Disadvantaged Groups Gain Most From Low Unemployment

Disadvantaged groups benefit disproportionately during periods of low unemployment. A new report from Cherrie Bucknor and Dean Baker at the Center for Economic and Policy Research (CEPR) measures the employment gains of disadvantaged groups by comparing employment rates by gender, race and ethnicity, and educational attainment in 20 metro areas with the highest unemployment to 20 metro areas with the lowest unemployment from 2013 to 2015.

The Impact of Low Unemployment Rates on Disadvantaged Groups,” finds that relatively disadvantaged groups have been the major beneficiaries of recent declines in unemployment. In all cases, the gains for whites — and especially college-educated whites — were limited. In periods of low unemployment, there are fewer white workers looking for jobs. This means that employers have little choice but to add blacks, Hispanics, or other people of color to their payroll to get the labor they need. This suggests that if the unemployment rate is allowed to fall further, there can be large additional benefits regarding employment, hours, and wages for the most disadvantaged groups in the labor force.

These data also illustrate the power of the economic policies exercised by the Federal Reserve Board. Many economists, at the Fed and elsewhere, want the Fed to be more aggressive in raising interest rates. However, this report shows that if the Fed allows the unemployment rate to continue to fall, disadvantaged groups will benefit disproportionately. Those gains may be reversed if the Fed raises interest rates to slow the pace of job creation.

Here is a sample of some gains by disadvantaged groups, measured in this report.

  • Black men living in low unemployment metro areas were employed at a rate over 12 percentage points higher than those living in metro areas with high unemployment.
  • Employment rates for Hispanic men were more than eight percentage points higher in metro areas with low unemployment and for women the gap was more than six percentage points.
  • By education attainment, the biggest gain was a 4.5 percentage point increase in employment rates between 2013 and 2105 for black women with a high school degree or less in metro areas with low unemployment.

This report only considers employment rates, but it is likely that tighter labor markets for disadvantaged groups will allow these workers to work more hours, if desired. By increasing their bargaining power, they are also likely to see more wage growth.


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CEPR

The Center for Economic and Policy Research (CEPR) promotes democratic debate on the most important economic and social issues that affect people's lives.

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