The Impact of Affirmative Action on the Income Gap

Abstract

There are persistent problems within the labor market that cause income discrepancies between whites and blacks. The income gap is not narrowing; rather it is widening. There does not seem to be one readily accepted theory, as to why this is happening, which makes it difficult to adopt one means of correcting this issue. Affirmative action policies were implemented in the 1970s to account for some of the inequality between minorities and non-minorities that the labor market is currently unable to account for. And while there have been countless highly political debates concerning the relevance of affirmative action policies in the social realm, from an economic point of view the pros and cons are completely numerical. While there is little disagreement that there is indeed an income gap that needs to be addressed, there is disagreement about the policies that would best address these issues in terms of economic gains. Leading economists who study labor market inequality almost always fall into one of two categories. While almost all labor market economists agree that current policies are not effectively reducing the income gap, they are divided as to what would be an effective means of achieving this goal. This division among economists stems from how they view the problem of inequality itself. Because the problem is seen quite differently, so too is the solution. On the one side stand the economists who argue that while the labor market is not operating perfectly, affirmative action policies are not the cure for the inefficiency because these polices have not been successful at reducing the income gap. Expert William Darity finds that the policies implemented in the early 1970s have not had a substantial effect on the income gap, and thus it would be beneficial to look into the implementation of other policies. On the other side stand economists who say that because of gains made by the individual recipients of affirmative action policies, aggregate effects will soon be seen and therefore the policies are working, yet need more time. Derek Bok finds that, across the board, the more selective the college, the higher the graduation rates are for all students, especially blacks. His study also revealed that the more selective and academically challenging the college attended, the more successful the students felt after college. Because I used aggregate data, my regressions did not show me a correlation between affirmative action policies and average income by race. I did find, however, that as the average income increased race became less and less significant. This suggests that at higher income levels, other factors such as education become more important than the role race plays when considered alone.