Asian Americans are the only non-white US racial group to experience long-term, institutional discrimination yet today exhibit high income. I reexamine this puzzle. I focus on California, where most Asians settled historically. Asians achieved extraordinary upward mobility relative to both blacks and whites for every cohort born in California since 1920. This mobility stemmed primarily from gains in earnings conditional on education, rather than unusual educational attainment. Historical test score data suggest that low initial earnings for Asians--unlike blacks--primarily reflected prejudice rather than skills. Asian history is consistent with the view that racial earnings gaps driven by contemporary prejudice do not persist in sufficiently competitive labor markets.
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