Does the Black/White Wage Gap Widen During Recessions?

Abstract

Researchers have long documented a significant wage gap between White and Black workers, at least some of which is attributable to discrimination. Drawing on research suggesting that discrimination increases during recessions, we test whether the racial wage gap expands during economic downturns. Using longitudinal wage data from the Panel Study of Income Dynamics over a 40-year time period (N = 18,954), we find that the wage gap between Black and White workers increases with the unemployment rate. Moreover, we find that the cyclical wage gap is more pronounced in states in which Whites hold more negative attitudes about Blacks and in states with larger Black populations, suggesting that the racial wage gap expansion during recessions is at least partially driven by discrimination. Finally, we find evidence for at least two mechanisms by which the wage gap expands during recessions. First, we find that Black workers are more likely to lose their jobs during downturns and earn lower wages upon reemployment than comparable Whites. Second, we find that Black hourly workers are slightly more likely to have their hours reduced during recessions than White hourly workers, thereby resulting in lower earnings. These findings suggest that the racial wage gap widens during recessions and that discrimination accounts for at least some of this expansion.

The (In)Flexibility of Racial Discrimination: Labor Market Context and the Racial Wage Gap in the United States, 2000 to 2021

“…Other studies have used unemployment rates as a measurement of labor market tightness (Boulware and Kuttner 2019; Chattopadhyay and Bianchi 2021; Zschirnt and Ruedin 2016). In this study, I use the unemployment rate, which has been used in the previous literature, as one of two measures of labor market tightness or slack.…”

“…In this study, I use wage discrimination as a measurement of racial discrimination in the labor market. Prior research has documented racial discrimination by showing that a gap between whites and nonwhites exists even after controlling for premarket and productivity differences (Altonji and Blank 1999; Chattopadhyay and Bianchi 2021; Corcoran and Duncan 1979; Darity and Mason 1998). I use nationally representative data for all months between December 2000 and December 2021, which allows me to measure racial discrimination reliably across different labor market conditions over time (e.g., periods of economic expansion and economic recession) in a wide range of occupations and industries, and across different racial groups (black, white, Hispanic, and Asian workers).…”

“…These contradicting findings could be explained by the different methodologies, different racial and ethnic groups, and different approaches used to measure labor market tightness used in various studies. Three existing studies measured racial and ethnic discrimination from callback rates using correspondence tests (e.g., audit studies) in the European context (Baert et al 2013;Carlsson et al 2017;Zschirnt and Ruedin 2016), one study relied on discrimination charges (Boulware and Kuttner 2019), and one study used estimates of discrimination from wage regressions (Chattopadhyay and Bianchi 2021). Studies also vary in terms of their target population.…”

“…Zschirnt and Ruedin (2016) conducted a meta-analysis of 43 separate audit studies in Organisation for Economic Co-operation and Development countries. Boulware and Kuttner (2019) and Chattopadhyay and Bianchi (2021) focused on racial discrimination against black workers in the United States. Last, studies also vary in their measurement of labor market tightness, such as the medium duration to fill job vacancies (Baert et al 2013), vacancy-to-unemployment ratios (Carlsson et al 2017), or unemployment rates (Boulware and Kuttner 2019; Chattopadhyay and Bianchi 2021; Zschirnt and Ruedin 2016).…”

Economic scarcity increases racial stereotyping in beliefs and face representation

“…Racial disparities often widen in the wake of economic downturns. For example, in the Great Recession of 2008, Black and Latinx Americans lost their jobs at approximately twice the rate of White Americans-a pattern observed again in 2020 during the recession triggered by the COVID-19 pandemic (Chattopadhyay & Bianchi, 2020;Saenz & Sparks, 2020). Explanations for these disparate effects of economic recession often focus on structural disparities in American society, yet scarcity has been shown to exacerbate prejudice in White Americans' perceptions, judgments, and actions-individual-level forms of prejudice that may meaningfully interact with and contribute to these broader patterns (Krosch & Amodio, 2014;Bianchi, Hall, & Lee, 2018).…”