Today, I'm speaking with Will Spriggs.
He's a professor of economics at Howard
University and the chief economist for the AFL-CIO.
Hi, Professor Spriggs.
Thanks so much for joining me. Can the Fed do anything
to close the racial wealth gap or employment gap?
Is that their job or is that something Congress
should be more involved in?
Well, the Fed plays a definite role because when
you run the economy at actual full employment, then
everybody finds jobs.
When you see a group of people not having a job,
then you either have to wave your hands, which is
what many economists would prefer that the Fed do.
The mechanisms that create friction in the labor
market, that make it harder for Black workers, for older
workers, for the long-term unemployed to get attached
to the labor force, those frictions are tied to
inefficiencies within the labor market, some of which
can be corrected when you get closer to full
employment. So we know that Black workers face
discrimination. Discrimination costs less
when you're not at full employment.
In the economy, the unemployment rate for white
high school dropouts is below the Black unemployment
rate, which means that white high school dropouts
have it better than a lot of Black people.
And so at its extreme, when we have a really poor labor
market, white high school dropouts do better than
Black people with associate degrees.
When the labor market tightens, that's not true.
Blacks with associate degrees do better than white
high school dropouts.
The argument that the Fed makes is if you run the
economy at full speed, just like an NBA team, if we run
really hard, I have to get somebody off the bench
because even the best NBA player in as excellent
condition as they are, they cannot play 48 minutes every
game. They can't.
Yeah.
And somebody has to come off the bench.
And their argument is that the people on the bench are
on the bench for a reason.
They're not the starters because they don't know how
to play. And so the more I put the people on the bench
on the court, then eventually the worse we're
going to be. That's what we do when we have these Black
workers with associate degrees sitting around
looking for jobs.
We put some of the best players on the bench and
we're not putting them on the court.
How does implicit bias impact economic data and
therefore policy?
Implicit bias impacts the questions we ask and the
questions we ask then dictate what are the data
that we need to answer those questions so it can
get to the way that we ask the question.
So a lot of questions are geared at labor force
participation as an example.
But if people tend to do jobs that aren't on the
regular payroll, where you get a statement from your
employer and you see your Social Security taxes
withheld, a lot of people from sort of cognitive tests
that we've done of "do you understand the question," a
lot of people think when they're asked, "did you do
something for paid employment," mean "did I
have a regular job with payroll deductions?" And
they don't interpret that to mean "I repaired my
neighbor's car.
They paid me $200." Now, clearly, I did work and
clearly they paid me.
But that's not their interpretation of it.
In some populations, that's a very common way of doing
work. And for parts of the population that are lower
wage workers who have to cobble together income, it
can be quite common for them to do that kind of
work. And we found because of the whole question of gig
work and who does gig work, we have found that we were
missing a lot of communities' labor force
participation, because we weren't probing enough to
get over the cognitive issue of do you understand
the question I'm trying to get at?
So there are a lot of people who do cash work, and
it turns out that they are far more important than the
gig work people thought this was about Uber drivers.
It turns out Uber drivers really aren't that
important. And this other part of the economy that we
miss turns out to be very important.
So there are a lot of things that we miss just
because of how we construct the way we think about
things, who we think we're asking the questions of, who
we think it's important to have information on.
How does that relate to the Black-white employment gap
and what causes that?
Is there really a gap or is it just in the way that
we're studying it?
Well, there's kind of this fixed ratio over time that
the Black-to-white unemployment rate is about 2
to 1. In recent years it has drifted to a number a
little less than 2 to 1.
Part of this is likely because of a change in
demographics. The relative size of the Black workforce
has grown compared to the white workforce, but the
employment-to-population ratio of Blacks to whites is
considerably flat as well.
And that sticks pretty close to 1.2 to 1.
That is that white men tend to have like a 20 percentage
higher employment-to-population
ratio than Black men.
During economic downturns, the labor force
participation of Blacks is highly sensitive to the
conditions of the labor market. Part of the reason
the unemployment rate stays 2 to 1 is because when the
labor market collapses, black men withdraw from the
labor market so their unemployment rate doesn't
spike as much as one might predict.
Let's take the example of the shock when we shut down
the economy.
Yeah. The pandemic.
Because of Covid, in order to save lives, we shut down
parts of the economy.
Well, in that instance, for the first time ever, the
unemployment rate for white men stayed above 10% for two
months. In a typical economy, right, you would
expect the Black unemployment rate to be 20%.
It was not.
It was way below that.
But that's misleading because what also happened
is that Black labor force participation collapsed.
So when people aren't in the labor force, they aren't
unemployed. So you can get the sense that, oh, well,
Blacks didn't do so badly because, look, their
unemployment rate wasn't twice the white unemployment
rate. Now, when there is an economic slowdown, then you
do see it in the Black unemployment rate first,
because when the economy slows down, what is slowing
down initially is hiring.
And before we get to unemployment, we just don't
see much hiring.
And the result is if you are in the queue to look for
a job, it gets harder.
Because Blacks are very sensitive to this, then what
happens is the Black labor force participation starts
to drop and Blacks who have been in the queue the
longest just give up.