This month’s Journal of Law and Economics has several superb papers. Today, I discuss a shocker from Nobelist James Heckman and colleagues, Labor Market Discrimination and Racial Differences in Premarket Factors (subs. required, free version).
A 1996 paper by Neal and Johnson (jstor) showed that most of the black-white wage differential could be explained by AFQT scores. IQ scores, however, can be influenced by schooling and on average blacks receive worse schooling than whites so Heckman et al. control for schooling and look for even earlier measures of ability (Neal and Johnson use teenage scores). The results are not encouraging. After throwing all kinds of factors into the analysis they are able to increase the unexplained wage gap somewhat but no matter how far back they go they still find big ability differences, even in children as young as 1-2 years of age.
The real shock, however, does not come until near the end of the paper where Heckman et al. compare blacks and Hispanics. I will let the authors speak:
Minority deficits in cognitive and noncognitive skills emerge early and then widen. Unequal schooling, neighborhoods, and peers may account for this differential growth in skills, but the main story in the data is not about growth rates but rather about the size of early deficits. Hispanic children start with cognitive and noncognitive deficits similar to those of black children. They also grow up in similarly disadvantaged environments and are likely to attend schools of similar quality. Hispanics complete much less schooling than blacks. Nevertheless, the ability growth by years of schooling is much higher for Hispanics than for blacks. By the time they reach adulthood, Hispanics have significantly higher test scores than do blacks. Conditional on test scores, there is no evidence of an important Hispanic-white wage gap. Our analysis of the Hispanic data illuminates the traditional study of black-white differences and casts doubt on many conventional explanations of these differences since they do not apply to Hispanics, who also suffer from many of the same disadvantages. The failure of the Hispanic-white gap to widen with schooling or age casts doubt on the claim that poor schools and bad neighborhoods are the reasons for the slow growth rate of black test scores.