Does the Black/White Wage Gap Widen During Recessions?

Abstract

Researchers have long documented a significant wage gap between White and Black workers, at least some of which is attributable to discrimination. Drawing on research suggesting that discrimination increases during recessions, we test whether the racial wage gap expands during economic downturns. Using longitudinal wage data from the Panel Study of Income Dynamics over a 40-year time period (N = 18,954), we find that the wage gap between Black and White workers increases with the unemployment rate. Moreover, we find that the cyclical wage gap is more pronounced in states in which Whites hold more negative attitudes about Blacks and in states with larger Black populations, suggesting that the racial wage gap expansion during recessions is at least partially driven by discrimination. Finally, we find evidence for at least two mechanisms by which the wage gap expands during recessions. First, we find that Black workers are more likely to lose their jobs during downturns and earn lower wages upon reemployment than comparable Whites. Second, we find that Black hourly workers are slightly more likely to have their hours reduced during recessions than White hourly workers, thereby resulting in lower earnings. These findings suggest that the racial wage gap widens during recessions and that discrimination accounts for at least some of this expansion.