Gad Levanon is head of The Conference Board’s Labor Market Institute. The opinions expressed in this commentary are his own.
Despite heightened awareness, the wage gap between Black and White workers continued to widen rapidly over the last decade. But the pandemic has created a potential opportunity to help shrink the divide: remote work.
Much of the racial wage gap stems from the fact that Black workers with a bachelor’s degree are underrepresented in high-paying occupations and industries, such as the tech sector, and they are over-represented in relatively low-paying jobs, such as counselors and social workers, or jobs that do not require a college degree, such as drivers and security guards.
After accounting for demographic, geographical and educational differences, the wage gap between Black men and non-Hispanic White male workers with at least a bachelor’s degree was 18% in 2010. By 2019, that gap had grown to 24%, largely due to this growing labor market segmentation.
Compounding these trends, the share of Black workers is especially low in some jobs that had strong growth in the number of high-paid workers. This is especially visible in the rapidly growing tech sector, which experienced a very large increase in its share of high earners in the past decade. While the share of Black workers among the top 20% of earners in the labor market was 6.1% between 2015 and 2019, it was just 4% in the tech sector. Among top earners in the software development occupation, only 3.3% were Black.
Part of the problem is that the bulk of tech jobs are located in cities with small Black populations, like San Francisco, Seattle, Austin and San Jose. That has impeded Black workers’ ability to enter into the industry. This geographical mismatch makes it harder for tech companies to recruit Black workers, and it shows in the data: The share of Black workers among top earners in the tech sector was just 2.3% in the Austin metro area, 2% San Francisco, 1.6% in Seattle and just 0.8% in San Jose.
In theory, Black tech workers from other parts of the country could relocate to these areas, but in practice that does not seem to be happening much. However, in metro areas with large Black populations, the share of Black tech workers tends to be much higher. For example, in Atlanta and Washington, DC, two metro areas with large Black populations, the share of Black workers among top earners in the tech sector was 12% and 13%, respectively.
The pandemic has posed a potential solution: Employers are more willing to hire remote workers, meaning they can cast a wider net when recruiting. In a recent survey, organizations reported they were more willing to hire remote workers (88% of respondents compared to just 52% before the pandemic). And 36% of surveyed organizations are willing to hire 100% virtual employees anywhere in the United States or globally, compared to just 12% before the pandemic.
This new willingness to hire remote workers could help employers located in areas with small Black populations, like tech companies in Silicon Valley and Seattle, to hire Black workers anywhere in the United States. As the cases of Atlanta and Washington, DC show, these workers exist. Adjusting the geography of recruitment to target them can make a difference.
The issue of underrepresentation of Black workers in the tech sector is not new. Earlier in the decade, several high-profile tech companies have publicly recognized the problem and CEOs know they need to do more. According to The Conference Board’s C-Suite Challenge Survey from late 2020, US CEOs believe recruiting a more diverse workforce and building a more inclusive culture are among the top human capital management issues in the coming year. Acknowledging a problem is an important step toward solving it. In 2020, some leading tech companies made public commitments to significantly raise the share of Black workers and other minority groups.
By opening up more roles for remote work and recruiting outside their own zip codes, tech companies have an opportunity to better diversify their workforces and help narrow the wage gap between Black and White workers.
These will be good first steps, but there’s a long way to go. It will be critical for CEOs to keep focused on this as a priority, or else the racial wage gap may not close any time soon.