Thursday, March 5, 2009

It Matters If You're Black Or White

Headline employment numbers have been awful lately. The US economy shed 600,000 jobs in January of 2009. But certain labour groups have fared fairly well despite the downturn. Understanding how can help us set policies that can help stabilize the economy from future cyclical downturns.

For example, we saw here that those with a bachelor's degree or higher are experiencing far lower unemployment rates (around 3%) than those who never completed high school (around 11%). We also saw that teenage unemployment rates are far higher than those of adults, which are likely due to artificially high wage rates.

The US Bureau of Labour Statistics also publishes employment data by race. Although it is not a comfortable topic for most Americans, there are still significant employment differences between blacks and whites, as shown below:

While the differences are clearly pronounced in the chart above, it does not even take into account wage differences between the races. Furthermore, some of the disparities between sub-categories of the races are averaged out in the chart above. For example, the difference is most pronounced between black males, who experience an unemployment rate of 15.8%, versus white females who by contrast experience only a 6.2% unemployment rate.

Much of this difference in employment rates may be explained by varying levels of education between the races. But that should be a signal of how important education levels are to an economy. Economists agree that gains from education are not part of a zero sum game. That is, an increase in the number of educated people does not result in fewer positions for those who are educated. It actually results in productivity improvements that increase wealth and opportunities for everyone in society. As such, governments need to ensure that everyone is getting a fair chance at an education, as it contributes to the welfare of the entire country.

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