Objective. Debate over the causes of wage inequality have raised suggestions that, rather than discrimination, skill differences may be the reason for racial wage disparities. The purpose of this research is to examine what impact on-the-job skill differences have on wage inequality.

Method. I regress the log wage onto race and a measure of skill. The Multi-City Study of Urban Inequality Employer Survey is particularly useful in this analysis because it contains the employer's evaluation of the worker's relative skill against other workers.

Result. When white and black men have the same employer's competitive performance rating, rather than decreasing racial wage differences, the differences actually increase.

Conclusion. The wage gap is not a skills gap, but evidence of racial discrimination in the labor market.