Authors: Soobin Kim, Michael J. Culbertson, Eric Grodsky, Chandra Muller, John Robert Warren
Abstract: We document the role of premarket human capital in explaining racial and ethnic income disparities in labor market outcomes for individuals from their late 20s to mid-50s. Using comprehensive measures of the human capital students possess at the end of high school—including scores on achievement tests in reading comprehension, vocabulary, and math, GPA—and detailed school context measures, we study Black-White and Hispanic-White gaps across various economic outcomes. We find that human capital at high school completion largely determines racial and ethnic differences in mid-life labor market outcomes, explaining up to 87% of gaps in some outcomes. Our analysis examines men and women separately to provide a comprehensive picture of how human capital relates to racial and ethnic disparities across genders. We find that human capital explains a larger proportion of Black-White income gaps for women (95%) than men (69%), with women’s racial gaps primarily explained by test scores while men’s gaps show greater contributions from educational attainment and school characteristics. Finally, we show that the Black-White income gap for this cohort widened from early career to mid-life, with the explanatory power of human capital increasing as people grew older. Our research extends previous literature by considering longer-term outcomes, employing comprehensive and refined human capital measures, and broadening the scope of racial and ethnic comparisons. These findings emphasize the critical and persistent role of human capital development in shaping long-term economic outcomes and racial and ethnic disparities, reinforcing the need for targeted educational interventions to address persistent inequalities across the life course.