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Rising interest rates hurt this group the most

Wage stagnation and wage inequality easily top the list of economic issues Americans are most concerned about—look no further than the presidential election, which has largely focused on economic issues. This concern is also evident in invigorated efforts to raise the minimum wage, expand paid leave, and strengthen the collective bargaining power of workers.

These issues resonate with nearly every worker, because wages are at the heart of the American dream. Money earned from work is the main source of income for most American households. This is the money Americans use to meet basic living expenses and to save for down payment on a home, college tuition, or retirement. This is especially true for African American and Latino workers, who have less inherited wealth and rely almost exclusively on their paychecks to support themselves and their families.


Job seekers waiting in line to enter a job fair in New York.
Victor J. Blue | Bloomberg | Getty Images
Job seekers waiting in line to enter a job fair in New York.

Concern over wage inequality is also fully justified by the data. Since 1979, wages for the vast majority of workers—regardless of gender, race or ethnicity— have been stagnant or declining.

Although economic productivity has grown, creating the potential for higher wages, most of our economic gains have gone to the top 1 percent of earners. In the process, wages of black and Hispanic workers have fallen even further behind those of whites. In 1979, the median black worker earned 83 cents for every dollar earned by the median white worker, compared to just 75 cents on the dollar in 2014. For the median Hispanic worker, that gap has gone from 81 cents on the dollar to 70 cents on the dollar.

Growing wage inequality has meant that today's workers must work harder to attain the same middle class standard of living their parents had a generation ago. For people of color however, the concept of getting less for equal (and sometimes greater) effort is nothing new. Observed differences in pay by race and ethnicity are partially explained by differences in education, experience, or the kinds of jobs held by workers of color relative to whites.

Yet, even when these characteristics are the same, differences in pay still exist. This remaining difference is commonly attributed to racial discrimination—the part of racial pay gaps that won't go away, regardless of how hard one works. While racial discrimination in employment and pay was outlawed by the Civil Rights Act of 1964, it remains an all too familiar reality of American life.

Policy is an extremely important tool to address racial discrimination, both through racially targeted and race neutral efforts. Enforcement of anti-discrimination laws during the 1960s played a critical role in reducing, but not eliminating, racial discrimination in employment and pay. Even today, racial discrimination is difficult to prove because workers have much less information available to them than do employers.

Consistently strong enforcement of these laws requires an ongoing national commitment that includes greater transparency in the ways that hiring, pay, and promotion decisions are made and ensuring that workers have effective and efficient tools to pursue any violation of their rights. A recent proposal by the Equal Employment Opportunity Commission and the Department of Labor to annually collect summary pay data by gender, race, and ethnicity from businesses with 100 or more employees is an important step in the right direction.

In terms of race neutral policies, the tight labor markets of the late 1990s helped to narrow pay disparities as employers were forced to compete for a shrinking pool of available workers by offering higher wages. These tighter labor markets also made it easier for workers who felt they were being underpaid to pursue or bargain for higher pay.

Policies aimed at achieving full employment, including monetary policy decisions that prioritize low rates of unemployment, are essential. Efforts by the Fed Up campaign have been effective in pressing the Fed to acknowledge the fact that communities of color are experiencing a slower rate of recovery than indicated by national unemployment and job growth numbers. In the absence of any risks of high inflation, near term increases in the interest rate unnecessarily dampen any hopes for a full economic recovery or much needed wage growth.

Commentary by Valerie Rawlston Wilson, director of the Economic Policy Institute's Program on Race, Ethnicity and the Economy, a source for reports and policy analyses on the economic condition of America's people of color. Prior to joining EPI, Wilson was an economist and vice president of research at the National Urban League Washington Bureau. Follow her on Twitter @ValerieRWilson.

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