Prejudice and Racial Matches in Employment for Low-Skilled Workers
Jee-Yeon Lehmann, University of Houston and Timothy Bond, Purdue University
The current national poverty rate masks great racial heterogeneity in the state of poverty in the U.S. According to the 2010 Census, 27% of blacks live below the official poverty line, nearly three times the rate for non-Hispanic whites. Non-labor market factors such as differences in family structure or geography can explain a significant portion of this disparity, yet it is difficult to ignore the role of the large and persisting racial gap in labor market outcomes. Inequality in labor market performance is especially salient for low-skilled black workers who face close to 10% lower wages and 25% longer unemployment durations compared to similar whites (Lang and Lehmann 2012). For college-educated blacks, however, the wage gap is virtually non-existent and the employment gap is much smaller. Understanding the sources of these labor market racial disparities for lowskilled workers is critical for explaining and mitigating the high poverty rates among blacks.
In this project, we seek to provide the first theoretical and empirical analysis of the relation between prejudice and the rates at which workers match with and separate from same-race employers and its impact on the wage and employment dynamics of low-skilled black workers. We test the predictions from the model using a uniquely created dataset that links multiple confidential data sources with information on regional levels of prejudice, employer race, and earnings and employment histories of workers. Results from our study will greatly inform our understanding of the varying levels of limited employment opportunities afforded to low-skilled blacks across the U.S. and the sources of persistent low earnings and employment that contribute to greater rates of poverty among black Americans.