The Boss is Watching: How Monitoring Decisions Hurt Black Workers

Abstract African Americans face shorter employment durations than similar whites. We hypothesise that employers discriminate in acquiring or acting on ability-relevant information. In our model, monitoring black but not white workers is self-sustaining. New black hires were more likely fired by previous employers after monitoring. This reduces firms’ beliefs about ability, incentivizing discriminatory monitoring. We confirm our predictions that layoffs are initially higher for black than non-black workers but that they converge with seniority and decline more with AFQT for black workers. Two additional predictions, lower lifetime incomes and longer unemployment durations for black workers, have known empirical support.