How does Steinbeck handle the issue of racial prejudice in his portrayal of Lee, Adam's Chinese servant, and "the Nigger," whorehouse madam?

Perhaps due to the times, Steinbeck was influenced by the prevailing attitudes at the time which in our current worldview could be considered borderline racist. However, we can give credit to him by the subtle manner with which he handles the topic by not outrightly showing disdain for any particular group of people.

He goes beyond just using stereotypes ( in the case of Lee, speaking pidgin) and actually addresses the issue by brilliantly building up this character to a point where, though a servant, is not a slave and actually comes out as a very intelligent person to be relied upon by Adam's family.

The Nigger, on the other hand, is merely a descriptive name which at the time would have been tolerated. Steinbeck says nothing degrading about her as a person and indeed builds her up as a person of great value providing an essential service at the time. You can tell this even by dignity in her funeral.

One would fault Steinbeck for portraying these characters in positions of servitude, his audience at the time would have expected as much. However, he more than makes up for this (currently) perceived bias by building up these characters beyond a level that would have been expected of them at the time.