The Effects of Job and Housing Location on Race / Gender Wage Differentials in Milwaukee : Testing the ` Network Hypothesis

This study considers the joint role of job and housing location as they affect the earnings of different race and gender groups. Building on Wial's (1991) case study of networks in Boston which distribute good jobs, the `network hypothesis' suggests that the channels which distribute high wage jobs inside Milwaukee county are connected to individuals who are predominantly white males and live outside of the county, thereby limiting access for others partly on the basis of race and gender and partly due to job and housing location. Data from the 1990 U.S. census are used to test this hypothesis. The results are consistent with the network hypothesis. The Effects of Job and Housing Location on Race/Gender Wage Differentials in Milwaukee: Testing the `Network Hypothesis' As the sun rises over Lake Michigan, a portion of Milwaukee's inner city is shadowed by the buildings of the central business district. Yet even the most casual observer could not fail to notice that the individuals coming to work in these buildings do not resemble the inner city residents living nearby. Skin color marks the workers as commuters from outside the community, and their attire suggests the commuters are wealthier than local residents. Implicit in this observation is the possibility that differences in earnings by race and gender may have dimensions which are specific to job and housing location. The analysis here uses data on Milwaukee from the 1990 U.S. Census to analyze this issue. Until recently, there was little in the way of theory or evidence to suggest a link between discrimination and job or housing location. In the voluminous literature on discriminatory wage differentials, only a handful of papers consider the effects of housing location, finding that blacks and whites experience positive returns to suburban residence. 1 Surprisingly, where this finding has been unearthed, no compelling explanation emerges from the standard theory (Price and Mills, 1985, p. 9). One might think that the literature on labor segmentation, initiated in the hope of explaining the adverse economic circumstances of urban blacks in the U.S., might offer more, but both job and housing location have historically been ignored in this literature (e.g., Edwards, Reich and Gordon, 1975; Gordon, Edwards and Reich, 1982). This situation changed with the publication of Wial's (1991) study of mobility among young males in three ethnic neighborhoods of Boston. In interviews with both employees and employers, Wial finds evidence of employment networks which funnel young men from `bad' to `good' jobs, which he views as movement from secondary to primary segment jobs. In these networks, individuals strive to use contacts with current employees holding good jobs either to obtain timely or otherwise valuable information about particular 2 job openings or to gain a personal recommendation to the boss. Employers support these networks by either hiring directly through the network or, more commonly, by hiring the first qualified applicant (who is often both first and qualified by virtue of network membership). Wial's study explicitly suggests that job networks are specific to ethnic groups and to residence. By excluding women, the study implies these networks are gender specific as well. Further, Wial finds individuals in his sample limit their job search to employers already connected to the network, hinting that job location may also be specific to each network. It is the role of these four potentially relevant characteristics of segmented labor markets which drive the analysis below. Building on Wial's findings, I hypothesize that white males, living outside of Milwaukee county while holding good jobs inside of the county, maintain a network which distributes these jobs. This possibility is labelled the `network hypothesis. ' 2 For a stereotypic example, suppose we found a whitesonly country club located in the suburbs, excluding women from desirable tee-times, having members who are executives in industry, banking or government within the city, and where jobs are discussed during golf games. If such discussions occur, we would not be surprised if white, males residing in the suburbs tended to fill openings for good jobs in the city. This stereotype, however, misses the far broader channels through which such networks can develop. For example, individuals holding good jobs in the city and commuting from the suburbs may meet through activities relating to school, church, or community organizations in the suburbs, or during lunch or other activities surrounding the workplace. In such settings, either the organization or activity may be segregated or individuals might segregate themselves within the activity by gender and race for informal discussions during which information about jobs may be shared or recommendations of specific individuals for jobs may be given. More directly, a study of employment in downtown Milwaukee conducted in 1991 and 1992 finds the vast majority of new high wage jobs in the revitalized downtown area being held by white suburbanites and the corpus of new low wage jobs being provided