Giving Compass' Take:

• Kate Bahn researches data on job displacement disparities by race and black-white disparities in the U.S. since the 1990s. 

• How can policymakers ensure that structural changes in the U.S. economy don’t continue to contribute to racial economic inequality?

• Here are three ways policy can help upskill the workforce. 

Job displacement is a distinct form of job loss that reflects how structural changes in the economy impact individual workers, not how it may be rooted in an individual’s job performance. Job displacement in the United States today is a consequence of a wide array of structural changes stretching back decades—think automation, globalization, and the impact of information technology—but it may be felt differently by race due to occupational segregation, systemic differences in job tenure, and discrimination in layoff decisions by employers due to ongoing racial discrimination dating back centuries.

It’s important to look at job displacement because it can make a big difference in workers’ long-term outcomes. In an Equitable Growth working paper, Marta Lachowska of the W.E. Upjohn Institute for Employment Research, Alexandre Mas of Princeton University, and Stephen Woodbury of Michigan State University used linked employee-employer information from administrative records to examine how incomes are affected after job displacement. Using this highly accurate data, they find that displacement leads to lower earnings over time.

Specifically, the three economists find lower earnings 5 years after the initial displacement. Those lost earnings are about 16 percent on average, compared to prior earnings—the result of a combination of fewer work hours (explaining 45 percent of those lost earnings) and lower hourly wage rates (explaining the other 55 percent).

These findings call attention to the potential importance of job displacement in black-white labor market inequality. African Americans have higher rates of unemployment and longer spells of unemployment. Occupational segregation by race and gender reinforce racial and gendered wage gaps. And because different occupations are more likely to experience more structural job displacement than others, racial differences in displacement tend to be amplified in some occupations.

Read the full article about job displacement in the U.S. by Kate Bahn at Washington Center for Equitable Growth.