Racial Recession

Economists seem to have settled on a name for the economic calamity we have just lived through. They call it the "Great Recession." As bad as the economy has been at the aggregate level, for minorities it has been much worse. It was a Great Recession for whites. It has been a Great Depression for blacks.

The chart below depicts the sorry truth that the latest experience is a statistical regularity. However bad the unemployment rate is for the general population, it is always worse for black Americans. On average, the black unemployment rate has been 6.6 percentage points higher than the white unemployment rate since 1972. According to the most recent data, the unemployment rate for blacks is 7.8 percentage points higher than the rate for whites.

The climb during the latest downturn is par for the course. In times of recession, when the probability of being unemployed increases 1 percent for whites, it increases 1.5 percent for blacks.

On average, the black unemployment rate has been 6.6 percentage points higher than the white unemployment rate since 1972.

There is a vast academic literature studying the causes of high black unemployment. A number of factors have been found to contribute to the disparity, such as skill levels, location, and the fact that blacks may have been disproportionately harmed by the decline of the Rust Belt manufacturing economy. But studies tend to find that a large share of the variation is unexplained by things we can measure. This suggests that discrimination may well still be a factor in the American labor market.

One recent study by economists Yusuf Baskaya and Isaac Mbiti of Brown University went to Olympian lengths to explain the differential employment results and found that they could not, then concluded that employment differences "may stem from discrimination by employers who lay off black workers disproportionately during economic downturns." While it is possible that there is some other omitted variable, Occam 's Razor suggests that discrimination is alive and well.

This might surprise many readers who live and work in well-integrated communities. Baskaya and Mbiti can explain the surprise, too. They found that there appears not to be any sign of discrimination against higher-skilled workers, those in the highest quartile of the wage distribution.

U.S. Unemployment Rate by Race

Conservatives often object, correctly, to crude Democratic policies that target these issues, such as affirmative action. One should not, however, deny that discrimination exists. It is the simplest explanation for the data we see. It also argues for conservative policies.

If, for example, blacks with higher skills are unlikely to experience discrimination, then let's improve minority education with charter-school initiatives. If the economy suffers because marginal tax rates rise, then blacks will feel it the most. If blue-collar wages and employment respond favorably to corporate tax rates, then lowering them will disproportionately benefit black workers.

In last year's election, 96 percent of black Americans voted for President Obama. Since then, they have suffered immeasurable harm, harm that could have been eased by these and other conservative policies. If conservatives want to appeal to black Americans, they can start by admitting there is a problem.

Kevin A. Hassett is a senior fellow and the director of economic policy studies at AEI.

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About the Author

 

Kevin A.
Hassett
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.



    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

  • Phone: 202-862-7157
    Email: khassett@aei.org
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