Fields of Study and the Earnings Gap by Race in Brazil

• Date: 01 August 2017
• Published date: 01 August 2017
• DOI: http://doi.org/10.1111/rode.12292
• Author: Mauricio Reis

Fields of Study and the Earnings Gap by Race in

Brazil

Mauricio Reis*

Abstract

Workers with tertiary education in Brazil earn three times more than those with a lower level of

schooling. Thus, the attainment of a bachelor’s or graduate degree by a black worker usually provides

important benefits at the individual level. However, an educational improvement of this type does not

assure equal labor market outcomes relative to white workers with the same level of education. The

labor earnings differential by race in Brazil is high even among individuals who completed at least a

bachelor’s degree. This paper investigates this labor earnings gap, emphasizing the unequal distribution

of whites and blacks across fields of study. Evidence indicates that disparities in the distribution of racial

groups across fields of study help explain 18% of the total median earnings differential in 2000 and 33%

in 2010, accounting for most of the gap between white and black workers due to characteristic effects in

this latter period.

1. Introduction

The labor earnings difference between white and black workers is noticeably high

in Brazil, and disparities in the schooling level by race help to explain an important

part of this earnings gap (Grad

ın, 2014; Garcia et al., 2009; Salardi, 2012).

Educational differences between whites and blacks are clearly illustrated by the

proportion of individuals in each one of these two groups who attained tertiary or

higher education. In 2000, only 3.7% of black workers in Brazil had at least a

bachelor’s degree, while 8.5% reached this level of schooling in 2010. In the latter

period, however, 22.2% of white workers had a bachelor’s or graduate degree.

1

As a consequence of the improvement in the average educational level of black

individuals over time, the participation of this racial group in the Brazilian labor

force with a bachelor’s or graduate degree increased from 15% in 2000 to 25% in

2010. Workers with at least a bachelor’s degree in Brazil earn three times more

than those with a lower level of schooling, on average, and this educational

improvement contributed to important earnings gains for many black individuals,

who entered a select group that comprised 15% of the Brazilian labor force in

2010. Although the attainment of a bachelor’s or graduate degree by a black

worker usually provides important benefits at the individual level, it does not

assure equal labor market outcomes relative to white workers with the same level

of education. Census data also show that whites earned 39% more per hour than

*Reis (Corresponding author): Instituto de Pesquisa Econ^

omica Aplicada, Av. Presidente Antonio

Carlos, 51(1409), Rio de Janeiro, RJ, Brazil 20020-010. Tel: +55-21-3515-8586; Fax: +55-21-3515-8547;

E-mail: mauricio.reis@ipea.gov.br. This paper has benefited from helpful comments and suggestions from

Paola Salardi, two anonymous referees, and participants at the 2013 IARIW-IBGE Conference on

Income, Wealth and Well-Being in Latin America (Rio de Janeiro, 2013), the 19th LACEA Meeting

(Sao Paulo, 2014), the 42th ANPEC Meeting (Natal, Brazil, 2014), and seminar participants at IPEA-Rio

and INSPER.

Review of Development Economics, 21(3), 756–785, 2017

DOI:10.1111/rode.12292

©2016 John Wiley & Sons Ltd

did blacks among Brazilian workers with at least a bachelor’s degree in 2000, while

in 2010 the hourly labor earnings differential between whites and blacks increased

to 41%.

The literature on labor earnings differences by race in Brazil provides evidence

that disparities in years of schooling represent a large share of the earnings gap.

According to Grad

ın (2014), education accounts for one-third of the total gap,

while Salardi (2012) provides evidence that education helps to explain more than

half of the earnings differential by race in Brazil. However, findings that the racial

differential remains elevated even among those at the top of the educational

distribution indicate that equalizing whites’ and blacks’ years of schooling does not

seem to be enough to equate racial differences in labor market outcomes. Thus,

instead of analyzing individuals in all educational groups as previous studies did,

2

the objective here is to investigate the labor earnings differential between white

and black workers with a bachelor’s or graduate degree in Brazil. In the context of

increasing years of schooling among Brazilian black workers, this paper aims to

identify other factors besides low education that may also constitute a barrier to the

reduction of the racial labor earnings differential.

An aspect that draws attention when comparing white and black individuals with

tertiary education in Brazil is the unequal distribution across fields of study. Black

workers are more concentrated in areas like education, arts, languages and

humanities, and social care, while white individuals are more represented in

engineering and health professions. Several studies present evidence for different

countries indicating that university premium varies substantially by field of study

(Altonji, 1993; Blundell et al., 2000; Finnie and Frenette, 2003; Kelly et al., 2010;

among many others). The Brazilian labor market not only exhibits important

earnings differences across fields of study, but also the participation of black

individuals is much higher in fields of study with lower average earnings. In both

2000 and 2010, for example, the average labor earnings in engineering are three

times higher than that in education. Thus, the distribution of white and black

workers with tertiary education across fields of study is an element that may play a

role in the labor earnings gap by race in Brazil.

Another factor that may contribute to the earnings gap by race among

individuals with a graduate degree is the mismatch between field of education and

occupation. Some of the human capital accumulated during tertiary education is

occupation-specific and an individual may have an income penalty when his or her

occupation does not match the field of study (Robst, 2007; Nordin et al., 2010),

mainly when the occupation requires a lower level of schooling (Hartog, 2000).

Fernandes and Narita (2001) provide empirical evidence indicating that effects

associated with this type of mismatch are also present in the Brazilian labor market.

As the mismatch between field of study and occupation is greater among black

workers than among white ones, its consequence for the racial earnings gap is also

investigated in this paper. It should be mentioned that there are many other

elements that may contribute to explaining this earnings differential by race in

Brazil, such as demographic characteristics, proportion of workers with a graduate

degree, which are also considered in the empirical approach, as well as unobserved

variables, such as discrimination and quality of education.

The aim of this paper is to decompose the labor earnings differential between

Brazilian white and black workers with tertiary education in order to investigate

which elements affect the high racial gap that still persists even among those who

have reached the top of the educational distribution. The empirical analysis

EARNINGS GAP BY RACE IN BRAZIL 757

©2016 John Wiley & Sons Ltd