Older Black Workers Face More Risk in Economic Downturns

The Bureau of Labor Statistics (BLS) today reported a 3.2% unemployment rate for workers age 55 and older in March, a rate unchanged since February.

For decades, economists have documented that the racial gap in unemployment rates is widest at the depth of a recession and narrowest right before the economy goes into recession. In short, that black workers are the first fired and last hired over the business cycle.

Older workers are no exception. We are now 9 years into an economic expansion — one of the longest ever — and the racial jobs gap for older workers is at record lows. However, we predict that when the downturn begins and unemployment increases, older black workers will be disproportionately laid off and, once again, experience higher rates of unemployment.

In 2003, the aftermath of the recession, the black unemployment rate for older workers was 6.8%, 2.9 percentage points greater than the older white unemployment rate of 3.9%. By the time that expansion peaked in December 2007, signaling the start of the Great Recession, unemployment rates dropped to 4.2% for black older workers and 3.3% for white older workers, narrowing the racial jobs gap to 0.9 percentage points. When unemployment peaked again in 2011, black older workers’ unemployment rate grew to 10.1%, 3.6 percentage points higher than white older workers at 6.5% – the largest gap in the past 15 years. As of February 2018, almost 11 years since the last round of low unemployment rates, the racial unemployment gap has once again narrowed to a gap of just 1.1 percentage point.

Following this trend, when the economy takes another downturn, black older workers will most likely face more risk of losing their jobs and/or not finding new jobs at a higher rate than older white workers.

Economic growth shrinks the racial gap in unemployment for a number of reasons. When workers are scarce, employers relax hiring practices that have discriminatory effects. In recessions, the racial unemployment rate gap grows because older black workers lose their jobs faster than older white workers

Discrimination in wages and employment persists in the U.S. economy beyond differences explained by white workers having more education than black workers. Blacks with a college education have the same unemployment rate as non college-educated whites.

Economic downturns and employment discrimination make it harder for older people to save for retirement. One solution to both unemployment and job discrimination is a federal job guarantee to ensure all citizens over 18 seeking employment have a job at non-poverty wages. Strengthening Social Security and creating Guaranteed Retirement Accounts (GRAs) — proposed universal individual accounts funded by employer and employee contributions and a refundable tax credit throughout a worker’s career — would help older workers, and older black workers in particular, off-ramp into an adequate retirement during a downturn.