The Sexual Orientation Wage Gap for Racial Minorities

• Published date: 01 January 2015
• Author: Michael D. Steinberger,Jamie H. Douglas
• Date: 01 January 2015
• DOI: http://doi.org/10.1111/irel.12077

The Sexual Orientation Wage Gap for Racial

Minorities

*

JAMIE H. DOUGLAS and MICHAEL D. STEINBERGER

We explore the sexual orientation wage gap across four race and ethnic groups in

the 2000 U.S.Census: Asian, black, Hispanic, and white. Using decomposition

analysis, we explore if racial minority groups experience the same pattern of sex-

ual orientation wage differences as their white counterparts, and how racial and

sexual orientation wage differences interact over the distribution of wages. For

men, we show a combined unexplained penalty greater than the sum of their

individual unexplained race and sexual-orientation differentials. Racial minority

lesbians, however, earn higher wages than what the sum of their racial and

sexual-orientation analyses would suggest.

Introduction

There are an estimated 8.8 million American adults who identify as gay, les-

bian, or bisexual, representing nearly 3.5 percent of the U.S. population (Gates

2011). The existing literature generally focuses on aggregate statistics for gay

and lesbian individuals and finds that gay men experience lower wages than

their heterosexual counterparts (Badgett 1995; Elmslie and Tebaldi 2006), while

lesbian women generally make more than heterosexual women (Klawitter

2012). Estimates suggest that racial and ethnic minorities are more likely than

white Americans to identify as lesbian, gay, bisexual, or transgender (LGBT):

4.6 percent of African Americans, 4 percent of Hispanics, 4.3 percent of

Asians, compared to 3.2 percent of whites (Gates and Newport 2012).

Research that examines the wages of racial minorities (regardless of sexual ori-

entation) generally documents lower average earnings relative to whites (Fryer

2011). While an increasing amount of scholarship documents wage differences

by sexual orientation, there is little systematic investigation of whether the

*

The authors’affiliations are, respectively,Department of Economics, University of Washington, Seattle,

Washington Email: jamiehd@uw.edu; Pomona College Department of Economics, Claremont, California and

UCLA Williams Institute, Los Angeles, California Email: michael.steinberger@pomona.edu.

JEL: J15, J16, J31.

The authors would like to thank Heather Antecol, M.V. Lee Badgett, Christopher Carpenter, numerous

seminar participants, and three anonymous referees for excellent input that improved the paper.

INDUSTRIAL RELATIONS, Vol. 54, No. 1 (January 2015). ©2014 Regents of the University of California

Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington

Road, Oxford, OX4 2DQ, UK.

59

sexual orientation wage gap varies for racial minority groups. This study

explores if racial minority groups experience the same pattern of wage differ-

ences by sexual orientation as their white counterparts, and how racial and

sexual orientation wage differences interact over the distribution of wages. We

explore the role of human capital characteristics in explaining the observed

wage gaps, and investigate whether unexplained factors associated with race

and sexual orientation magnify or counteract each other in the wages of racial

minority gays and lesbians.

Using data from the 2000 U.S. Census, we document the sexual orienta-

tion wage gaps across four race and ethnicity groups: Asian, black, His-

panic, and white. We use the framework set forth in Antecol, Jong, and

Steinberger (2008) to explore the sexual orientation wage gap over the dis-

tribution of hourly earnings when we compare racial minority gay men and

lesbians to their same race heterosexual counterparts. To investigate the role

of race we then compare the wages of Asian, black, and Hispanic gay men

and lesbian women to their white gay and lesbian peers. Finally, to exam-

ine the potential for interaction effects of race/ethnicity and sexual orienta-

tion, we compare the wages of racial minority gay men and lesbian women

to white heterosexual workers and contrast the observed difference to what

we would expect based on summing the separate race and orientation

differences.

The sexual orientation wage gap does vary by race and ethnicity. While

white gay men earn less than their heterosexual married counterparts, this pat-

tern is reversed for black and Hispanic men. The large wage advantages of

white lesbian women relative to their same-race heterosexual peers are not

found to the same degree for other racial groups. The determinants of the

wage gaps also show interesting results. For sexual-orientation minorities with

observed wage advantages, we find that differences in human capital accumu-

lation (particularly education) are the main factor behind the observed wage

gaps. However, for sexual-orientation minorities with observed wage penalties,

unexplained factors are the primary determinants of the observed gaps. For

men, our results provide evidence of a combined unexplained penalty that is

greater than the sum of the individual unexplained race and sexual-orientation

differentials. Racial minority lesbians, on the other hand, earn wages that are

higher than what the sum of their racial and sexual-orientation analyses would

suggest.

The next section provides an overview of the literature on the wages of

racial and sexual-orientation minorities. We then describe our data, followed

by a section in which we illustrate the variation in the sexual orientation wage

gap by race. The determinants of the observed wage gaps are explored next,

using an Oaxaca–Blinder (1973) decomposition for the average wage gap and

60 / JAMIE H. DOUGLAS AND MICHAEL D. STEINBERGER

a DiNardo, Fortin, and Lemieux (1996) decomposition to examine the wage

gap along the distribution of wages.

Literature Review

A complete review of the literature on racial and sexual orientation minority

wage gaps in the United States is beyond the scope of this study. We therefore

focus on overall trends in the literature and suggest avenues for further reading.

The black–white wage gap, and its change over time, has been studied

extensively in the United States. While black men tend to earn less than their

white counterparts, there are much smaller differences in the average wages of

black and white women (Altonji and Blank 1999; Couch and Daly 2002; Fryer

2011). The black–white male gap has converged markedly since the 1960s,

due largely to increases in the educational attainment and the returns to educa-

tion of black workers.

1

,

2

Hispanic men and women both tend to earn less than

their non-Hispanic white peers (Antecol and Bedard 2002; Borjas 1982;

Reimers 1983; Smith 2003).

3

Unlike other racial minorities, Asian American

men and women tend to earn higher average wages and have higher educa-

tional attainment than their white peers (Suh 2009; Waters and Eschbach

1995). Similar to Hispanics in the United States, there is wide dispersion in

the wages of Asian Americans by country of origin.

Although attention to sexual-orientation minorities has developed more

recently than research on racial and ethnic minorities, the literature on the

wage gaps of sexual-orientation minorities has grown quickly. In the seminal

paper in the field, in 1995, Badgett used General Social Survey data and docu-

mented a wage penalty between 11 and 27 percent for behaviorally gay and

bisexual men and a similar, but statistically insignificant wage penalty for les-

bian and bisexual women. Subsequent studies using other data sources consis-

tently documented wage penalties for gay men relative to straight men,

1

The literature on racial wage gaps within the United States shows estimates of wage gaps will be

biased if sample restrictions systematically exclude members of the general population (for example, Blau

and Beller 1992; Chandra 2000, 2003; Heckman 1979; Heckman, Lyons, and Todd 2000; Neal 2004). Our

analysis, which is focused on estimated wages for working individuals in the U.S. Census, will therefore

potentially not reflect latent earnings differences for the general (working and nonworking) population.

2

If there are differences in average educational quality (Card and Krueger 1992; Neal and Johnson

1996) the documented differences in our sample in the quantity and return to educational attainment of racial

and sexual orientation minorities relative to heterosexual whites may not represent the full heterogeneity of

schooling-related human capital between groups.

3

Particularly salient in the literature of explanations behind the wage gaps of Hispanic workers is con-

sideration of recent immigration status and country of origin. We explore one measure of this issue through

analyzing differences in our results by citizenship status.

Sexual Orientation Wage Gap by Race /61