How social segregation leads to economic inequality
In Brown versus Board of Education, the celebrated 1954 ruling that struck down laws segregating schools by race, the Supreme Court declared that "separate educational facilities are inherently unequal." The cause of this inherent inequality, the majority opinion stated, was segregation's psychological impact on children. It made African-American children feel inferior and thus less motivated to learn. A new study argues that simple economic forces arising from segregation directly create economic inequity, independent of any psychological effects.
Indeed, the power of segregation may be even greater than commonly thought. The study shows that even when there is no history of discrimination between two groups, social segregation alone can cause dramatic economic inequities to develop.
Rajiv Sethi of Columbia University, Glenn Loury of Brown University in Providence, R.I., and Sam Bowles of the Santa Fe Institute in New Mexico, have created a simple mathematical model for understanding the interaction between segregation and inequality. They imagined a situation in which discrimination that had historically existed between two groups of people came to an end, so that people from both groups who had equal skills subsequently began earning equal wages. The researchers then asked whether, over many generations, the income of the two groups would tend to equalize or whether the disparity would persist.
The model incorporated the idea that parents tend to invest more heavily in giving their children the skills that employers value when they expect that investment to pay off later in higher wages. It also included the fact that children are more likely to succeed when they are surrounded by other children who are succeeding. For example, studies show that having friends with strong vocabularies helps a child to pick up more words with less effort.
The latter effect makes informal, social segregation particularly damaging, the researchers found. People who have been subject to discrimination in the past are less likely to have acquired the skills needed for high-wage jobs, compared with those who were not subject to discrimination. Their children, then, are less likely to pick up those skills naturally at home. Furthermore, in a socially segregated society, children will mix mostly with peers from their own group. As a result, children from the less-advantaged group will be less able to pick up high-wage skills from their friends.
These impediments make parents' investment in their children's future wage-related skills less likely to pay off, leaving parents less inclined to make the investment than parents in a socially advantaged group. The children are thus likely to have less economic success in adulthood.
"If you have enough integration between the social networks of the two groups, the inequality will go away over generations," Sethi says, but otherwise, the inequality could get worse, the study shows. "Equal opportunity won't be enough," notes Sethi. He presented the team's results July 7 at PET07, the conference of the Association for Public Economic Theory, in Nashville.
The researchers also performed their mathematical experiment with two segregated groups that began with equal skills and income. The team found that even when the two groups start out equal, some slight discrepancy is bound to develop randomly over time. As soon as that happens, the same dynamics come into play and magnify the inequality, making one group wealthier and more highly skilled and the other group poorer and less skilled.
This result should serve as a warning for societies with strong social divisions, Sethi says. Even when social groups are economically equal, continued segregation may result in inequality over time.
Sethi sees evidence that some areas of the United States today are socially segregated enough to cause increasing inequality. In particular, he and Rohini Somanathan of the University of Delhi found that in Manhattan, the degree of segregation in housing was far greater than it would be if it were just a side effect of segregation by income.
To calculate what racial segregation in Manhattan would look like if it derived only from unequal distribution of income, the researchers created a hypothetical map of the city. In each neighborhood, the income distribution accurately follows data from the 2000 Census, but the demographics are adjusted so that the proportion of black and non-Hispanic white households reflects statistics for Manhattan as a whole. For example, on average across Manhattan, blacks represent 53 percent of black and white households in the lowest income category, with household earnings of less than $10,000 per year. In real life, that percentage varies widely from the average in different neighborhoods, but in the adjusted map, every neighborhood has blacks making up precisely 53 percent of the households in this lowest income category.
Similarly, each neighborhood is ascribed the same percentage of blacks in each higher income category. The percentage of black households declines with rising income, falling to 3 percent in the highest income category (more than $200,000 annually).
This re-imagined map shows far less racial segregation than in the true depiction in Figure 1, suggesting that people choose to live in areas with a high percentage of people of their own race. Because people's social networks are usually strongest in their own neighborhoods, the map suggests that Manhattan also has a high level of social segregation, which could impede efforts to erase economic inequalities.
The positive side of the study, however, is that integration has a powerful effect in ending inequalities. "If equality between groups is a social objective," Sethi says, "the way to do it is through integration."
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