Labor force participation rate of black workers exceeds that of whites

The June jobs report brought good news and bad news.

Employers have created 850,000 jobs, a sign of progress amid rising vaccinations and fewer COVID-19 restrictions.

On the other hand, the overall participation rate, which tracks the proportion of people aged 16 and over working or looking for work, remained unchanged from 61.6% in May – and down by compared to 63.3% since before the pandemic. In other words, workers take their time to return to the labor market.

But the statistics for black workers may tell a different story.

For the first time since 1972, the participation rate of black workers (61.6%) exceeded that of white workers (61.3%). While economists view the change as more than an anomaly, they caution against declaring a new reality for black workers, who have historically been economically disadvantaged.

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Janelle Jones, chief economist at the US Department of Labor, pointed out that the economy is still in a transitional phase.

“All of the data has been particularly volatile,” said Jones, a native of Lorain, Ohio, who is the first black woman to hold the position in the department. “Even the metrics we usually use for predictive behavior are just fading away, and we’re still trying to figure them out. It’s exciting to see the labor force participation rate increase (for black workers), but we don’t mean to say it’s the new normal.

Other statistics show black workers are still at a disadvantage

The employment-to-population ratio, or the share of the population who work and no longer seek, has grown more slowly for black workers since the pandemic. In June, the ratio was 55.9% for black workers, 58.1% for white workers and 58% overall. The overall ratio was 61.1% before the pandemic.

“If (the employment-to-population ratio) is low, that means they’re not really related to employment,” Jones said. “And that’s honestly how we end up with an unemployment rate for black workers of 9.2%, which is very high. If the overall unemployment rate were 9.2%, we would be running around like our hair is on fire. Sometimes I’m disappointed – not with this Department of Labor and not with this White House – when people say we’re on the road to recovery when black workers at 9.2% unemployment are still a problem. economic crisis with millions of workers facing devastation. “

By comparison, the national unemployment rate is 5.9% and preliminary data indicates an unemployment rate of 5.2% for Ohio in June.

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Yet black workers, like everyone else, can feel optimism as employers raise wages to attract people to work, Jones said. Workers currently have increased bargaining power, and this is when black workers are most successful.

“We’ve seen workers out of work for maybe a year say, ‘Maybe I don’t want to work for $ 2.13 (minimum cash wage) plus tips and have to cough and never get a paid time off and never have sick time, ”Jones said. “I think it’s phenomenal. We see it in industries where black and brown workers, especially black and brown women, are overrepresented.”

How age and wealth affect labor market participation

It’s important to point out that the labor force participation rate also tracks people looking for work, and black people may not be able to afford to stop looking, even for low-paying jobs.

“We know that black workers, on average, are less likely to have a financial cushion, or less likely to have generational wealth that could be a cushion during this time,” Jones said.

The overall labor force participation rate has been declining for decades. The rate of white workers has followed this trend, while black workers, particularly black men, have seen an upward trend in recent years (excluding a sharp decline during the onset of the coronavirus) .

Participation rate of white workers, 2000-2021.
Participation rate of black workers, 2000-2021.

The reason is an aging population, said economist Bill LaFayette, owner of economic consultancy firm Columbus Regionomics.

“The participation rate for men has been declining for decades since the 1940s,” he said. “Men are living longer and more of us are reaching an age where we can retire. On the other hand, the participation rate of women increased steadily until 2000, then it started to decline. the rate was on the rise until around 2000 and women entered the labor market. And now, female retirements dominate their entry into the workforce.

LaFayette speculates that the increase in the labor force participation rate of black workers is due to an age difference between black and white populations.

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“The share of the black American population 65 or older is 10.6%, while 17.3% of white people are 65 or older,” he said. “So the much more regular participation of black workers in the workforce certainly reduces the decline that would otherwise occur. “

Differences in life expectancy could explain this, he said.

“And the wealth of African Americans is only a tiny fraction of the wealth of white households,” he added. “So it may be that African Americans need to work longer and may not be able to retire so soon.”

Trevon Logan, Ohio State Professor of Economics

But there can be a host of other explanations, said Trevon Logan, professor of economics at Ohio State University. There’s even research co-authored by Yale School of Management Dean Kerwin Charles on the correlation between video game use and decreased work hours among young men.

“I don’t think we’ve necessarily solved this problem of what it is yet,” Logan said. “I think this is the time to get qualitative information and ask people what’s going on. We know that post-secondary enrollment rates are increasing, and yet we don’t see the (overall) participation rate. in the labor market to increase. “

Regarding increasing the labor force participation rate of black workers, Logan said he would like more research to be done on labor markets in the United States.

“Some localities already had relatively high salaries for essential workers,” he said. “Are we seeing faster growth in areas where wages have grown, on average, faster for essential employees?” Do we see the rate of participation in the labor market increasing more rapidly? “

Preliminary data shows that the overall labor force participation rate in Ohio was 60.2% in June, indicating an increase from 59.9% in May. However, the data is not disaggregated by demographics or by city.

Ohio Labor Force Participation Rate, 2000-2021.

“We’re not sampling enough people that we can do it statewide,” Logan said. “And I can tell you that the Columbus job market is probably very different from the Cincinnati job market, the Cleveland job market, and the Youngstown job market. So you would like to break it down to a much finer level. . “

Logan said it’s important to keep an eye on the data over time to get a better idea of ​​the prospects for black workers.

“This is not an immediate boost to the job market and the US economy,” he said. “Savings don’t work like a switch.”

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