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Last Hired, First Fired? Black-White Unemployment and the Business Cycle

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Author Info

  • Kenneth A. Couch

    (University of Connecticut)

  • Robert Fairlie

    (University of California, Santa Cruz)

Abstract

Past studies have tested the claim that blacks are the last hired during periods of economic growth and the first fired in recessions by examining the movement of relative unemployment rates over the business cycle. Any conclusion drawn from this type of analysis must be viewed as tentative because the cyclical movements in the underlying transitions into and out of unemployment are not examined. Using Current Population Survey data matched across adjacent months from 1989 to 2004, this paper examines labor market transitions for prime age males to test this hypothesis. Considerable evidence is presented that blacks are the first fired as the business cycle weakens. However, no evidence is found that blacks are the last hired. Instead, blacks are initially hired from the ranks of the unemployed early in the business cycle and later are drawn from non-participation. Narrowing of the racial unemployment gap near the peak of the business cycle is driven by a reduction in the rate of job loss for blacks rather than increases in hiring. There is also evidence that residual differences in the racial unemployment gap vary systematically over the business cycle in a manner consistent with discrimination being more evident in the economy at times when its cost is lower.

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File URL: http://www.econ.uconn.edu/working/2005-50.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-50.

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Length: 43 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:uct:uconnp:2005-50

Note: We thank David Card and seminar participants at the University of Connecticut, the Federal Reserve Bank of San Francisco, the 2005 Society of Labor Economists Meetings, and Wesleyan University for helpful comments. Daniel Beltran and Oded Gurantz provided excellent research assistance.
Contact details of provider:
Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
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Keywords: unemployment; race; business cycle; discrimination;

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References

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  1. Harry J. Holzer, 1986. "Reservation Wages and Their Labor Market Effects for Black and White Male Youth," Journal of Human Resources, University of Wisconsin Press, vol. 21(2), pages 157-177.
  2. John Haltiwanger & Steven J. Davis, 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation," American Economic Review, American Economic Association, vol. 89(5), pages 1234-1258, December.
  3. Ralph E. Smith & Jean E Vanski & Charles C. Holt, 1974. "Recession and the Employment of Demographic Groups," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 5(3), pages 737-760.
  4. M. Badgett, 1994. "Rising black unemployment: Changes in job stability or in employability?," The Review of Black Political Economy, Springer, vol. 22(3), pages 55-75, March.
  5. Richard B. Freeman & William M. Rodgers III, 1999. "Area Economic Conditions and the Labor Market Outcomes of Young Men in the 1990s Expansion," NBER Working Papers 7073, National Bureau of Economic Research, Inc.
  6. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
  7. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-33, April.
  8. Kenneth Couch, 2002. "Black-White Wage Inequality in the 1990s: a Decade of Progress," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 31-41, January.
  9. Finis Welch, 2003. "Catching Up: Wages of Black Men," American Economic Review, American Economic Association, vol. 93(2), pages 320-325, May.
  10. Kim B. Clark & Lawrence H. Summers, 1980. "Demographic Differences in Cyclical Employment Variation," NBER Working Papers 0514, National Bureau of Economic Research, Inc.
  11. Note: For best results & the figures should be printed on a non-Postscript printer. Hoynes & H., . "The Employment, Earnings, and Income of Less-Skilled Workers over the Business Cycle," Institute for Research on Poverty Discussion Papers 1199-99, University of Wisconsin Institute for Research on Poverty.
  12. Lynch, Lisa M, 1989. "The Youth Labor Market in the Eighties: Determinants of Re-employment Probabilities for Young Men and Women," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 37-45, February.
  13. John Bound & Richard B. Freeman, 1991. "What Went Wrong? The Erosion of Relative Earnings and Employment Among Young Black Men in the 1980s," NBER Working Papers 3778, National Bureau of Economic Research, Inc.
  14. Baker, Michael, 1992. "Unemployment Duration: Compositional Effects and Cyclical Variability," American Economic Review, American Economic Association, vol. 82(1), pages 313-21, March.
  15. Fairlie, Robert W & Sundstrom, William A, 1997. "The Racial Unemployment Gap in Long-Run Perspective," American Economic Review, American Economic Association, vol. 87(2), pages 306-10, May.
  16. Welch, Finis, 1990. "The Employment of Black Men," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S26-74, January.
  17. Brigitte C. Madrian & Lars John Lefgren, 1999. "A Note on Longitudinally Matching Current Population Survey (CPS) Respondents," NBER Technical Working Papers 0247, National Bureau of Economic Research, Inc.
  18. Robert W. Fairlie & William A. Sundstrom, 1999. "The Emergence, persistence, and recent widening of the racial unemployment gap," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(2), pages 252-270, January.
  19. Kenneth A. Couch & Mary C. Daly, 2004. "The Improving Relative Status of Black Men," Working papers 2004-12, University of Connecticut, Department of Economics.
  20. Harry J. Holzer & Paul Offner, 2001. "Trends in Employment Outcomes of Young Black Men, 1979-2000," JCPR Working Papers 245, Northwestern University/University of Chicago Joint Center for Poverty Research.
  21. Lawrence H. Summers, 1981. "Measuring Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 609-620.
  22. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
  23. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
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Cited by:
  1. Donald Freeman, 2011. "On (not) Closing the Gaps: The Evolution of National and Regional Unemployment Rates by Race and Ethnicity," Working Papers 1101, Sam Houston State University, Department of Economics and International Business.
  2. Maré, David C. & Fabling, Richard, 2013. "The Incidence and Persistence of Cyclical Job Loss in New Zealand," IZA Discussion Papers 7745, Institute for the Study of Labor (IZA).
  3. John M. Nunley & Adam Pugh & Nicholas Romero & Richard Alan Seals, Jr., 2014. "An Examination of Racial Discrimination in the Labor Market for Recent College Graduates: Estimates from the Field," Auburn Economics Working Paper Series auwp2014-06, Department of Economics, Auburn University.
  4. Julie L. Hotchkiss & M. Melinda Pitts, 2007. "Evidence of demand factors in the determination of the labor market intermittency penalty," Working Paper 2007-16, Federal Reserve Bank of Atlanta.
  5. Wido Geis, 2010. "High Unemployment in Germany: Why do Foreigners Suffer Most?," Ifo Working Paper Series Ifo Working Paper Nr. 90, Ifo Institute for Economic Research at the University of Munich.

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