The racial wage gap is narrowing, but occupational segregation may hinder further progress

Black workers have historically earned less on average than their white counterparts, and prior to the Covid-19 pandemic, progress on closing this wage gap stalled. In the early 2000s, the difference between what Black and white workers in the US earned was the same as it had been in 1950, according to academic research cited by the New York Times.

Recent research from pay-equity software platform Syndio offers some encouraging findings, though: Black workers saw higher wage growth than white workers from 2021 to 2023, and as a result the racial wage gap has narrowed to the smallest it’s ever been.

Despite these positive trends, occupational segregation is likely to hinder progress toward closing the racial wage gap entirely, said Chris Martin, a labor research economist with Syndio.

Smallest-ever gap. Between the end of 2021 and the end of 2023, “usual weekly earnings” rose by 24% for Black men and 17% for Black women, according to Syndio’s analysis of Bureau of Labor Statistics data. Wages for white workers rose more slowly, up 10% for white men and 11% for white women over the same time period.

As a result, Black men earned 80 cents on the dollar compared to white men as of 2023, while Black women earned 75 cents on the dollar. This is a marked improvement from 2020, when Black men earned about 75% of what white men earned, and Black women earned about 69% relative to white men.

Part of the reason this wage gap is closing in is because “occupations that are disproportionately Black are seeing higher wage growth of the median,” said Martin. Black customer service representatives, for example, accounted for 18.2% of workers in the profession in Q4 2023, for example, and this occupation saw wages rise 15% on average between 2021 and 2023. Overall, median wage growth for “disproportionately Black” occupations was 15.6% during this time period, and 13.7% for occupations not considered disproportionately Black.

Limits to progress. If the racial wage gap continued to narrow at this pace for the next few decades, eventually you’d expect to see Black workers catch up to white men, Martin said.

“But there’s probably a limit to how long this dynamic can go on unless there’s some other changes in terms of reduced occupational segregation or…a reduction in the differentials between some of these jobs and others,” he continued.

Black workers remain underrepresented in high-paying jobs such as dentistry, law, engineering, and software development. And while the occupations where Black representation is strong saw above-average wage growth in recent years, it’s still not likely enough to help these workers catch up to those higher-paying professions. For example, “while wages went up at twice the average rate for psychiatric technicians (an occupation that is 33% Black)” during the time period Syndio examined, “it is unlikely that pay rates for psychiatric technicians will ever reach the levels of those other jobs,” Martin noted in a blog post about his research.

Takeaways for HR. Given the strong wage growth the US economy has seen in recent years, Martin said it’s a good idea for HR leaders to audit their compensation practices to understand how worker pay has kept pace with the market.

“Look at employees that have stayed through the pandemic through the past three years. How has their wage growth kept pace with this market wage growth? And of course, that’s going to be different by occupation,” he said. “I wouldn’t be surprised if we see some gendered racial impacts in terms of who’s been left out of the labor market growth.”