Is the Scarring from Unemployment Worse for Black Workers?

Laura D. Quinby and Gal Wettstein, Boston College and Glenn Springstead, U.S. Social Security Administration

This project will use the Continuous Work History Sample and the Panel Study of Income Dynamics to examine whether unemployment’s “scarring” of future earnings affects Black workers differently than otherwise similar White workers. SSA has an interest in this question as Black workers experience more frequent and longer unemployment spells than White workers, a trend recently exacerbated by the COVID pandemic. While it is well known that job loss hurts the long-run earnings of displaced workers, recent research does not emphasize how the effect might vary by race. Displaced Black workers may have a harder time recovering earnings than similar White workers because of discrimination in hiring. However, a simple analysis could miss this dynamic because – due to continuing differences in education and employment opportunities – Black workers are less likely to hold the type of “career ladder” jobs that offer large wage premiums, and therefore have less to lose. This study will use regression analysis to consider how job loss affects the subsequent earnings of Black and White workers who are similar along many dimensions, including education and prior earnings.