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When Work Disappears: Racial Prejudice and Recession Labour Market Penalties

  • David W. Johnston
  • Grace Lordan

This paper assesses whether racial prejudice and labour market discrimination is counter-cyclical. This may occur if prejudice and discrimination are partly driven by competition over scarce resources, which intensifies during periods of economic downturn. Using British Attitudes Data spanning three decades, we find that prejudice does increase with unemployment rates. We find greater counter-cyclical effects for highly-educated, middle-aged, full-time employed men. For this group, a 1%-point increase in unemployment raises self-reported racial prejudice by 4.1%-points. This result suggests that non-White workers are more likely to encounter racially prejudiced employers and managers in times of higher unemployment. Consistent with the estimated attitude changes, we find using the British Labour Force Survey that racial employment and wage gaps increase with unemployment. The effects for both employment and wages are largest for high-skill Black workers. For example, a 1%-point increase in unemployment increases Black-White employment and wage gaps for the highly educated by 1.3%-points and 2.5%. Together, the attitude and labour market results imply that non-Whites disproportionately suffer during recessions. It follows that recessions exacerbate existing racial inequalities.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1257.

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Date of creation: Feb 2014
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Handle: RePEc:cep:cepdps:dp1257
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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