Eliminating the Income Gap: A New Way to Define Economic Success
By Sara McCarthy, Director of Communications, Fund for Our Economic Future
A recent post on this blog highlighted the outcomes of TalentNEO, a Northeast Ohio demonstration project operated by Towards Employment and supported by the Fund for Our Economic Future, that tested the use of skills scores in hiring. Among the pilot’s notable findings: Black and white participants secured employment at equal rates, indicating that the use of skills assessments can increase objectivity in hiring decisions, decrease barriers to opportunity for job seekers and improve workplace diversity. The potential of skills scores is particularly heartening given that the black unemployment rate in Northeast Ohio is three times that of the white unemployment rate.
But TalentNEO also exposed a not-so-positive outcome: White individuals in the demonstration with the lowest scores ended up earning over $5,000 more annually than black participants with the highest scores—a differential of nearly 20 percent.
This finding is consistent with data analyzed on a broader scale by the Fund for Our Economic Future, a collaboration of more than 40 Northeast Ohio philanthropic organizations. This analysis showed that a white worker in Northeast Ohio earns on average nearly $20,000 more annually than a black worker.1
The gap in earnings cannot be explained by differences in levels of education. A 2016 analysis from the Economic Policy Institute finds: “Black male college graduates (both those with just a college degree and those who have gone beyond college) newly entering the workforce started the 1980s with less than a 10 percent disadvantage relative to white college graduates but by 2014 similarly educated new entrants were at a roughly 18 percent deficit.”2
Some additional analysis by my former colleagues Peter Truog and Kevin Alin (both of whom are leading new efforts to increase racial equity in Northeast Ohio) found that in the Cleveland metropolitan statistical area (MSA) in 2016, white workers were disproportionately represented in occupations like management, which pay higher wages on average, while workers of color are disproportionality represented in occupations like health care support, which pay lower wages on average. Further, within occupations, workers of color often earn less on average than white workers. For example, in Northeast Ohio a white worker in a management occupation earned an estimated $85,000 annually, on average, while a worker of color earned an estimated $66,000 annually, on average. The result: Of the $69 billion earned in 2016 in compensation by workers in the Cleveland MSA, $58 billion is earned by white workers and $11 billion is earned by workers of color. White workers earn over $6 billion more than would be expected if compensation were distributed in accordance with the demographics of the working-age population of the region.3
These are staggering numbers and should cause all of us—philanthropic institutions, employers, service providers, legislators, civic leaders—to stop and reflect on whether we are contributing to or actively combating these disparities.
This is not to say that work is not being done. Indeed, efforts like TalentNEO provide some hope. But it bears repeating (and repeating and repeating) that these are systemic issues that require more—more attention, more action, more accountability. As outlined in the Fund’s The Two Tomorrows report, raising awareness of the pervasiveness of the issue is step one (it cannot be explained away!). Differentiated actions must result from this awareness. And then as a community we must hold ourselves accountable in working toward elimination of these disparities. And while the path forward may sound daunting, we believe a more extraordinary tomorrow is possible.
At the Fund for Our Economic Future, we are committed to doing our part. We will continue to report out to the community how the Northeast Ohio economy is doing and whether we’re closing the gaps in employment and income by race. We’re ensuring that we’re increasing racial inclusion in the decision-making power of the Fund through intentional reflection on and changes to our governing processes. We will continue to call for disaggregation of data by race for all of our grants, and we will identify and define actions to combat exclusive systems in job creation, job preparation and job access.
Eliminating racial disparities in employment and income isn’t just the right thing to do. Our region’s economic success depends on it.