There has been a rise in the jobless rate for blacks. This has set back the progress of the United States on labor market parity. The job report for July brought more jobs than was expected with the United States adding 943,000 nonfarm payrolls. There has also been a drop in the unemployment rate to 5.4%. So, the dip was more than what had been expected by the experts. In fact, the numbers in July had been so good that the nation was able to shave four months off of economic recovery. But irrespective of such positive reports, the black unemployment rate is increasing.
The Black unemployment rate dropped by 1%, while the Latinx or Hispanic unemployment rate dropped by 0.8%.
Unemployment rates are still high for Black, and these Black unemployment rates are much higher than the pre-pandemic rates. Even though the unemployment rate dropped due to people dropping out of the labor force, the rate at 8.2% was less than the unemployment rate for the dropout of High School that was 9.5%.
The drop in the unemployment rate continues to be left out as economic recovery picks up.
The Labor Market has been Designed to Create an Unemployment Gap Between Black and White
The drop in the Black unemployment rate gap is not by accident. This is because the labor market has been designed in such a way that it leads to a gap. Tight labor markets will be able to close this gap. The theory implies that in a tight labor market where the economy is closer to full employment, the employers are unlikely to discriminate, letting people conventionally on the labor market margins to ultimately get hired. Even though this phenomenon might help in explaining the dropping Black unemployment rate, it will not be able to explain the gap.
As unemployment data disaggregated by race became available for the first time in 1972, African Americans have shown the rate of unemployment for white doubled consistently. This gap has persisted through the best economies and through some serious economic downturns.
Black Unemployment Rate Has Been Twice the White Unemployment Rate
The pattern of racial differentiation in the labor market stays consistent whether partitioned by gender, age, veteran status, or education level. CAP’s Feb 2020 brief made an argument that the pattern is an outcome of structural racism. So, the barriers in the labor market, including employment discrimination and mass incarceration, create an environment that lets the gap persists. So, it leads to unequal results in the data. The COVID-19 pandemic policymakers the chance to fix the issue and the later section of the column focuses on three certain policies for addressing structural racism in the economy of the United States.
COVID-19 Pandemic Resulted in a Temporary Closure of Unemployment Gap
If the labor markets do their work temporarily, it isn’t a sustainable policy to close the unemployment gap between Black and White permanently in the United States. It is unfortunately shown to be true when several people lost their jobs in the month of March because of the pandemic. Moreover, the present-day tight labor market has also come to an end with the recession induced by the pandemic. Almost 11 million people have lost their jobs due to the pandemic, and they are still out of jobs.
But the unemployment rate gap closed for some time. From March 2020 to April 2020, the figure dropped from 2.03 to 1.27. This might appear to be a positive development but due to the pandemic, the downturn has been different. In March, Black unemployment rose much faster than it did for white people. But in April, even though the unemployment rates increased, the rise was high for blacks and white. Thus, it led to a fall in the ratio.
However, essential jobs are in the low-earning sector. They don’t provide hazard pay and also place workers at a higher risk of being infected by a coronavirus. Even with the higher presence of blacks in the essential jobs, they are still experiencing a high rate of unemployment in comparison to the whites.
The economy began to recover slowly in May 2020 with $1200 federal stimulus checks and increased the benefits of unemployment insurance making their way to the individuals that qualified for it- the black to white unemployment rate started rising, falling yet again to a persistent and consistent pattern that has been highlighted in the February issue of CAP.
Unless the targeted policies focus on addressing the structural hindrances in the labor market, the gap will keep rising to manifest as the equilibrium outcome. Economists have seen in many other cases that structural issues can’t be solved with the help of cynical policies.
What Policies can Create an Inclusive Economic Recovery?
The pandemic has given policymakers the chance to create their own economic recovery plan, which doesn’t leave behind anyone. The recovery packages should include provisions that will handle structural racism. Here are the three policies that will help in reducing the Black unemployment rate.
- Strengthening Worker Power: Unions can reduce racial inequality by increasing earnings and leading to more economic stability for the blacks. Thus, policymakers need to enforce legislation that will help with the creation of unions and ascertain collective bargaining rights.
- Enforce Anti-Discrimination Laws More Strongly: The EEOC- Equal Employment Opportunity Commission enforces the anti-discrimination laws. But its effectiveness has waned in the last 40 years. It has caused the racial differences in the labor market to become worse.
- Reduces Barriers for Citizens Entering the Society Yet Again: Several years of disparities in the system of criminal justice have led to racial disparities in the incarceration rates that have caused the overrepresentation of Blacks with a criminal record and reduced the prospects of the labor market when they reenter the society.
Bottom Line
Economists have to say that while anticipating the next monthly job report, they can’t just depend on the unemployment rate as the mark of economic recovery since it masks underlying dynamics not just by race but also by age, gender, and geography.
