Racial inequities made worse by COVID-19 demand strong policy countermeasures

David Wilcox (PIIE)

March 2, 2021 5:00 AM
Image credit: 
REUTERS/Carlo Allegri

A depressingly familiar aspect of the COVID-19-driven economic collapse has been the fact that people of color have borne its economic cost disproportionately. Black and Latinx workers suffered higher peak rates of unemployment than did white workers. The jobs situation has improved for all major groups since last April but less for Black and Latinx workers than for white workers.[1]

That much is well known. But new research, reported in a paper that I coauthored with Darrick Hamilton, Ofronama Biu, Christopher Famighetti, Avi Green, and Kyle Strickland, spotlights additional factors that have importantly shaped the relative labor market experiences of different races and ethnicities during the past year and over a longer timeframe.

Occupational crowding has mattered greatly

Higher unemployment rates for Black and Latinx workers last year followed a historical pattern. But another pattern was not repeated: Generally, the unemployment rate increases more for Black workers than for white workers during a recession. Yet between February and April last year, the unemployment rate for Black workers increased 10.7 percentage points—slightly less than the 11.1 percentage point increase for white workers.[2] The increase last year for Latinx workers (14.5 percentage points) exceeded that for white workers by about the historically typical amount.

Patterns of representation in various occupations probably help explain the historical anomaly for Black unemployment and suggest that the situation for Latinxs was even worse than the unemployment data alone would indicate. Black and Latinx workers are overrepresented in jobs that combined two characteristics that proved highly relevant—in some cases deadly—during the pandemic: First, these jobs were deemed “essential,” and thus were generally not subject to stay-at-home restrictions that applied to other jobs. Second, these jobs intrinsically involve close physical proximity to colleagues or customers.[3] As a result of being overrepresented in such jobs, Black workers probably suffered less unemployment than otherwise would have been the case but also more health risk. This finding casts the surprisingly small increase in the unemployment rate for Black workers in a different light. Latinx workers also were overrepresented in jobs combining these two characteristics, suggesting that while they “only” experienced the historically typical excess amount of unemployment relative to whites, they too (like Blacks) experienced a disproportionate amount of on-the-job health risk.

Another disturbing finding is that in these same roles (jobs deemed “essential” and involving high physical proximity to colleagues or customers), white men were paid relatively more and other groups correspondingly less. All told, Black and Latinx workers faced higher peak rates of unemployment, were overrepresented in high health risk occupations, and were paid less.[4] These patterns are likely to persist as service sectors reopen.

Education does not guarantee fair treatment

To address these labor market inequities, many experts recommend that relatively disadvantaged groups invest in more education.[5] For many Blacks and Latinxs, a college diploma will indeed lead to a higher and more secure standard of living, just as it does for many whites. But even a college degree does not guarantee a Black or Latinx worker access to fair treatment in the labor market: Black and Latinx workers with a college degree or more are unemployed at higher rates than similarly credentialed white workers.[6] Black workers with a college degree earn much less than comparable white workers.[7] Further, as Hamilton et al. 2020 note, “the median Black family headed by a person with a college degree has only two-thirds of the wealth of the median White family headed by a high school dropout” (p. 16). Some health differentials are wider at higher rungs of the educational ladder.[8]

Lest one think the credentials gap might somehow reflect that Black families place less value on education, Hamilton et al. note: “Black students attain more years of schooling and credentials than White students from families with comparable resources.”[9]

Policy recommendations

Racial inequities are deeply embedded in the structure of American society. A broad range of actions will be required to remedy centuries of wrongs. Hamilton et al. offer 12 aggressive policy steps that, taken together, would promote a more equitable recovery from the COVID-19 collapse and begin to redress serious structural racial inequities (p. 27). All deserve serious consideration. In the interest of brevity, I will highlight just one.

Even though education is not a panacea, it is a crucial aspect of how the next generation is equipped with the skills they will need to succeed in the workforce and in society more generally. At present, elementary and secondary education are funded in a way that perpetuates racial inequity. One example makes the point. In Winnetka, IL and surrounding towns—privileged suburbs north of Chicago—the median household income in the community is $167,000, and 1.4 percent of families receive benefits through the Supplemental Nutrition Assistance Program (SNAP). At New Trier High School (the public high school that serves the area), fewer than 1 percent of the students are Black, and spending in 2019 averaged $25,505 per student. By contrast, in relatively impoverished Bertie County, North Carolina, the median household income is $33,000, and more than 41 percent of families receive SNAP benefits. At the county public high school, 87 percent of the students are Black and spending per pupil averaged $14,631.[10] The amount of school spending per pupil has been shown to be associated with improved outcomes.[11] If anything, to overcome longstanding inequities, the spending disparity between New Trier and Bertie County high schools should be reversed.

One step that would help break the cycle of privilege—and exclusion from privilege—would be to loosen the link between local property taxes and school funding. Exactly how to do that in a way that will be politically viable is not clear; wealthy communities no doubt will staunchly defend their prerogative to lavish on the extras—but one approach might be to put a much more generous floor under funding for all students. Short of steps like that, and many others as well, the American promise of equality of opportunity will ring hollow in the ears of too many of our fellow residents.

Notes

1. The unemployment rate for whites peaked at 14.1 percent, the rate for Blacks reached 16.7 percent, and the rate for Hispanics topped out at 18.9 percent. On net, the employment-to-population ratio has declined from February 2020 to January 2021 by 3.4 percentage points for whites, 4.6 percentage points for Blacks, and 5.6 percentage points for Hispanics (Bureau of Labor Statistics, by way of the Federal Reserve Bank of St. Louis ).

2. Valerie Wilson (2015) has estimated that when the national average unemployment rate increases by 1 percentage point, the rate for Black workers usually goes up by 1.8 percentage points, whereas the rate for white workers goes up by only 0.9 percentage point.

3. Relative to white men, Black women and Latinx women were overrepresented in essential, high-physical-proximity occupations by a factor of more than 2; Black men, Latinx men, and white women also were overrepresented in such occupations, albeit to lesser extents. See Hamilton et al., table 3, p. 13.

4. See Hamilton et al., page 12.

5. See Hamilton et al., page 16.

6. From 1992 through the middle of 2020, the unemployment rate for persons age 25 or older with a college diploma averaged 4.1 percent for Blacks, 3.7 percent for Hispanics; and 2.6 percent for whites (Bureau of Labor Statistics).

7. In 2018, Black workers with a college diploma earned about 79 percent as much per hour as comparable white workers. See Hamilton et al. figure 2, p. 17.

8. For example, “Hamilton, Cohen, and Siddiqi (forthcoming) find that, among those with less than a high school diploma, Black women had a 50 percent greater mortality rate than their White women peers, whereas Black women with a bachelor’s degree had nearly a 70 percent (68 percent) greater mortality rate than their White peers” (Hamilton et al., p. 18).

9. Hamilton et al., p. 16.

10. See the National Center for Education Statistics for data on incomes and SNAP benefits for New Trier and for Bertie County. See data for racial composition of the student body and expenditure per pupil at New Trier High School and for Bertie County (accessed February 20, 2021).

11. See, for example, C. Kirabo Jackson, Rucker C. Johnson, and Claudia Persico (2015), The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms, National Bureau of Economic Research Working Paper No. 20847.