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Fed’s “Racism and the Economy” series explores racial inequities in labor markets

Second event in virtual series looks at causes, solutions for racial employment disparities

December 2, 2020

Fed’s “Racism and the Economy” series explores racial inequities in labor markets

Economist Valerie Wilson says a half century of racial inequities in the U.S. labor market can be mostly summed up in a simple ratio: 2 to 1.

Over the past 48 years, White job seekers have been twice as likely as Black counterparts to secure employment during any four-week period, Wilson said. She added the 2-to-1 ratio holds across all ages, education levels, genders, and macroeconomic conditions, all the way back to when the U.S. Bureau of Labor Statistics began breaking out unemployment by race in 1972.

“Over the last 4½ decades, only the most highly educated and most experienced Black workers have approached anything near unemployment rate parity with their White counterparts, and only during periods of exceptionally low rates of unemployment,” said Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity, and the Economy.

Wilson was among several experts who joined three Federal Reserve Bank presidents on Nov. 17 in the second event of the “Racism and the Economy” series, which focused on racial inequities in the labor market. The seven-part series, sponsored by the Federal Reserve Banks of Atlanta, Boston, Minneapolis, and San Francisco, examines structural racism, its impacts, and ways to dismantle it.

Examining occupational segregation

The Nov. 17 conference focused largely on “occupational segregation,” the exclusion of Blacks and Hispanics from professional and managerial roles, and over-representation of these groups in lower-wage occupations such as food preparation, cleaning, and health care services and support.

Before the pandemic, the share of Blacks and Hispanics in such work was far greater than that of Whites, said Atlanta Fed president Raphael Bostic.

Those jobs typically offer low pay, limited advancement opportunities, and few benefits. Making better jobs more accessible to people of color would help erode broad racial inequities in the labor market, numerous speakers said. But discrimination inhibits equitable outcomes, said Rebecca Dixon, executive director of the National Employment Law Project.

Dixon also cited policies dating back to New Deal programs that excluded half of all Black, Latino, and Native American workers from Social Security.

Some speakers also put blame on the Fed. Wilson said by raising the federal funds rate prematurely during economic expansions, the central bank may have shut down job growth before it reached workers of color.

Several speakers also note research that reveals that racial gaps in pay and access to higher-wage occupations persist regardless of education and skills. In fact, the job market status of Blacks is unchanged from 1950, if mass incarceration and the number of Blacks who have left the labor force entirely is accounted for, said William Rodgers, chief economist at Rutgers University’s Heldrich Center for Workforce Development.

“That’s why this conversation and what comes out of it is so important,” he said.

Proposing solutions

Conference speakers proposed several solutions for eliminating racial inequities in employment markets, including:

  • Fostering enlightened self-interest in the corporate sector: Delta Air Lines chief executive officer Ed Bastian said executives should realize that improving recruitment, training, and advancement of workers of color boosts profits. More diverse perspectives produce more creative thinking, better decisions, and happier employees and customers, he said.
  • Strengthening the Equal Employment Opportunity Commission: The EEOC’s funding in inflation-adjusted terms has not increased since the 1980s even as the labor force has grown by about 50 percent, Dixon noted. The result is case backlogs and generally feeble enforcement of workplace anti-discrimination rules.
  • Rethinking job applicant screening policies and algorithms: For instance, requiring a bachelor’s degree as a screening mechanism often doesn’t make sense, when job duties don’t truly demand it, said Byron Auguste, CEO and co-founder of the nonprofit Opportunity@Work. Such a requirement immediately excludes 75 percent of Black workers, 80 percent of Hispanics, and 80 percent of rural residents, Auguste said.

Presidents on why racial disparities matter to the Fed

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Racism and the Economy: Focus on Employment policy brief

Read the event's resulting policy brief

The presidents of the Atlanta, Boston, and San Francisco emphasized how racism shapes labor market conditions. The Boston Fed’s Eric Rosengren said that while economic discussions typically focus on the sheer numbers of jobs, the quality of those jobs is crucial. That’s become clear during the pandemic, during which people of color are being disproportionately affected, in part because they hold a larger share of lower quality jobs.

It can be easy to forget how important a high-quality job is these days, Rosengren said, adding he finds himself complaining after a long day of virtual meetings.

“But then I'm reminded that I do not encounter a dangerous work environment each day, that I have money to feed my family and many others don't,” Rosengren said. “I am not faced with the decision of leaving my children alone in an empty house in order to keep my job, or wondering what will happen to me or my family if I get sick and have no sick days to use.”

“The quality of jobs influences the quantity of jobs for many people of color,” he said. “More needs to be done.”

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