Thursday , 25 July 2024

Employment By Race: The Employment-to-Population Ratio For Blacks vs. Whites Has Changed

In the over 50 years that the U.S. Bureau of Labor Statistics has been keeping track, the share of Black Americans who are employed has consistently been lower than the share of white Americans with paid jobs. This changed briefly for the first time ever in March of 2023. That month, the Bureau of Labor Statistics recorded a greater percentage of Black Americans employed than white Americans. What explains this reversal and what, if anything, does it say about changes in access to employment by race?

The following article by  Valerie Wilson and Aaron Sojourner has been edited ([ ]) and abridged (…) by Lorimer Wilson, Managing Editor of munKNEE.com – Your KEY To Making Money! – for the sake of clarity and brevity to provide a faster and easier read.

The Facts:

  • The employment to population ratio (EPOP) is a core measure of labor market and economic strength. The measure expresses the share of a population employed instead of being not employed — which includes people searching for a job as well as many who are not, such as retirees, homemakers, and college students. In contrast, the unemployment rate looks only at those who are actively seeking work for pay and measures the share of people who have not found employment. The unemployment rate completely ignores retirees, homemakers, college students, and others who are not seeking paid work. Many economists consider the EPOP to be a more consistent or less ambiguous measure of labor market health than the unemployment rate.
  • Since significant changes in the population occur infrequently, a higher EPOP is likely to reflect an actual increase in the level of employment. In contrast, a decline in the unemployment rate does not always signal an improvement in employment conditions as it can occur when people who have not found employment stop seeking work, even if there is not a significant increase in the level of employment. Americans under age 16 and those who are in the military or imprisoned are excluded from calculation of both the unemployment rate and the employment population ratio. Differences in employment population ratios by race can reflect many factors, such as differences in ages, geographies, health, employer discrimination, occupational segregation, prior convictions, and many other factors.
  • In March 2023, Black Americans’ employment to population ratio exceeded that of white Americans for the first time in U.S. Bureau of Labor Statistics records that started in 1972. This sparked speculation about whether this signaled a meaningful shift toward greater racial equity in the labor force. Subsequent data suggest that was something of a blip in the series — monthly labor market statistics for Black Americans are notoriously volatile – rather than a new normal in racial employment trends (see chart). However, Black and white EPOPs coming close enough to even tease the possibility that a higher percentage of the Black population was employed relative to whites is noteworthy. The difference in employment to population ratios between Black and white Americans has narrowed over time. In the last ten years (2014-2023), Black EPOP has averaged 3.1 percentage points lower than white EPOP. The average difference was twice that (6.5 percentage points) in prior decades (1972-2013).
  • The convergence of Black and white EPOPs is partly the result of differences in the age demographics of the two populations. Since the Black population is younger than the white population, a larger share of the working age Black population is under age 50 when people are more likely to work. A larger share of the white population is older and more likely to have stopped working. This racial difference in population age demographics tends to raise Black EPOP and lower white EPOP. If you separate out different age groups, white EPOP is higher than Black EPOP at each age level, suggesting that the narrowing of the gap may not signal as large an increase in employment equity as the shrinkage of the raw EPOP gap might suggest, according to a recent analysis. If each age-by-race group’s employment rate is kept fixed at its observed level but the age distribution of Black Americans is shifted to match whites’ age distribution, then Black Americans would have an employment to population ratio about 8 percent lower than white Americans.
  • However, the dramatic jobs recovery since the pandemic recession has been especially favorable to Black workers and this has contributed to the most recent narrowing in the employment to population ratios. The difference in employment to population ratios between Black and white Americans has averaged only 1 percentage point over the most recent 12 months. An important contributing factor is that the current economic recovery has been particularly beneficial to Black men. Black men have historically had a much lower employment to population ratio than white men, averaging 10.6 percentage points lower since 1972. What’s noteworthy about the current narrowing of the Black-white EPOP gap is that faster EPOP growth for Black men relative to white men has significantly narrowed the difference among men to an average of 4.5 percentage points in the last year and a half. (The Black-white EPOP difference among women is much smaller, and Black women’s EPOP often exceeds that of white women in tight labor markets.) While these gains represent positive improvements, they must also be weighed against the issue of undercounting of the Black population and the disproportionate share of incarcerated Black men who are excluded from the BLS survey data sample of the “civilian, non-institutionalized population.”
  • So what, if anything, do these observations say about racial equity and the persistence of labor market discrimination? While Black workers made notable gains and narrowed differences in employment with white workers during the pandemic recovery, there is consistent and persistent evidence that Black job seekers encounter greater difficulties in being hired than white job seekers. The unemployment rate tells us about the difficulty finding employment among those in the labor force, including the employed and those actively seeking work. The unemployment rate for Black workers tends to be twice that of white workers and this is true throughout the business cycle, at nearly every level of education, across age cohorts and for women and men. In other words, Black workers are twice as likely as white workers to be stuck in job search mode rather than earning at any point in time. Black and white Americans differ in many ways besides race. However, the gap between unemployment rates is not much explained by differences in age, education, marital status, or state of residence. Experiments show that potential employers are less likely to call back Black applicants who have the same or better credentials as white applicants (see here and here).
  • In addition to differences in hiring, the burden of job loss and unemployment also falls disproportionately on Black workers. A new crop of studies that follow workers over time reveal vast inequality in workers’ labor market experiences over their careers (see here and here). About 4 in 5 workers enjoy very stable employment over decades rarely getting laid off or being trapped in unemployment. In contrast, a small group suffers very unstable employment and suffers most of the economy’s unemployment, with 6 times higher job turnover rates and 10 times more months spent unemployed. White Americans disproportionately belong to the first group and Black Americans to the second (see here).

What this Means:

Tight labor markets are important because they tend to draw in more marginally attached workers. In tight labor markets when labor supply is limited, employers have less discretion to discriminate. Ensuring that the Fed takes its responsibility to ensure full employment seriously alongside its responsibility to ensure price and financial stability will go a long way to promoting the tight labor markets that pressure employers to equalize opportunities. Innovation and additional investment in enforcing American workers’ rights to freedom from employers’ racial discrimination could help equalize opportunity. During the first two years of the Biden administration, the federal government made large, long-term commitments to invest in American transportation and energy infrastructure and in our manufacturing sector through the bipartisan infrastructure bill, the CHIPS & Science Act, and the Inflation Reduction Act. These investments are expected to support nearly 3 million jobs annually over the next 10 years, according to White House estimates. This boom in demand for American workers especially benefits those with less formal education who had been losing ground in the economy for decades.