Problem

Suppose empirical studies have discovered that an additional year of schooling raised wages by 7 percent in 1 970, regardless of the worker's race or ethnicity. The evidence also indicated that, holding education constant, a white worker earned 15 percent more than a Hispanic worker. Assume that education is the only factor that affects productivity and that the average white worker had 12 years of schooling in 1970, whereas the average Hispanic worker had 9 years. By 1980, the average white worker had 13 years of education, whereas the average Hispanic had 11 years. A year of schooling still increased earnings by 7 percent, regardless of the worker's ethnic background. And the wage differential between the average white worker and the average Hispanic was 24 percent. Was there a decrease in wage discrimination during the decade? Was there a decrease in the share of the wage differential between whites and Hispanics that can be attributed to discrimination?