Racial Bias in Hiring Practices Widens the Black-White Wealth Disparity

We know that systemic racism is harmful to society, but many people may not realize how much racial discrimination in hiring practices jeopardizes the wealth of Black individuals and communities. Many hiring managers may not even be fully conscious of their own biases, much less realize the economic damage that they cause. Here are some of the ways that racial bias in hiring contributes to an increasing Black-White wealth gap.

Occupational segregation crowds people of color and women into low-income jobs

Even before they send off a single application, women and people of color tend to be funneled toward specific careers, many of which are either in low-paying industries as a whole or in industries that hire women and people of color in primarily low-paying roles.

Even accounting for education, Black men are significantly more likely to have low-income jobs in the service industry than White men. Similarly, women are likelier than men to have low-income jobs in education, nursing, or child care fields. The labor market’s devaluation of careers historically held by women has damaging implications for people of color and White men as well. Data shows that all workers in women-dominated careers suffer from lower earnings, including Asian, Black, Hispanic, and White men.

Racial discrimination (still) happens at the earliest stage in the hiring process

Résumés with distinctively Black names. Studies show that job applicants with distinctively Black names are about 10% less likely to be contacted by employers regardless of their education, experience, or skills. This is even more likely in states where it’s illegal to ask about a candidate’s criminal record: employers make unjust assumptions based on implicit racial bias.

The myth of the “hard-to-find qualified Black candidate.” In 2020, Wells Fargo CEO Charles Scharf drew criticism for remarking that the company was struggling to meet diversity goals due to a lack of qualified Black applicants. He later apologized for his unconscious bias, but data suggests that neither Scharf or Wells Fargo are alone in perpetuating the myth that there isn’t enough Black talent to hire.

Employers who make this claim frequently subscribe to four major fallacies in their hiring practices. These include:

  • The myth that a single “most qualified” candidate exists in any objective sense (or that they must choose between a non-White candidate and a “qualified” one)
  • The search for a “culture fit” that perpetuates racial homogeneity
  • The notion that Black applicants need to be more accomplished than their White counterparts to be considered “qualified”
  • The idea that racial discrimination happens at the hands of a “few bad apples” rather than as a systematic practice

The above biases alone mean that millions of applicants of color are unfairly rejected even before their application is read, without the benefit of even an initial interview. The longer these applicants have to wait for a less-biased employer to interview them and extend a job offer, the greater the gap in their employment history becomes, making it less likely that they will be contacted as time goes on. Extended periods of unemployment are, of course, damaging to the wealth of Black applicants, to say nothing of their social status and mental health.

Fortune 500 firms have more discriminating hiring practices

In addition to occupational segregation and general racial bias in hiring practices, there is evidence that some of the most profitable U.S. companies are keeping people of color out of lucrative jobs. In the same studies that tested employer contact rates for applicants based on the ethnicity associated with their names, researchers found that the top 20% of the most profitable Fortune 500 companies accounted for about 50% of total instances of hiring discrimination.

Given that these firms and employee salaries account for such a large portion of the U.S. economy, excluding Black workers from positions in these firms directly contributes to widening the Black-White wealth disparity.

Help bridge the Black-White racial wealth gap with the National Fund for Workforce Solutions

The National Fund for Workforce Solutions invests in a dynamic national network of communities tackling critical workforce issues. To achieve our vision of an equitable future where workers, employers, and communities thrive and prosper, we commit to naming and confronting systemic racial inequity within our organization, in the nonprofit sector, and in the broader workforce system.

Read more about ways we strive to dismantle systems of discrimination and subcribe to the National Fund email list to stay up to date with the latest in workforce development across the country.