women's higher unemployment rates may stem from their frequent transitions into and out of the work force.(6) If persons reentering the work force after a period of absence experience particularly high unemployment rates, and black women reenter the work force frequently, then this could contribute to their higher unemployment rate. There are other possible explanations for black women's high unemployment rates. Black women may be less likely than white women to become discouraged and drop out of the labor force when they experience unemployment. To the extent that their finding a job is crucial to their family's economic survival, black women may be more persistent in continuing to look for a job when they face employment difficulties. To the extent that their earnings are less essential for their family's economic survival, white women may give up looking sooner than black women. Consequently, even if black and white women experienced the same unemployment difficulties, black women might be more likely to report themselves as "unemployed," whereas white women might be more likely to report themselves as "out of the labor force." An alternative explanation is that black women do in fact experience greater difficulty in finding jobs, but for reasons not directly related to current labor market discrimination. They may be less skilled in ways that are not measured in the Current Population Survey. Residential segregation may mean that they may live further away from employment opportunities. If so, it may be both more difficult for them to find jobs and, because they have higher transportation costs, less likely for them to accept jobs they are offered. Similarly, black women may find working more costly in other ways--for instance, they may find that quality day care is more expensive in their neighborhoods--and as a result keep looking longer for better paying jobs. Similar factors may play a role in causing young and unmarried black women's lower labor force participation rates. To understand the reasons underlying the racial differences in work patterns highlighted in this chapter, further social science research investigating these issues in depth should be undertaken. ENDNOTES (1) Hypothetical employment and unemployment patterns giving each group the other group's value for each ofthe characteristics separately were also performed for unmarried women. Racial differences ine ducation, children and marital status each appear to account for an equal share of the black-white differences in the presence and number of children for unmarried women are the only characteristic that can even partially account for unmarried black women's higher unemployment rates. (2) Glen. G. Cain, Married Women in the Labor Force: An Economic Analysis (Chicago: Univ. of Chicago Press, 1966); William G. Bowen and T. Aldrich Finegan, The Economics of Labor Force PArticipation (Princeton, N.J.: Princeton Univ. Press, 1969), pp. 88-269; D. Bell, "Why Participation Rates of Black Wives Differ," Journal of Human Resources, vol. 9 (1974), pp. 465-79; Claudia Goldin, "Female Labor Force Participation: The Origins of Black and White Differences, 1870 and 1880," Journal of Economic History, vol. 37 (1977), pp. 87-112; and Phyllis A. Wallace, ed., Black Women in the Labor Force (Cambridge, mass.: MIT Press, 1980). (3) James S. Cunningham and Nadja Zalokar, "Racial Differences in the Labor Force Participation of Wives and the Variability of Other Family Income: Evidence from the SIPP." Paper presented at the annual meetings of the American Economic Association, New York, N.Y., 1988. (4) Goldin, "Female Labor Force Participation," argues that black women's higher labor force participation rates may stem from the historical legacy of slavery and its effects on black women's expectations abotu work. Woodman, "Comment," however, is crticial of Goldin's interpretation of the census data. (5) See tables 2.11 and 2.12. (6) See Ronald G. Ehrenberg, "The Demographic Structure of Unemployment Rates and Labor Market Transition Probabilties," Research in Labor Economics, vols. 3 (1980), pp. 241-93.