The Washington PostDemocracy Dies in Darkness

What racial injustice looks like in America’s economy

(Marvin Joseph/The Washington Post)

I cannot begin to speak to the many wrenching and challenging emotions and issues raised by the escalation of racial violence and killings. I was deeply moved by the feeling and despair in this reaction to the killings of Alton Sterling and Philando Castile from Lezley McSpadden (the mother of Michael Brown, an unarmed black teenager who was shot and killed by police in Ferguson, Mo., two years ago). But I know I’m an outsider looking in.

One option is to wait for the news cycle to revert back to “normal,” and return to my usual policy analysis. That has some appeal, as doing otherwise would feel a bit like standing outside of a burning house filled with people showing interesting graphs to bystanders.

Another option, one I pursue below, is to briefly document some of the systemic racial injustice embedded in the economy. It would be ridiculously reductionist to argue that these data are the same problem that we’ve seen highlighted so vividly in recent years. But these persistent, unequal trends are very much in the mix and, at a time when we need to think deeply about institutional prejudices in all corners of society, they are worth a look.

Black unemployment; white unemployment: For as far back as we have the data, the black unemployment rate has been twice that of the white rate (see first figure). Moreover, as the second figure shows, you can’t dismiss that fact by citing lower levels of education among blacks. Not only does the 2-to-1 ratio roughly hold for each education level, the education explanation for racial differences in unemployment rates ignores the reality of racial educational barriers erected by systemic racism. Also, note that the black/white unemployment ratio is biased down by the disproportionate imprisonment of blacks, as the prison population is left out of the numbers.

There is, however, something potentially positive embedded in this arithmetic. For the ratio to stay roughly constant, black jobless rates must rise and fall about twice as much as white rates. That’s the algebra behind, “when the economy sniffles, too many black workers catch pneumonia.” But the converse is also true: The black unemployment rate is highly responsive (“elastic” in econ jargon) to labor demand of the lack thereof. This is visible in the first figure, as you see the black unemployment rate climb more than that of whites during recessions (shaded areas) and fall more during recoveries. That means that full employment is particularly useful to minorities.

Black pay, white pay: These racial disparities show up in pay, of course, as the work of economist Valerie Wilson has shown (Wilson’s work is a national treasure trove of information on racial economic disparities). In this paper, Wilson shows that in periods where labor markets really tightened up, this pumped-up reaction function I just noted is highly operative: “in all periods when median household income for African Americans increased more than that for whites (1982-1990, 1991-2001, and 1995-2000), African American households also experienced a greater increase in hours worked than did white households, especially if the households had lower incomes.” To be clear, neither racial wage nor income gaps closed, but the longer we stay at full employment, the more pressure there is on those gaps.

It’s not that discrimination disappears in very tight labor markets. It’s that doing business gets more expensive for racist employers who either have to hire someone they’d rather not or leave profits on the table.

Where do we go with this information? As I argued in a recent piece on this page, suppose the Federal Reserve were to accommodate another percentage point decline in the unemployment rate. Based on the historical record, that would lower black unemployment by close to two points, and when you map that tightening onto to low-wage, black workers, you get the picture below.

Racial wealth disparities are far larger than income ones. According to Federal Reserve data, as the figure below reveals, the median income ratio between non-whites and whites was 60 percent in 2013. For net worth (wealth minus liabilities), that ratio was 13 percent. There are many excellent analyses of racial wealth disparity — this one by Jordan Weissmann, for example — but one of deepest and most incisive dives into the origins of the black-white wealth gap is Richard Rothstein’s historical analysis of the public policy roots of historical segregation, the impact of which is very much with us today. In fact, Rothstein’s story begins with Ferguson and proceeds through a meticulous anatomy of segregation policies felt today in unequal schooling, policing, housing, wealth and access to opportunities.

These are but a few examples of racial inequities embedded in our economy. I’ve barely touched on inequalities in criminal justice, education, beginning with preschool, voting rights and political representation. But these persistent economic disparities in jobs, incomes and wealth provide some aged bricks in the edifice of institutionalized, systemic racism in the United States.

Like many friends and family members I’ve spoken to in recent days, I don’t know what to do about this ongoing crisis. There is, however, much we could and should do to reduce the gaps shown above. It involves a policy agenda that reconnects economic growth, which we have, to broadly shared prosperity, which has been missing for a long time, particularly from communities of color. I’ll break down the details in a later column, but for now, I can state only that the urgency of this reconnection agenda just keeps growing. If we continue to allow money-driven politics to block that agenda while demagogic candidates stir up more hatred, then there really is no way out of this horror.