White,black, and Hispanic male youths in central city labor markets

Data from the 1% 1980 Census Public Use Sample are used to estimate the determinants of employment and wage rates for out-of-school male youths residing in central cities. Separate calculations are undertaken for white, black, and Hispanic youths. Independent variables include individual, family background, and local labor market characteristics. Three basic findings emerge. First, racial inequality persists, with whites showing the best outcomes, Hispanics second, and blacks at the bottom. Second, underlying these unequal outcomes are rather different patterns of effect for personal and family characteristics by race. Note-worthy here is the Hispanic pattern of low reliance on schooling and high reliance on family. Finally, net of these effects, intercity differences are interesting and important. These include negative effects of city size and race composition effects which show white gains where blacks and Hispanics are a larger share of the population.     

Some considerations concerning the functional form of earnings

The problem of choosing the correct functional form of earnings has plagued studies of social inequality and labor market segmentation. Although this choice has often been made on superficial grounds, the results presented in the current paper demonstrate that this choice has very significant implications for the empirical findings that emerge from the study of earnings determination. Four functional forms of earnings are compared: dollar earnings, earnings rank based on social perceptions as calibrated by P. Coleman and L. Rainwater (1978, Social Standing in America, Basic Books, New York) the natural logarithm of earnings, and the best-fitting power function transformation of earnings as estimated by the Box-Cox technique. Evaluation of a generalized earnings determination model on a sample of private sector employees produces very similar results across these four functional forms of earnings. More divergent results are obtained when the models are compared across subsamples based on class, economic sector, and gender. Significant contrasts between earnings coefficients across groups are much more likely when utilizing log earnings or the Box-Cox power transformation than when using either dollar earnings or perceived earnings. In addition, the contrasts observed for log earnings and Box-Cox earnings are frequently in the opposite direction of those observed for dollar earnings or perceived earnings. The paper concludes with a discussion of the implications of these findings for theoretical developments in the study of social inequality and labor market segmentation.