Prejudice and racial matches in employment
Labour Economics, Volume 51, April 2018
Despite the narrowing of the racial gap in many key labor market outcomes over the past fifty years, significant differences between black and white Americans remain. In a recent study published in Labour Economics, “Prejudice and Racial Matches in Employment,” Analysis Group Managing Principal Jee-Yeon Lehmann and her coauthor provide new insights into the observed black/white differences in wages and job stability in the US. The authors show that when there is uncertainty about which employers hold prejudicial beliefs, black workers will accept lower wages from a job with same-race supervisors in return for a lower termination risk. These effects become magnified as the prejudice levels in the local labor markets increase. Using unique longitudinal data on supervisors' race, workers' wages and employment history, and state-level prejudice levels, the authors find support for these predictions.