The Wage Gains of African-American Women in the 1940s. Martha J. Bailey and William J. Collins. March 2006

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1 The Wage Gains of African-American Women in the 1940s Martha J. Bailey and William J. Collins March 2006 Affiliations: Bailey is a Robert Wood Johnson Foundation Research Fellow at the University of Michigan. Collins is an Associate Professor of Economics at Vanderbilt and Research Associate of the National Bureau of Economic Research. Addresses: Martha J. Bailey, University of Michigan, School of Public Health, 109 Observatory Street, SPH-II, Ann Arbor, Michigan ; William J. Collins, Department of Economics, Box B, Vanderbilt University, Nashville, TN 37235; Acknowledgements: Bailey gratefully acknowledges support from the Economic History Association, the University of Illinois Foundation s Rovensky Fellowship, and Vanderbilt University. Collins recognizes support from the National Science Foundation ( ) and the Brookings Institution s Model-Okun Fellowship. Jeremy Atack, Emily Boleman, Yanqin Fan, T. Aldrich Finegan, Price Fishback, Gillian Hamilton, Thomas Maloney, Robert A. Margo, anonymous referees, and NBER and Economic History Association conference participants made many helpful suggestions. Claudia Goldin kindly provided data from the Palmer Survey.

2 The Wage Gains of African-American Women in the 1940s Abstract: The 1940s marked a turning point in the labor market history of African- American women, characterized by sharp declines in agricultural and domestic service employment, a significant rise in formal sector employment, and large wage gains compared to white women. Using a semi-parametric technique, this paper examines the wage gains associated with changes in workers productive and personal characteristics, in their distribution across occupations and industries, and in the structure of their compensation. The most important contributing factors were an increase in the wages of domestic service workers relative to other occupational categories and large wage gains for blacks relative to whites within occupational categories. In the 1940s the average real weekly wages of black women nearly doubled, thereby narrowing the racial wage gap among non-farm working women by a full 15 percentage points. 1 At the same time, the proportion of employed black women holding formal sector jobs increased from 27 to 50 percent. 2 According to our best estimates of the racial wage gap, the 1940s marked a dramatic departure from 1 The figures are calculated using the wage income variable of Ruggles, et al., Integrated, and using the consumer price index for deflation. Sample restrictions are described in the notes to figure 1. The average weekly wage for black women rose from $13 to $24 (1950 dollars). The black-white ratio increased from 0.44 to See figure 1 notes for sample restrictions. Cunningham and Zalokar, Economic Progress, report results of a similar magnitude (0.44 to 0.64) for estimates of hourly wages. Ad hoc adjustments for cost of living differences between metropolitan areas and non-metropolitans areas (discounting metro area income by 20 percent) have little effect on the magnitude of the wage gains. And, as discussed later, the bulk of the absolute and the relative gains were not driven by selection into the labor force. 2 For the sake of brevity, we use the term formal sector to denote all occupations outside agriculture and private household service. 1

3 African-American women's experiences earlier in the twentieth century, as they took a large first step towards greater economic equality. Previous research has focused on the decade s significance in spurring the labor-force participation of white women and wage growth among black men. 3 But black women s labor market outcomes evolved quite differently from those of other groups. 4 Consequently, their economic history cannot be understood as a mere combination of the existing stories for white women and black men. By developing a detailed ecology of black women s labor market experiences in the 1940s and setting it in contrast to previous and subsequent decades, this paper contributes to a central theme in American economic history: the story of how race, gender, and labor markets interacted over the course of the turbulent twentieth century. Our argument is twofold. First, we claim that the 1940s were a watershed decade for African-American women's integration into formal sector employment and marked a turning point in the growth path of their wages relative to those of white women. The labor market gains during the 1940s were not continuations of pre-existing trends, and the relative wage gains in the 1940s are comparable to those achieved during the 1960s and commonly associated with the Civil Rights Movement. 5 Moreover, the 1940s advances were sustained. Over the 1950s, black women s wages and occupations did not revert back toward their pre-world War II distributions, nor did the wage gap between black and white women widen. Second, using a semi-parametric decomposition methodology pioneered by John DiNardo, Nicole 3 Goldin, Role ; Maloney, Wage ; Margo, Explaining. 4 See Blau and Beller, Black-White Earnings, and Neal, Measured for examinations of more recent trends in the racial wage gap among women. 5 Changes in black women s wages were larger in absolute terms during the 1940s than the 1960s, but the gains relative to white women were approximately the same in each decade. We offer a detailed comparison later in the paper. The black-white wage gap continued to narrow in the 1970s, which we do not capture in our comparison. But because the 1940s gains were almost certainly concentrated in the 1941 to 1945 period, we think it is useful to compare them with the gains achieved in a similar five-year period following the 1964 Civil Rights Act. 2

4 Fortin and Thomas Lemieux, we quantify the importance of changes in the wage structure after accounting for changes in black and white women s productive and personal characteristics and in their representation across jobs and locations. 6 We find that large wage gains in domestic service jobs (where black women were concentrated) relative to clerical jobs (where white women were concentrated) made significant contributions to racial wage convergence. But even within job categories and after accounting for observable characteristics, black women s wage gains outpaced those of whites. The results suggest that such black-specific wage gains account for approximately 38 percent of the decade's total convergence in mean weekly wages. The large net flow of black women into formal sector jobs (which is not explained by changes in their observable characteristics) coupled with pervasive increases in black women s wages relative to those of white women (even in the occupations black women were leaving) is consistent with a substantial increase in the relative demand for their labor in the formal sector. Previous work has shown that wartime labor demand, complemented by institutional and policy changes, permitted many black workers to attain better-paying jobs and compressed the American wage structure. 7 Although we cannot directly measure the prevalence of discriminatory practices, it appears that black women took advantage of new employment opportunities, generating a pattern of wage and occupational gains that lasted well beyond the extraordinary years of World War II. In subsequent decades, African-Americans built upon their wartime economic advances. They increased their presence in jobs that were in urban areas and covered by formal contracts and benefits, minimum wage legislation, and collective bargaining. This better positioned them to organize and advocate for Civil Rights, to take advantage of formal-sector networks of employment and information, 6 DiNardo, Fortin, and Lemieux, Labor Market. 7 See Goldin and Margo, Great Compression, for a thorough discussion of the wage structure s compression. See Reed, Seedtime, and Collins, Race, and Labor Market, on government antidiscrimination policies during the war. See Moreno, Black Americans, on unions. 3

5 and to gain employment in previously racially exclusive firms. 8 Moreover, with higher household income and increasing urbanization, their children faced, on average, better educational opportunities and labor market options than were available in the rural South. 9 In this sense, the rapidly changing employment pattern of African Americans in the 1940s particularly when viewed in contrast to the pace of occupational and wage convergence before World War II laid the foundation for later economic, political, and social progress. BLACK WOMEN S WAGES AND JOB MOBILITY: THE 1940S IN HISTORICAL CONTEXT The importance of the 1940s in the economic history of racial disparities is highlighted by abrupt and pervasive changes in African-American women's labor market outcomes. First, our estimates of the black-white ratio of mean nonfarm wages among women from 1909 to 1969 indicate that the 1940s marked a turning point. As we discuss below, accounting for potential sample selection or measurement error does not greatly alter the magnitude of mean wage convergence in the 1940s. Second, the wage gains were widespread. Black women's wages increased throughout the wage distribution and throughout the country, both in absolute terms and relative to white women s wages. Part of this was due to their movement into higher paying occupations, yet even within occupational groups, black women s wages increased faster than white women s. Third, the timing of the wage gains for black women corresponds 8 Membership in the National Association for the Advancement of Colored People (NAACP) skyrocketed during World War II (Tushnet, NAACP s Legal Strategy, p. 135). Reed characterizes the period as Seedtime for the Civil Rights Movement. See Whatley, Getting a Foot, on the importance of employers changing hiring practices during World War I. 9 For example, in the 1950 microdata sample (Ruggles et al., Integrated), school enrollment rates were significantly higher for blacks residing in metropolitan areas than for those in non-metro areas, particularly at relatively young (under 7) and old (over 14) ages. Despite the Supreme Court decision in Brown v. Board of Education in 1954, most southern schools remained segregated until the mid 1960s (Clotfelter, After Brown), and the South historically lagged the non-south in its commitment to public education (Nicholls, Southern Tradition; Wright, Old South). 4

6 to sharp changes in their occupational distribution. Later in the paper, we argue that this combination of findings is consistent with strong demand-side shifts that signaled the start of a long-run, though episodic, decline in labor market discrimination against black women. Due to data constraints, we focus our examination of wages on samples of wage and salary workers employed in non-farm occupations (as described in appendix 1), but our examination of the occupational redistribution of women incorporates farm sector employees. Changes in Mean Wages, Prior to 1940, the census did not collect information on workers wages, and other sources of wage information are either unrepresentative of the national labor force or not race-specific (or both). Nonetheless, one can estimate the black-white nonfarm wage gap for earlier years using three sources of wage and labor force data: (1) the 1940 sample of the Integrated Public Use Microdata Series (henceforth IPUMS) allows the calculation of mean wages for women by race-industry-region cells in the previous year; 10 (2) the IPUMS samples for earlier years (1910, 1920, and 1930) reveal the distribution of female workers across race-industry-region cells in each census year; and (3) the industry-level average wage series from Historical Statistics of the United States indicate how the inter-industry wage structure changed over time Ruggles, et al. For simplicity, we often refer to the census year when discussing wage gains, though the census income question always pertains to the previous calendar year. 11 U.S. Department of Commerce, Historical Statistics, pp To maintain a reasonable number of observations per race-industry-region cell in 1940, we used two-digit industry categories (rather than the more detailed three-digit codes). We distinguish workers by industry categories (rather than occupations), because the long-run wage series reported in Historical Statistics are industry-based. See the notes to figure 1 for more information. This approach is similar in spirit to that taken in Smith, Race. We extend his idea, however, by allowing geographic redistribution and industry-level wage fluctuations to affect the estimated black-white wage gap for women. 5

7 Specifically, we calculate the average black-white wage gap in a given year as W B 1 B B i, t B W ˆ N r i r i t W t N r i Wi t = = t,,,,, 1939 Gˆ,1939, (1) W 1 W W Wi, t W ˆ W N W t N t r, i r, i, t r, i, 1939 W i,1939 where N i,r,t denotes the number of women observed in industry i, in region r, at time t (and N t =Σ i,r N i,r,t ) using the 1910, 1920, or 1930 IPUMS sample, and W i, r,1939 denotes a race-specific mean wage computed for women within industry-region cells using the 1940 IPUMS. The superscripts, B or W, indicate black or white respectively. The ratio, Wi, t Wi,1939, denotes the average wage in industry i in year t relative to the average wage in industry i in 1939 as reported in Historical Statistics. 12 The estimated series, therefore, incorporates changes in the representation of black and white women across regions and industries, N i,r,t, and changes in industry-level wages, Wi, t Wi,1939. Because the wage series from Historical Statistics are not specific to sex, race, or region, the estimates implicitly assume that within industries the relative wage gaps across these groups remained stable over time For example, we can calculate the average wages of black women in the South who worked in household service in 1940 and then extend a series backwards using the wages for domestic servants reported by U.S. Department of Commerce, Historical Statistics. Then, we can assign a wage to each southern, black, domestic servant in the 1910, 1920, and 1930 IPUMS. We can do the same for every other race-region-industry category, and then, by averaging across all female workers (by race) in a particular year we can obtain an estimate of the black-white wage ratio. 13 For example, southern black domestic servants are assumed to have the same wage changes (in percentage terms) as northern white domestic servants, although they are allowed to have different wage levels. The dearth of race-specific wage data for women in the early twentieth century makes this assumption difficult to support, but the existing fragmentary evidence suggests that it is plausible. Wright cites a 25 percent racial gap in median wages for women in Virginia manufacturing establishments in 1907 (textiles for whites, tobacco for blacks) (Old South, p. 183). The IPUMS data suggest a nearly identical racial gap in median wages in non-durable manufacturing in Virginia (and the entire South Atlantic region) in Moreover, it is reassuring that when extended forward to 1950, the estimated series captures 80 percent of the actual increase in blacks relative wages (the actual ratio changes from 6

8 Figure 1 suggests that the 1940s marked a dramatic break with the past black women s relative wage gains were large and most likely unprecedented in the twentieth century. Rather than being a continuation of previous trends, it appears that the 1940s may have reversed a slight, downward trend in black women's relative wages from 1909 to From a different empirical perspective (and cognizant of the scarcity of race-specific wage data for women before 1940), Claudia Goldin argues that the blackwhite wage ratio for women probably declined from 1900 to 1940:... if the 1940 ratio of white to black female earnings... is applied to the data for white earnings in 1890 or 1900, the resulting black female earnings are far too low. This implies that the ratio of black to white earnings must have decreased from 1890 to 1940, an inference that is consistent with the formidable restrictions on black women s employment during the period. 14 Comparing wage convergence during the 1940s to that in later decades is more straightforward because the decennial census surveyed workers about both their annual wages and the intensity of their work (for example, weeks of work in the previous year or hours of work in a recent week). 15 Therefore, the wage ratios for 1939 to 1969 in figure 1 are based on actual census data. After a comparatively slight rise in the 1950s, figure 1 depicts a sharp increase in the black-white wage ratio during the 1960s. That black workers gained ground in the 1960s is widely-known and well-documented. In fact, the volume of the literature on wage trends after the Civil Rights Act of 1964 tends to obscure the significance of the 1940s. 16 Nonetheless, the relative wages gains in the 1940s for black women were just as large as those 0.44 to 0.59, and the estimated ratio changes from 0.44 to 0.55). 14 Goldin, Understanding, p Anderson, Last Hired, points out that despite the observed gains, discrimination against black women was still very common in the 1940s. 15 Because actual weeks worked are not reported in the 1960 and 1970 census, we divide annual wages by the mean number of weeks worked by individuals in a given interval using information on the distribution within intervals from the 1950 census. When undertaking the decomposition analysis we also account for changes in reported hours of work. We did not attempt to calculate an hourly wage because the census hours variable does not pertain to the previous year (whereas income and weeks worked do). 16 See, inter alia, Freeman, Changes ; Brown, Black-White Earnings ; Smith and Welch, Affirmative 7

9 recorded during the 1960s (16.2 versus 15.8 percentage points in figure 1), and the absolute real wage gains in the 1940s were considerably larger. Selection and Measurement Issues To be sure, changes in the composition of our samples (selection) or changes in the composition of total earnings may have influenced changes in the observed black-white wage gap among women. One might hypothesize, for example, that the increase in white women s labor-force participation could increase the proportion of white workers with few skills, or that in-kind payments to black domestics could skew the measures of earnings. Here, we assess the potential influence of differential changes in labor force participation, differential changes in labor market experience (an unobservable characteristic in the census), and in-kind payments to servants. First, it seems unlikely that a disproportionate increase in the number of relatively low-skilled white workers is artificially driving the observed wage convergence among non-farm workers. It is true that the fraction of white women (from ages 18 to 64) in the labor force increased from 28 to 32 percent from 1940 to 1950 and that the fraction of black women working remained relatively stable at approximately 43 percent. But at the same time, the proportion of black, female workers in agriculture declined from 15 to 8 percent, suggesting that a large number of relatively unskilled black women transitioned into our sample of non-farm wage workers. Additionally, although it is not possible to identify new entrants to the labor force in the census data, the decompositions presented later in the paper explicitly take account of changes in a number of observable personal characteristics. In general, these decompositions suggest that changes in age, marital status, child-at-home, and hours of work explain little of the overall racial convergence. A hypothetical calculation further demonstrates that the scope for sample selection s effect on the Action ; Donohue and Heckman, Continuous versus Episodic Change ; Card and Krueger, School Quality ; Chay, Impact ; and Neal, Measured. 8

10 black-white mean wage ratio is narrow. For example, increasing the sample size of white women in 1940 by four percentage points (to simulate the change in the participation rate from 28 to 32 percent) and assigning all of the additional workers the wage we observe for white women at the 25 th percentile would raise the black-white ratio from 0.44 to only Assigning each additional worker a wage we observe at the 10 th percentile for white women would raise the black-white ratio to only To drive the entire increase from 0.44 to 0.59, we would have to assign the additional workers large negative incomes. These simple calculations take no account of general equilibrium effects on the wage structure, but the point is clear: even extreme assumptions about the unobserved skill of additions to the white labor force do not account for the strong pattern of convergence at the mean. Differential changes in labor-market experience among black and white workers during the war may also confound measures of wage convergence. A unique collection of retrospective work histories collected in the 1951 "Palmer Survey" allows an evaluation of this issue for more than 4,000 female workers residing in Chicago, Los Angeles, New Haven, Philadelphia, San Francisco and St. Paul. 17 To our knowledge, it is the only dataset that contains retrospective information on women s labor market experiences during the 1940s. The data suggest that there is no statistically or economically significant racial difference in the number of months that women who were in the labor force in 1951 had worked during the 1940s. Nor is there much difference in the 1940s months-of-work gap between black entrants (those not in labor force in 1940, but in labor force in 1951) and black non-entrants (those in the labor force in both years) compared to the gap between white entrants and non-entrants. 18 This 17 Gladys Palmer directed the study which collected work histories for men and women in 1951 if they were in the work force. It is also known as the Six-City Survey. See Palmer, Labor Mobility ; Goldin, Role ; and Collins, African-American Economic Mobility. The women s transcription cards (and most of the men s) remain in the archives of the University of Pennsylvania. We thank Claudia Goldin for sharing the data for women with us. 18 Pre-1940 experience cannot be ascertained. With city fixed effects and controlling for age (quadratic), marital status, and years of education, black entrants had 46 months less experience during the 1940s than non-entrants; white entrants had 45 months less experience than white non-entrants. Although not 9

11 evidence cannot completely dismiss the hypothesis that differential changes in experience levels mattered, but it does deflate the notion that this was an important factor in determining the black-white wage gap. Yet another concern is that unobserved payments in-kind to domestic servants might lead to an overstatement of the actual earnings gains, because black women disproportionately moved out of jobs with potentially high levels of unobserved compensation. To investigate this, we inflated all household servants' weekly wages by 20 percent in the 1940 and 1950 samples (a figure that approximates the gap in earnings between black workers in household service and those in other forms of service after adjusting for observable characteristics) to gauge the effect on the wage distributions and measures of inter-racial convergence. Although the levels of the black-white wage ratios at the mean and at the 25 th percentile are raised by the adjustment (in both 1940 and 1950), as one would expect given the concentration of black women in household service, the characterization of relative wage changes during the 1940s is not greatly affected. The ratio of average wages increases by 0.14 in the 1940s with the ad hoc adjustment for potential in-kind payments, whereas the increase is 0.15 without the adjustment. 19 Therefore, the remaining analysis proceeds without the adjustment. The Changing Distribution of Wages in the 1940s To widen the perspective on wages, figure 2 plots the full distributions of the log of real weekly wages in 1939 and Vertical lines mark the distributions medians. 20 Black women s weekly wages at each percentile fell far below the wages of white women in 1939 (panel A). For example, the median nationally representative, the proportions of entrants in the samples for white and black women are nearly the same: 41 percent of blacks in the sample in 1951 were entrants and 42 percent of whites were. 19 At the 25 th percentile, the black/white ratio increased by 0.12 with the adjustment and by 0.11 without it. By 1940, live-in servants were rare. Only about five percent of all household servants (black and white) appear to reside with their employers (using the related variable in the 1940 IPUMS sample to identify domestic employees ). 20 See the notes to figure 2 for a description of the sample. Distributions of hourly wages exhibit similar patterns. Later in the paper, we pay careful attention to changes in the number of hours worked when 10

12 black woman s wages fell slightly below the 10 th percentile of the white distribution, and the 90 th percentile of the black distribution fell slightly below the 50 th percentile of the white distribution. By 1949 (panel B), the wage distributions of both groups had not only increased in absolute terms (hence their rightward shift), but the black women s distribution converged strongly upon that of white women, as reflected in the narrowing space between the medians. In 1949, the median black woman s wages were near the 15 th percentile of the white distribution, and the 90 th percentile of the black distribution exceeded the 65 th percentile of the white distribution. Figure 3 plots the percentage increase in real weekly wages at several percentiles in the income distributions for black and white women and for men. For the sake of brevity and consistency with other studies of wage convergence, the figure follows convention and compares wage gains across groups at particular percentiles in each group s distribution. 21 This is merely the distributional analog of the usual comparisons made at the center of the distribution like the mean or median (for example, figure 1 uses the mean). 22 Each plot in figure 3 rests well above zero, which reflects the dramatic real wage gains throughout the distribution for all four groups. At the medians, blacks weekly wages (for both men and women) increased at nearly twice the rate of those for whites. Another notable feature is the absence of wage compression among black women. While the rate of wage gains among black women was large and fairly uniform across percentiles, the strong downward trend in the other plots is indicative of wage compression within those groups. 23 decomposing the wage gains. 21 For comparison see Margo, Explaining ; Gottschalk, Inequality ; and Autor and Katz, Changes. 22 Nonetheless, readers might find other comparisons to be of interest. For example, as just noted, the median wage level of blacks in 1939 was approximately the same as that for whites at the 10 th percentile, but the median wage value for blacks increased substantially more than the wage at the 10 th percentile for whites (0.66 versus 0.49 log points). Such cross-percentile views are possible in the tables presented later in the paper, though our discussion emphasizes the conventional same percentile comparisons. 23 There is compression in the sense that the percentage change in income is larger below the median than 11

13 The absence of compression among black women may reflect two factors. First, even workers at the high end of the black women s wage distribution often worked in low-skill jobs in There were many more household servants above the 75 th percentile of the black distribution than there were operatives or school teachers (the highest paying jobs commonly held by black women). The compression between skill groups emphasized by Goldin and Margo, therefore, might not have impinged on the top end of the black women s distribution. 24 The wage setting policies of the National War Labor Board, for example, were most relevant in areas that employed comparatively few black women. 25 Second, the availability of a large pool of unskilled black women in agriculture and the rural South may have dampened wage growth at the lower percentiles of the black women s non-farm wage distribution. Changes in the Occupational Wage Structure Table 1 provides an occupation-based perspective on the changing wage structure. In one important sense the changes in the wage structure were similar for black and white women specifically, service wages increased relative to wages in other fields. But because black and white women were distributed so differently across occupations, the changes in the occupational wage structure had different implications for the overall wage gains of black and white women. Moreover, even within occupational categories, the wage gains for blacks were often larger than for whites. The first column of table 1 simply lists the proportion of black or white female workers in four broad occupational categories in The second column reports the average change in real weekly wages for women in a particular category (by race) from 1939 to The third column is the product of the first two. Large within-category wage changes carry more weight if they occur in categories that include a large proportion of workers. Because the change in wages within occupational categories could reflect not only pure changes in occupational wages but also in the characteristics of those in the above it, although absolute dollar gains need not have the same pattern. 24 Goldin and Margo, Great Compression. 12

14 occupation cell (such as marital status, educational attainment, and region of residence), we have also calculated an adjusted wage change. For women in each occupational group (separately by race), we make the adjustment by regressing the log of real wage in the 1940 and 1950 samples on observable characteristics and a year dummy for observations from the 1950 sample. 26 The coefficient on the year dummy is reported in column 4. Wage gains were pervasive across occupational categories in the 1940s, with the largest gains occurring in service jobs. Black women were heavily concentrated in service jobs, and despite the large wage gains, this was the only nonfarm employment category with a declining share of black women s employment. Although wage gains in the service category for white women were also large, the effect on the overall white wage structure was comparatively small due to the low representation of white women in service. Rather, white women were highly concentrated in the professional, clerical, and sales category, the job category experiencing the smallest increase in wages. These broad patterns remain even after adjusting for observable characteristics (column 4). Complementing the effect of differential wage gains across occupations, it is evident that within each category (except the laborer category, where very few women worked) the wage gains were larger for black women than for whites. 27 Changes in Occupational Distributions, The extraordinary demands of wartime production and the conscription of men for the armed services induced a significant redistribution of women across occupations in the 1940s. The sharpness of 25 See Rockoff, Drastic Measures, for a history of price and wage controls. 26 The regressions control for a set of age, education, hours, and region of residence dummy variables as well as binary indicators for marital status, metropolitan residence and the presence of a child at home. 27 An earlier version of this paper included partitions by region and educational category. Wage gains by southern blacks exceeded those of blacks elsewhere, and within every region, black wage gains far exceeded those of whites. Nonetheless, the importance of the differential wage growth in the South should not be overstated: assigning southern black women the percentage wage gains that occurred elsewhere (rather than the southern increase) would lower the national average wage gain by only a few 13

15 the break in the 1940s is evident in table 2 which documents the occupational distributions of black and white women from 1910 to Through most of the twentieth century, white women were much more likely than black women to be employed in professional, clerical, sales, and operative jobs. In contrast, black women were much more likely to be employed in household service and agriculture. Between 1940 and 1950, the representation of black women in household service declined rapidly, a clear departure from the steady increases from 1910 to At the same time, the proportion of black women working as operatives almost doubled. Although the proportion of white women employed in household service also declined (from a relatively low base), the proportion working as operatives remained fairly constant. Instead, white women s representation in the clerical sector increased by almost seven percentage points. The transitions among white and black women appear especially large given the gradual nature of changes before 1940 (and in the 1950s). In fact, a simple dissimilarity index calculated across broad occupational categories (similar to those in table 2) for each census year is essentially flat from 1910 to 1940 (approximately 0.61) before declining in the 1940s (to approximately 0.53). 28 The shifts in table 2 are similar to those reported by the Bureau of Labor Statistics for the 1940 to 1944 period, indicating World War II s central place in the story. 29 It is possible that changes in observable characteristics, such as educational attainment and region of residence, may account for the striking racial differences in occupational sorting among women. 30 We percentage points. 28 The dissimilarity index indicates the proportion of a group (for example, black women) that would have to switch occupations to match the occupational distribution of another group (for example, white women). We calculate it with broad occupational groupings similar to those in table 2, using only the main line figures for professional and operative jobs (not the subcategories) and the subcategory lines for service jobs. 29 Wolfbein, War, p The impact of educational attainment on wages is a major theme in the literature on racial wage convergence among men, especially post-1960 (Smith and Welch, Black Economic Progress ; Margo, Race; Card and Krueger, School ), but less is known about the long-run implications for women s labor 14

16 investigate the relationships in two sets of probit regressions for each census year from 1910 to In the first set of regressions, the dependent variable is formal sector employment (=1 if employed outside agriculture and household service, for a sample that includes all workers). In the second set, the dependent variable is household service employment (for a sample that includes only non-farm workers). The regressions control for race (=1 if black), literacy (or years of education), region of residence, metropolitan status, age categories, marital status, and the presence of a child at home. 31 The coefficient on the race variable indicates the magnitude of the racial difference in the dependent variable that cannot be accounted for by differences in the included covariates. For instance, the coefficient on race may reflect unobservable differences in human capital (perhaps related to the quality of schooling) or may be due to pervasive labor market discrimination. When additional information becomes available in the 1940 census, we include dummy variables for categories of educational attainment (rather than literacy) in the regressions. Finer controls for human capital absorb some of the residual effect otherwise attributed to race and yield a slightly smaller, but still very large, unexplained difference in occupational concentration at mid-century. Figure 4 plots the estimated coefficients on the race dummy variable. Three important points are immediately clear. First, the racial differences were large even when controlling for observable characteristics. At mid-century, measures of educational background and geographic location do not explain the crowding of black women in domestic service. Second, there was little change in the association between race and the likelihood of employment in the formal sector or domestic service from 1910 to During the 1940s, however, there was a sharp decline in the likelihood of black women being household servants. Closely related is the abrupt increase in the conditional likelihood of employment in the formal sector, which reflects movement out of both agriculture and household service. market outcomes. 31 The census reports literacy until 1930 and highest grade completed from 1940 onward. To maintain a consistent specification over time, we assume that those who finished at least second grade are literate by census standards (see Margo, Race, for justification of this threshold). 15

17 Finally, there was no reversion after the 1940s. The estimated race coefficients continued on the path set in the 1940s. Such measures are, of course, indirect and imperfect indicators of discriminatory practices in hiring, but they suggest a retreating color line in some areas of the formal sector. Just as black women were much more likely to work as household servants than would be predicted on the basis of their observable characteristics in 1940, they were far less likely to work in operative and clerical jobs. Nonetheless, during the 1940s, the magnitude of the race coefficient (from similar probit regressions) fell from to for operative workers. 32 In contrast, there was a slight increase in the magnitude of the race coefficient during the 1940s for clerical workers (it increased from to -0.23). Rather, black women s breakthrough into the clerical sector occurred in the post-1960 period, as the daughters and grand-daughters of the working women of the 1940s entered the labor force. 33 DECOMPOSING WOMEN S WAGE GAINS IN THE 1940S To quantify the importance of changes in workers personal characteristics, in workers geographic distribution, in the overall wage structure, and in the wage structure for black women relative to white women, our decompositions employ a semi-parametric technique pioneered by DiNardo, Fortin and Lemieux (henceforth DFL ). 34 This approach is similar in spirit to standard Blinder-Oaxaca decompositions and, like other decomposition techniques, cannot account for general equilibrium and spill-over effects. 35 One advantage of the DFL approach, however, is that it retains the 1950 wage 32 The underlying sample for this calculation includes farm workers, whereas in figure 4 we calculated the household service regressions for samples that exclude farm workers. 33 See Cunningham and Zalokar, Economic Progress, and Sundstrom, Servants, on long-run occupational change. 34 DiNardo, Fortin, and Lemieux, Labor Market. 35 Blinder, Wage Discrimination ; Oaxaca, Male-Female Wage Differentials. See Acemoglu, Autor, 16

18 structure for each race, while re-weighting observations from 1950 such that the distribution of individuals characteristics resembles the distribution of characteristics from The resulting counterfactual distribution of weekly wages is the distribution that would have prevailed in 1950 if women's characteristics had not changed from 1940 to 1950, assuming that changes in characteristics over the decade did not affect the wage structure. In the next step, we carry this decomposition further by estimating the race-specific changes in the labor market returns to worker characteristics during the 1940s. We use these estimates to distinguish between the changes in black women's wage structure that were in common with those among white women and the changes that accrued specifically to blacks. Both steps of the decomposition provide a rich characterization of changes across the full range of the wage distribution, while relaxing assumptions about the wage structure that are implicit in Blinder-Oaxaca decompositions. 36 Accounting for Changes in Worker Characteristics Let W be a random variable denoting the log of wages, X denote the vector of individual characteristics, and t w and t x be binary random variables that indicate the year (1940 or 1950) in which either W or X, respectively, is observed. For example, an observation on an individual sampled in the 1950 census could be written (W, X, t w =50, t x =50). We assume that wages and characteristics have the joint distribution, F(w, x, t w, t x ). Thus, the joint distribution of wages and attributes in 1950, for instance, can be written as F(w, x t w =50, t x =50). Using Bayes rule, the marginal density of wages in 1950 can be written as the expected value of the conditional density of wages given the vector of characteristics, X, in 1950, or f 50 (w) f (w; t w =50, t x =50) = f (w x, t w =50) df X (x t x =50) = E X { f (w X, t w =50) }. (2) and Lyle, Women, on the potential effects of changes in women s labor supply on wage inequality during the 1940s. 36 See Barsky et al., Accounting, for a discussion of potential problems associated with standard parametric assumptions and the strengths of this technique in the context of decomposing the inter-racial 17

19 Supposing that workers characteristics had remained distributed as they were in 1940 and that the changes in characteristics over the 1940s did not affect the wage structure, the counterfactual wage distribution may be written as a weighted function of the actual 1950 density, f (w ; t w =50, t x =40) = f (w x, t w =50) df X (x t x =40) = f (w x, t w =50) df X (x t x =50) df X (x t x =40) (3) df X (x t x =50) = E X { f (w X, t w =50) ψ x (X)}, where ψ x (x) = df X (x t x =40) is a counterfactual reweighting function that is applied to the df X (x t x =50) 1950 wage density. This function is simply the ratio of the probability mass in 1940 to that in 1950 for the realization of a specific set of characteristics, X. For instance, a woman observed in 1950 whose characteristics are less likely to be observed in 1940 receives less weight in the counterfactual distribution, while a woman in 1950 with characteristics more likely to be observed in 1940 receives more weight. In this manner, the counterfactual density is obtained by reweighting every individual observed in 1950 such that the distribution of characteristics in 1950 resembles the distribution of Xs in This high-dimensional reweighting function can be transformed into a simple estimation problem by again applying Bayes rule and the definition of discrete probability functions, ψ x (x) = df X (x t x =40) = df X (t x =40 x) df(x) df X (t x =50) = Pr(t x =40 x) Pr(t x =50).. (4) df X (x t x =50) df X (t x =50 x) df(x) df X (t x =40) Pr(t x =50 x) Pr(t x =40) We estimate the first ratio of the final expression and use the ratio of the count of observations in 1950 to the count in 1940 for the second ratio. After obtaining estimates of ψ x for each individual in 1950, the empirical distribution and the weights are used to compute the counterfactual wage distribution. More details on our implementation of this method are available in appendix 2. Accounting for Changes in the Wage Structure To incorporate the influence of the changing structure of wages into the decomposition framework, we estimate separate wage regressions for white and black women in 1940 and 1950, wealth gap. See appendix 4 for Blinder-Oaxaca decompositions. 18

20 including controls for age, education, region, occupational and industrial categories, marital and child status, and metropolitan residence, W r iy = X β + ε (5) r iy r y r iy where r indexes race and y indexes the year. Based on the estimates of β from these regressions, we predict a counterfactual 1940 wage for each woman observed in the 1950 sample using the equation, r r ( ˆ r ˆ r = W X β β ). (6) r ˆ i40 i50 i w This adjustment simulates the 1940 wage distribution by adjusting the estimated returns to various Xs in 1949 to those prevailing in Wage structure changes for black women can be further decomposed into two parts: 1) a part attributable to changes in the common wage structure (that is, changes that parallel those for white women); and 2) a part attributable to differential changes in the labor market returns for black women relative to white women. Thus, the simulated 1940 wage for a black woman observed in 1950 can be written as B B ˆ ˆ W ˆ W B )] [( ˆ B ˆ B ) ( ˆ W ˆ W = W X β β X β β β β )]. (7) B wi 40 i50 i50[( i B In equation 7, the second term, ˆ W ˆ W X β β )], captures the change in the common wage structure. i50[( B The next component, ˆ B ˆ B ) ( ˆ W ˆ W X β β β β )], represents differential changes the wage structure i50[( for black women relative to white women. In combination with the procedure that re-weights the 1950 observations to simulate the 1940 distribution of characteristics, this adjustment approximates the full 1940 wage distribution. 37 The results from the wage regressions are reported in appendix 3. Decomposition Results: Women's Absolute Wage Gains In the context of this paper s investigation, it is useful to partition the vector of individual 37 We adjust the prices after reweighting 1950 characteristics to reflect those observed in Thus, B B after obtaining the estimates from equation 7, we use the distribution generated by θ ψ ˆ (where θ i i i wi 40 denotes the sample line weight assigned to individual i in 1950) to decompose the prices. 19

21 characteristics, X, into four subsets presented here in the order they enter the decomposition: 1) a set of individual attributes including eight age categories, eight hours-worked categories, and indicator variables for marital status and the presence of a child at home; 2) a set of five dummy variables denoting levels of educational attainment; 3) a set of eleven occupational and ten industrial categories; and 4) a set of location dummies, including nine census region categories and an indicator variable for metropolitan residence. We provide more detailed definitions of each of these variables in appendix 1 and present Blinder-Oaxaca decomposition results for comparison in appendix 4. Because we are especially interested in the fraction of the total change in wages attributable to occupational upgrading and the changing compensation structure after accounting for personal (age, marital status, child present in home, hours worked) and productive (education) characteristics, these characteristics enter first in the decomposition sequence. 38 Following this initial adjustment, the decomposition quantifies how worker mobility across jobs and locations transformed the overall distribution of wages. Table 3 presents the results for black (panel A) and white (panel B) women. Taken together, changes in observable characteristics (second row of panel A) account for an increase of 0.14 log points at the mean of the black women s distribution, or about one quarter of their average wage gains during the decade. However, at different points in the wage distribution, changes in characteristics account for different proportions of the wage gains. At the 10 th percentile, for example, observable characteristics account for none of the gains among black women. For white women, the total wage increase at the mean is much smaller than for blacks, as is the contribution of changes in observable characteristics (0.06 log points, or 19 percent of the total gain at the mean). Table 3 also breaks down the results into the four detailed subcomponents described above. For black women, changes in the basic composition of the work force (age, marital status, child at home, and hours supplied) tended to raise weekly wages by the most at and above the median. In contrast, the 38 This is similar in spirit to correcting for selection on observable worker characteristics. For a discussion of the potential importance of selection on unobservables for the ratio of mean wages, see the 20

22 influence of these characteristics is smaller for white women throughout the distribution. 39 Changes in educational attainment had positive and relatively uniform effects throughout the distributions for both black and white women. For black women, the contribution was somewhat larger, but the racial difference in this regard is small. Occupational and industrial changes made almost no difference to the wage profile of white women, except at the low end of the percentile distribution where the decline in domestic service would be most influential. 40 Among black women, however, occupational and industrial shifts made their biggest impact at the median of the percentile distribution, accounting for an increase of 0.09 log points in wages (14 percent of the total). This represents the largest single contribution (at any percentile) of all changes in observable characteristics and reflects the movement from domestic service to more lucrative employment. After accounting for occupational and industrial changes, the remaining influence of geographic shifts is small for both black and white women. A narrow interpretation of this finding is that locational shifts per se were not major factors in racial wage convergence in the 1940s (for example, movements of domestic servants from the South Atlantic to the Mid-Atlantic census regions did not contribute much if the migrants remained domestic servants). A broader interpretation is that the geographic redistribution of black workers out of the rural South and into cities coincided with their occupational and industrial mobility. The implication is that the Great Migration s influence on black women s wages in the 1940s was inextricably linked to the job changes that migration facilitated. Table 4 decomposes changes in the wage structure. Panel A breaks the absolute real wage gains for black women into four components: the influence of changing characteristics (as reported in table 3), the influence of changes in the common wage structure for women, the influence of differential changes text. 39 The nature of the decomposition, which adjusts for personal characteristics simultaneously, makes it difficult to infer precisely what drives this result. A Blinder-Oaxaca decomposition at the means suggests that no single component of these characteristics is responsible. 40 It is possible, of course, that non-pecuniary aspects of their jobs improved. 21

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