Working Paper

Racial Gaps in Labor Market Outcomes in the Last Four Decades and over the Business Cycle

Abstract: We examine racial disparities in key labor market outcomes for men and women over the past four decades, with a special emphasis on their evolution over the business cycle. Blacks have substantially higher and more cyclical unemployment rates than whites, and observable characteristics can explain very little of this differential, which is importantly driven by a comparatively higher risk of job loss. In contrast, the Hispanic-white unemployment rate gap is comparatively small and is largely explained by lower educational attainment of (mostly foreign-born) Hispanics. Regarding labor force participation, the remarkably low participation rate of black men is largely unexplained by observables, is mostly driven by high labor force exit rates from employment, and has shown little improvement over the last 40 years. Furthermore, even among those who work, blacks and Hispanics are more likely than whites to work part-time schedules despite wanting to work additional hour s, and the racial gaps in this involuntary part-time employment are large even after controlling for observable characteristics. Our findings also suggest that the robust recovery of the labor market in the last few years has contributed significantly to reducing the gaps that had widened dramatically as a result of the Great Recession; however, the disparities remain substantial.

Keywords: Business Cycle; Discrimination; Inequality; Labor Force Participation; Racial Disparities; Unemployment;

JEL Classification: J00; J15; J16; J64; J7;

https://doi.org/10.17016/FEDS.2017.071

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2017-06-30

Number: 2017-071

Pages: 33 pages