Black–White inequality in earnings losses after job displacement, 1981–2020

Abstract While social scientists have devoted significant effort to understanding racial economic inequalities, surprisingly little work has examined inequalities in how Black and White workers recover from job loss. Trends in racial inequalities after job loss have not been systematically examined since the mid-1990s, leaving open questions about how economic restructuring and business cycle fluctuations have shaped racial inequalities in post-displacement outcomes. In addition, extant research on racial inequalities in post-displacement outcomes has focused on inequalities among men. I use data from the 1984–2020 Displaced Workers Supplement to the Current Population Survey to offer the first historical accounting of racial inequalities in earnings changes after job displacement since the mid-1990s. Large racial inequalities in earnings losses are explained by Black workers’ relatively low levels of education, employment in vulnerable segments of the labor market, and disadvantage in finding new jobs, but also mitigated by White workers’ large earnings losses due to lost earnings advantages accumulated at their previous job. Among men, racial inequalities in post-displacement earnings increased substantially during the Great Recession, entirely due to unobserved differences between White and Black men. Using Heckman-corrected models, I demonstrate that standard ordinary least squares (OLS) models substantially underestimate racial inequalities in the effect of job displacement on earnings among men due to racial differences in workers’ likelihood of finding a new job—accounting for racial differences in selection into reemployment reveals significant racial disparities among men in the effect of displacement on earnings between 1981 and 2009.