Abstract
This paper conducts stationarity tests for levels and ratios of national and regional unemployment rates by race and ethnicity. Results indicate that both unemployment rates and ratios for the total population and for subgroups by race, ethnicity and region are stationary around changing means. The black/white unemployment ratio has increased on average and the Hispanic/white unemployment ratio has decreased on average. Results are compared across regions of the US.
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Notes
Ritter and Taylor base their argument on Lang’s (1986) language theory of discrimination. In this line of reasoning, white managers don’t speak the same “language” (in the broadest sense of that term, including all modes of expression) as black employees, and are therefore less able to make accurate subjective assessments of performance. Left unaddressed in the paper is why the same phenomenon would not apply to Hispanics, some of whom at least do not speak the same (literal) language as their employers.
Data for Hispanics are not as reliable as data for blacks and whites, especially during the early years. Prior to 1983, Hispanic populations in the Current Population Survey (CPS) were not controlled to independent totals, so counts are not as reliable as later years. Hispanics may be of any race, and as classifications are self-reported, reporting conventions may change over time. Also, Hispanics were especially concentrated geographically during the 1970s, with over 60% of the population in six states–Arizona, California, Colorado, New Mexico, Nevada, and Texas–in 1975, and the majority in the Northeast and Midwest located in major cities.
The four Census regions of the United States represent groups of States as follows: 1) Northeast: Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont; 2)Midwest: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin: 3) South: Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia; 4)West: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming.
To 2009 for regional data.
The post-WWII monthly high for whites was 10.2 in both January and February, 1983.
Blacks and Hispanics are not evenly distributed across regions. For blacks, the regional distribution of the total population is: Northeast, 17%; Midwest, 18%; South, 55%; West, 10%. For Hispanics: Northeast, 15%; Midwest, 8%; South, 38%; West, 39%.
Freeman (1973) argued that the difference in unemployment rates was a more appropriate measure of the gap than the ratio of the rates because equal changes in the percentages of blacks (or Hispanics) and whites losing their jobs would leave the gap unchanged. While undoubtedly true, it is also true that equal percentage changes in the number unemployed (given an unchanged labor force) will cause the same percentage change in the difference, thus widening the gap. Moreover, it can be argued that there is a qualitative difference between a gap of four percentage points when the black unemployment rate is 14% and the white unemployment rate is 10%, say during a deep recession, and the same gap when the respective rates are 7% and 3%, say during “full” employment. The ratio is used here because changes in the ratio can be interpreted as differences in the percent changes of the number unemployed, or as the implied differences in the elasticities of the number unemployed to the change in GDP.
7.17 is the 10% critical value reported by Andrews (1993) to identify a single endogenous break in mean. Because I prefer to be somewhat biased toward finding breaks in the unemployment series, and because the 7.17 critical value identifies relatively consistent breaks in most of the unemployment series, as shown below, I do not re-estimate the critical values via a bootstrap, as is often done. One could also proceed by identifying structural breaks via minimization of γ in Eq. (2); estimates using this method on the national unemployment rates produced nearly identical results (available on request).
In the first case, identifying a large number of structural breaks is tantamount to over-fitting the data. In the second, as shown below, in the preponderance of cases the null of stationarity could not be rejected with two identified breaks.
Blanchard and Katz (1992) argued persuasively that unemployment differentials across regions were resolved by labor mobility.
Unemployment rates for the Midwest and South fell well below those in the Northeast and West during the long expansion of the 1990s before all regions rebounded sharply in the recession beginning in 2007.
Indeed, the severity and duration of the most recent recession and the concomitant increase in unemployment, especially the proportion of the long-term unemployed, is consistent with a shift at the national level in the Non-Accelerating Inflation Rate of Unemployment, or NAIRU.
Estimates by race and origin by region are only through 2009, so ending mean estimates will tend to be more optimistic regarding unemployment rates than the national averages, which are through 2010.
With the proviso, noted earlier, that the Hispanic unemployment data for the early 1970s are less reliable than the white and black series.
By comparison, however, the correlation between GDP growth at the national level and the gaps expressed as differences in unemployment rates was only 0.04 for the black/white gap and 0.09 for the Hispanic/white gap.
Recall that Ritter and Taylor (2011) can account for the Hispanic/white gap by controlling for age, education, and other factors, but not for the black/white gap.
That the education gap helps to explain the Hispanic/white unemployment gap is important information, but places the problem only at one remove. High school dropout rates for Hispanics (18.2% in 2008) continue to be more than three times the rate of whites and twice the rate of blacks. (U.S. Department of Education, 2010).
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Data appendix
Data appendix
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1.
The source of regional GDP: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Analysis, on the web at http://www.bea.gov/regional/gsp/.
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2.
The source of regional unemployment by race and region: From 1981 to 2009 Geographic Profile of Employment and Unemployment, downloaded from ftp://ftp.bls.gov/pub/time.series/gp/. From 1970 to 1980, U.S. Department of Labor, Bureau of Labor Statistics, Handbook of Labor Statistics, various issues. Washington : U.S. G.P.O. : [Available] from the Supt. of Docs.
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Freeman, D.G. On (Not) Closing the Gaps: The Evolution of National and Regional Unemployment Rates by Race and Ethnicity. Rev Black Polit Econ 39, 267–284 (2012). https://doi.org/10.1007/s12114-011-9106-2
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DOI: https://doi.org/10.1007/s12114-011-9106-2