Equal Employment Opportunity: Displacement Rates, Unemployment Spells,
and Reemployment Wages by Race (Fact Sheet, 09/16/94, GAO/HEHS-94-229FS).
Despite many federal efforts to provide equal employment opportunities
regardless of race, such as the Civil Rights Act of 1991, economic
outcomes for African Americans persistently lag behind those of whites
in the United States. This fact sheet examines data from the Equal
Employment Opportunity Commission to determine whether African Americans
were uniquely affected by the 1990-91 recession and whether the emphasis
on overall progress in minority employment has caused many employers to
overlook the specific employment situation of African Americans. GAO
compares (1) the length of time displaced African American workers were
unemployed with unemployment spells for displaced workers of other
racial groups and (2) the reemployment wages of displaced African
Americans with those of displaced whites and Hispanics. In addition, GAO
examined these factors for the years 1982 to 1991, allowing GAO to see
how they varied during an entire business cycle.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-94-229FS
TITLE: Equal Employment Opportunity: Displacement Rates,
Unemployment Spells, and Reemployment Wages by Race
DATE: 09/16/94
SUBJECT: Employment discrimination
Comparative analysis
Employment of minorities
Blacks
Hispanics
Fair employment programs
Hiring policies
Unemployment rates
Labor statistics
Racial discrimination
IDENTIFIER: Census Bureau Current Population Survey
Census Bureau Displaced Worker Survey
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Cover
================================================================ COVER
Fact Sheet for the Honorable
Julian C. Dixon, House of Representatives
September 1994
EQUAL EMPLOYMENT OPPORTUNITY -
DISPLACEMENT RATES, UNEMPLOYMENT
SPELLS, AND REEMPLOYMENT WAGES BY
RACE
GAO/HEHS-94-229FS
Equal Employment Opportunity
Abbreviations
=============================================================== ABBREV
CPS - Current Population Survey
DWS - Displaced Worker Survey
EEOC - Equal Employment Opportunity Commission
PSID - Panel Survey of Income Dynamics
Letter
=============================================================== LETTER
B-258283
September 16, 1994
The Honorable Julian C. Dixon
House of Representatives
Dear Mr. Dixon:
Despite numerous federal legislative efforts to provide equal
employment opportunities regardless of race (such as the Civil Rights
Act of 1991), African American economic outcomes persistently lag
those of whites in the United States. The labor market is a chief
source of these differences. For example, average African American
wage rates are consistently below those of whites, and African
American unemployment rates are higher than those of most other
racial groups. Recently, media reports have highlighted changes in
net employment by race. According to these reports, African
Americans were the only group to experience net employment losses
during the last recession.
On October 19, 1993, you asked us to examine data from the Equal
Employment Opportunity Commission (EEOC) to determine if African
American workers were uniquely affected by the 1990-91 recession and
whether an emphasis on achieving overall progress in minority
employment has resulted in many employers' disregard for the specific
employment situation of African Americans. In consultation with your
staff, we agreed to address these issues by (1) analyzing a
nationally representative database of workers displaced during the
1990-91 recession, (2) reviewing EEOC's database on the U.S. firms,
and (3) interviewing corporate officials at a judgmentally selected
sample of companies.
In subsequent discussions with your staff, we agreed to report our
findings in two parts. This initial report relies on the nationally
representative database and provides an analysis of the probability
of African American, white, Hispanic, and Asian workers being laid
off in the last recession. To provide a more complete picture of
African American labor market performance, we also compared (1) the
length of time displaced African American workers were unemployed
with unemployment spells for displaced workers of the other racial
groups, and (2) the reemployment wages of displaced African Americans
with those of displaced whites and Hispanics. In addition, we
examined these factors for the years 1982 to 1991, allowing us to see
how they varied over an entire business cycle.\1 In a subsequent
report, we plan to present an analysis of EEOC data and interviews
with corporate and federal officials.
--------------------
\1 The last recession ended in the fourth quarter of 1982. The
following recovery lasted until July 1990, when the economy again
entered a recession lasting for 8 months, until March 1991.
BACKGROUND
------------------------------------------------------------ Letter :1
The Wall Street Journal, in an analysis of EEOC data, reported that
African Americans were the only racial group to experience net losses
in employment during the 1990-91 recession.\2 The EEOC data showed
the occupational composition by race for about 35,000 firms reporting
in both 1990 and 1991. Employment in these firms totaled over 40
million, accounting for about 37 percent of the U.S. nonagricultural
employment. However, because firms are required to report to the
EEOC only when they have (1) 100 or more employees or (2) 50 or more
employees and federal contracts, results from analyzing the EEOC data
do not necessarily represent the workforce as a whole. In fact,
nationally representative data from the Bureau of Labor Statistics
show that net employment declined for African Americans (227,000),
whites (1.1 million), and Hispanics (156,000) during the 1990-91
recession.\3
Displacement rates provide a more precise assessment of job losses
associated with the recession.\4 While net employment changes at a
firm can result from a variety of reasons, such as the sale of
company units, voluntary attrition (outflows), or acquisitions
(inflows), in a recession, the most notable change is worker
displacement through layoffs as firms cut back production or
discontinue operations.\5
The economics literature has long noted disparities in worker
displacement across groups, with racial minorities experiencing
higher displacement rates than whites.
--------------------
\2 Rochelle Sharpe,"Losing Ground: In the Latest Recession, Only
Blacks Suffered Net Employment Loss," The Wall Street Journal, Sept.
14, 1993, p. 1.
\3 J. Meisenheimer II, E. Mellor, and L. Rydzewki, "Job market
slid in early 1991, then struggled to find footing," Monthly Labor
Review, Vol. 115, No.2 (Feb.1992), pp.3-17.
\4 We defined a displaced worker as one who experienced an
involuntary job separation.
\5 In a recession, unemployment rates rise as workers are laid off,
but worker displacement is only part of why unemployment rates rise.
During a recession, new workers continue to enter the labor market,
but the number of job vacancies is low. These new job seekers are
unemployed (increasing the unemployment rate) even though they have
not been displaced from a job due to the downturn. Some new job
seekers or displaced workers pursuing reemployment may also leave the
labor market (decreasing the unemployment rate) because of the low
likelihood of finding a job.
IN SUMMARY
------------------------------------------------------------ Letter :2
During the 1990-91 recession, African Americans were 15 percent more
likely to lose their jobs than whites. Hispanic and African American
workers experienced the highest layoff probabilities of the four
groups examined, followed by whites. Asians experienced the lowest
layoff probability. The high African American displacement rate was
partially due to the impact of the recession on industries and
occupations in which African Americans were disproportionately
represented; however, differences still persisted after accounting
for industrial and occupational affiliations, education levels, and
worker age.
Once displaced, African American workers were unemployed slightly
longer than workers in the other groups, on average. For workers
losing jobs in the 1990-91 recession, the average African American
unemployment spell lasted 12 weeks while the average white worker
experienced 11 weeks of unemployment; average unemployment spells
were 10 weeks for Hispanics. Once reemployed, African Americans had
the highest relative losses in weekly earnings, experiencing an
average decrease of 10.1 percent. In contrast, white and Hispanic
employees experienced average earnings losses of about 9.5 percent
and 5.3 percent, respectively.\6
These results are not unique to recession periods. In years of
economic growth, fewer workers of all races experienced job
displacement, and displaced workers spent less time unemployed.
However, African American workers consistently experienced the worst
labor market outcomes throughout the decade regardless of the state
of the economy.
The following sections discuss each of these issues in detail.
Section 1 provides descriptive data on differences in worker
displacement by race. Section 2 reports results from a statistical
analysis that focused on the probability of displacement by race.
Section 3 provides results from a statistical analysis that focused
on unemployment spells and reemployment wages for displaced workers
by race. Finally, Section 4 discusses trends in each of these
characteristics over time.
--------------------
\6 Average unemployed durations and wage losses were not reported for
Asians because the number of Asian displaced workers who answered
these survey questions were too small for reliable estimates.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3
To examine African American job displacement, we used two methods of
analysis. First, we reviewed and summarized the existing economics
literature on worker displacement; selected papers are summarized in
appendix I, table I.1, and a broader set of references are included
at the end of this report. Second, we developed summary statistics
and estimated a statistical model using data from the Displaced
Worker Survey (DWS), a biannual supplement to the January Current
Population Survey (CPS).\7 The results of this analysis, along with a
detailed description of our statistical methods, are discussed in
appendix II.
--------------------
\7 As a supplement to the CPS, this survey is administered if a
respondent answered "yes" to the following question: "In the past
five years, have you lost or left a job because of a plant closing,
an employer going out of business, a layoff from which you were not
recalled, or other similar reasons?" For those answering "yes," the
survey collects information on the predisplacement job and the
worker's experience since displacement.
---------------------------------------------------------- Letter :3.1
As arranged with your office, unless you announce its contents
earlier, we plan no further distribution of this fact sheet until 15
days after the date of this letter. At that time, we will send
copies to other interested parties.
Please contact me or Cornelia Blanchette, Associate Director, on
(202) 512-7014 if you or your staff have any questions. The major
contributors to this report are Wayne Upshaw, Assistant Director, and
Patrick Redmon, Senior Economist, (202) 512-7023.
Sincerely yours,
Linda G. Morra
Director, Education
and Employment Issues
DESCRIPTIVE DATA ON RACIAL
DIFFERENCES IN LAYOFFS IN THE
1990-91 RECESSION
=========================================================== Appendix 1
Heterogeneity in average characteristics across racial groups is one
explanation for differences in worker displacement by race. Labor
economists have long noted several factors that affect general labor
market performance, including susceptibility to layoff.
Traditionally, workers with the least experience or education are the
most likely to be laid off. Additionally, certain industries and
occupations experience relatively high layoff rates. If certain
minority groups, on average, are less educated or experienced, or if
such groups concentrate in industries and occupations with inherently
high displacement rates, then these factors may explain why African
Americans and Hispanics exhibit disproportionately high displacement
rates. In this section, we examine these factors as potential
explanations for disproportionate layoff rates across racial groups.
DIFFERENCES IN DISPLACEMENT BY
RACE
--------------------------------------------------------- Appendix 1:1
To examine proportional differences in layoff rates by race, it is
important to understand the composition of the sample we used to
produce the estimates. This sample includes private-sector workers
over 20 years old. Whites make up nearly 80 percent of this sample,
followed by African Americans with about 9 percent. Table 1.1
provides a complete description of the sample.
Table 1.1 also shows the racial composition of workers who
experienced layoffs during 1990-91. Whites constituted the largest
share of displaced workers, with 77 percent of total layoffs.
However, this number is less than the white share of the sample. If
layoffs were proportional, whites should have constituted about 80
percent of the layoffs. African Americans made up about 9 percent of
this sample but experienced 10.2 percent of the layoffs; Hispanics
accounted for over 7 percent of the sample but 9 percent of the
layoffs. Asians, as did whites, constituted a less than proportional
share of layoffs, accounting for about 3 percent of the sample but
slightly over 2 percent of total layoffs.
Table 1.1
Racial Composition of Sample Drawn From
the January 1992 Current Population
Survey
Percen
Displa t of
Percen ced, all
t of 1990- displa
Race Number total 91 ced
---------------------------- ------ ------ ------ ------
White 41,475 79.7% 2,824 77.2%
African American 4,734 9.1 373 10.2
Hispanic 3,765 7.3 338 9.3
Asian 1,535 2.9 80 2.2
Native American 373 0.7 33 0.9
Other 162 0.3 9 0.3
Total 52,044 100.0% 3,657 100.1%
\a
------------------------------------------------------------
\a Column does not sum to 100 percent due to rounding.
RACIAL DIFFERENCES IN LAYOFFS
DUE TO AGE AND EDUCATION
--------------------------------------------------------- Appendix 1:2
Differences in worker characteristics should partially explain
disproportionate layoff rates. Table 1.2 describes the
characteristics of workers displaced in the last recession by race.
For example, displaced African Americans and Hispanics were, on
average, younger than displaced whites and Asians. The average for
both African Americans and Hispanics was 36 and 35 years old,
respectively, versus 38 for whites and 40 for Asians. Because
seniority is often a major criterion for layoff in both unionized and
nonunionized firms, layoffs are usually concentrated among young
workers. Hence, the age difference between these groups could
partially explain the disproportionate layoff rates across groups;
because they were younger, these workers were more likely to be laid
off regardless of race.
Racial differences in educational attainment conveys essentially the
same story. About 82 percent of displaced white workers ended their
education with a high school diploma or less, while about 77 percent
of Asians ended their education with high school or less. For
displaced African Americans and Hispanics, over 90 percent ended
their educations with a high school diploma or less. Because less
educated workers are more likely to be displaced, these differences
in schooling may further explain differences in layoff rates across
groups.
Table 1.2
Characteristics of 1990-91 Displaced
Workers by Race (Means)
Africa
n
Americ Hispan
Variable White an ic Asian
---------------------------- ------ ------ ------ ------
Age (years) 38 36 35 40
Female (percent) 39% 51% 35% 35%
Education (percent) 19% 27% 46% 28%
Did not complete high school
High school graduate 63 65 44 49
College graduate 13 6 7 15
Graduate education 5 2 3 8
------------------------------------------------------------
With the exception of Asians, displaced workers were younger (and
therefore had less potential labor market experience) and more likely
to be male than workers who were not displaced.\8 Table 1.3 shows the
average characteristics of nondisplaced workers in our sample, and
these facts are clear when comparing displaced worker characteristics
in table 1.2.
Table 1.3
Characteristics of Nondisplaced Workers
by Race (Means)
Africa
n
Americ Hispan
Variable White an ic Asian
---------------------------- ------ ------ ------ ------
Age (years) 38 38 36 38
Female (percent) 43% 54% 40% 47%
Education (percent)
Did not complete high school 16% 24% 43% 18%
High school graduate 59 64 48 42
College graduate 18 10 7 28
Graduate education 7 2 2 12
------------------------------------------------------------
Another potential explanation is that the high African American and
Hispanic layoff rates are related to the economy's effect on
particular industries and occupations in which these groups tended to
concentrate.
--------------------
\8 For displaced Asian workers, however, these characteristics are
different. The average displaced Asian in 1990-91 was 40 years old
versus 38 for nondisplaced workers.
RACIAL DIFFERENCES IN LAYOFFS
DUE TO INDUSTRY AND OCCUPATION
--------------------------------------------------------- Appendix 1:3
We found that industry and occupational differences appear to
partially contribute to disproportionate layoffs among African
Americans and Hispanics. We compared layoff rates for industries
with the share of minority employment in the industry. Table 1.4
shows that manufacturing shouldered over 28 percent of all layoffs in
1990-91, the highest layoff rate of the industries listed below.
African American workers were disproportionately represented in
manufacturing, potentially contributing to the likelihood of being
displaced. Although about 23 percent of the total workforce was
employed in manufacturing, over 28 percent of African Americans
worked in manufacturing. Overall employment by industry as well as
for African Americans and Hispanics appears in table 1.5.
Table 1.4
Layoffs by Industry
Percen
t of
total
layoff
Industry s
---------------------------------------------------- ------
Agriculture 1.31%
Mining 1.72
Construction 14.00
Manufacturing 28.44
Transportation 4.78
Communications 5.44
Wholesale trade 4.87
Retail trade 16.68
Finance 6.21
Medical 2.41
Education 0.85
Other\a 4.59
------------------------------------------------------------
\a This category includes the following industries: utilities and
sanitary service, social services, forestry and fisheries, and other
professional services. This column does not sum to 100 because some
individuals did not identify their industry.
Table 1.5
African American and Hispanic Employment
by Industry
Percent
Percent African Percent
of all American Hispanic
employme employme employme
Industry nt nt nt
------------------------------ -------- -------- --------
Agriculture 1.49% 1.10% 3.63%
Mining 1.02 0.26 0.88
Construction 6.41 3.89 7.21
Manufacturing 23.46 25.36 25.44
Transportation 4.21 4.53 4.21
Communications 2.52 3.22 1.62
Wholesale trade 4.44 2.77 4.16
Retail trade 18.50 16.96 19.41
Finance 7.83 6.88 5.70
Medical 9.08 11.19 6.66
Education 2.29 1.74 1.21
Other\a 18.75 22.10 19.87
------------------------------------------------------------
\a This category includes the following industries: utilities and
sanitary service, social services, forestry and fisheries, and other
professional services.
We performed a similar analysis for occupational categories. Table
1.6 shows layoff rates by occupation, and table 1.7 shows overall
employment with African American and Hispanic employment by
occupation. African Americans were concentrated in clerical and
machine operator categories, occupations that ranked second and third
in proportion of displaced workers. Hispanics were concentrated
among machine operators and precision production positions, both
categories with high layoff rates.
Table 1.6
Layoffs by Occupation
Percen
t of
total
layoff
Occupation s
---------------------------------------------------- ------
Executive 10.53%
Professional 5.99
Technical 2.95
Sales 10.45
Clerical 14.79
Precision production 18.57
Machine operator 13.70
Mover 4.84
Handler 6.48
Other\a 11.70
------------------------------------------------------------
\a This category includes the following occupations: private
household services; protective services; farming, forestry, and
fishing; and other services.
Table 1.7
Occupational Distribution for African
Americans and Hispanics
Percent
Percent African Percent
of all American Hispanic
employme employme employme
Occupation nt nt nt
------------------------------ -------- -------- --------
Executive 11.99 6.02 5.89
Professional 9.85 4.84 4.49
Technical 3.83 2.94 2.06
Sales 12.16 8.68 9.09
Clerical 16.66 16.74 13.13
Precision production 12.70 8.85 13.74
Machine operator 9.21 14.42 15.50
Mover 4.61 5.85 4.79
Handler 4.53 6.83 7.08
Other\a 14.46 24.83 24.73
------------------------------------------------------------
\a This category includes the following occupations: private
household services; protective services; farming, forestry, and
fishing; and other services.
STATISTICAL ANALYSIS OF
DIFFERENCES IN DISPLACEMENT ACROSS
GROUPS
=========================================================== Appendix 2
The preceding section demonstrated that observable worker
characteristics ostensibly accounted for some of the disproportionate
displacement rates across racial groups. However, our statistical
analysis (described in app. II) shows that differences persist
across groups even after controlling for the characteristics
discussed earlier. Using our statistical modeling results, we
calculated the likelihood of a worker of average age and education
being displaced in 1990-91 for each racial group.\9 While we could
not statistically control for all potential factors, such as job
tenure, that may account for remaining differences, our analysis of
the characteristics of displaced workers suggests that these
omissions cannot account for all differences in layoffs across
groups.
During the last recession, African Americans and Hispanics faced the
highest probability of displacement, even after controlling for age,
education, gender, industry, and occupation. Table 2.1 shows these
estimated probabilities.\10 African Americans faced a layoff
probability of 6.6 percent in 1990-91, and Hispanics faced
approximately the same risk rate with a 6.8-percent probability.
Whites and Asians, however, faced layoff probabilities of 5.7 and 4.6
percent, respectively. This means that African Americans and
Hispanics faced a risk of displacement at least 15 percent greater
than that of comparable whites and at least 43 percent greater than
Asians.
Table 2.1
Probability of Layoff by Race,
Controlling for Industry, Occupation,
Education, and Age
Adjust
ed
probab
ility
of
Race layoff
---------------------------------------------------- ------
White 5.7%
African American 6.6
Hispanic 6.8
Asian 4.6
------------------------------------------------------------
Note: These layoff rates are statistically different from zero; the
layoff rates for African American, Hispanic, and Asian workers are
statistically different from the white layoff rate at the 5-percent
level of significance.
The reasons for these differences by race are not clear. One
potential explanation is that African American and Hispanic workers
have less tenure, on average, than white employees. Tenure
differences could occur because job turnover is greater among these
groups. In that case, the likelihood of displacement would be higher
because these workers would have less time on the job, even if they
had the same education and total labor market experience. Because
seniority is still heavily used in labor contracts and by nonunion
firms, less tenure on the job increases the risk of displacement.
We could not estimate the effect of job tenure on the likelihood of
displacement. Although the Displaced Worker Surveys collects job
tenure information for the displaced workers it surveys, the Current
Population Survey does not collect this information, and we cannot
statistically control for tenure without information on both
displaced and nondisplaced workers.
However, we have gained some insight into tenure differences by race.
DWS data on tenure suggest that tenure cannot account for racial
differences for African Americans, although it may explain relatively
high Hispanic displacement rates and relatively low Asian
displacement rates. Table 2.2 shows the average years of tenure on
the job from which workers were displaced by race. Displaced African
American workers had higher tenure than whites, for those reporting.
If tenure was a likely explanation for disproportionate African
American layoffs, we would expect African Americans to have lower
average tenure. Displaced Hispanics, in fact, have a year less
tenure than displaced whites, providing a potential explanation for
their relatively high layoff rate. Displaced Asians have more tenure
than whites, potentially explaining their relatively low layoff rate.
Other factors, such as racial discrimination, that we also could not
observe or measure may account for differences in displacement across
racial groups. However, we cannot determine how much of the
15-percent difference in African American and white displacement
rates could be due to such factors.
Table 2.2
Differences in Tenure of Displaced
Workers by Race
Tenure
(in
Race years)
---------------------------------------------------- ------
White 4.1
African American 5.2
Hispanic 3.1
Asian 5.0
------------------------------------------------------------
--------------------
\9 These estimates also control for gender, industry, and
occupational differences across races. The method of calculating
these probabilities is detailed in appendix II.
\10 All results were significant at the 5 percent confidence level.
RACIAL DIFFERENCES IN UNEMPLOYMENT
SPELLS AND REEMPLOYMENT WAGES
=========================================================== Appendix 3
We have established that layoff rates vary across groups, but
differences in layoff rates do not necessarily imply that the cost of
displacement differs across groups.\11
Losses from displacement come from two sources: (1) time spent not
working after being displaced from a job and (2) potentially lower
compensation after finding another job.
In addition to experiencing a relatively high layoff rate, displaced
African American workers stayed unemployed longer than those in other
racial groups once they lost their jobs. Moreover, for those
displaced workers who found jobs, African Americans also experienced
the greatest wage loss upon reemployment. Whites found new
employment most quickly, although they also received lower weekly
earnings in their new jobs than in the previous ones. Hispanics
experienced the shortest unemployment spells and the smallest wage
loss upon reemployment.
--------------------
\11 In this report, we examine only the private cost of worker
displacement--the cost to the worker.
UNEMPLOYMENT SPELLS AND
REEMPLOYMENT WAGES BY RACE
--------------------------------------------------------- Appendix 3:1
Among displaced workers who found new jobs, African Americans
experienced the longest spells of unemployment. Table 3.1 shows the
average number of weeks of unemployment for each racial group.
Displaced African Americans had the longest unemployment spells with
an average spell of nearly 12 weeks. Displaced whites found new work
somewhat more quickly, with about 11 weeks of unemployment on
average. Displaced Hispanic unemployment spells lasted about 10
weeks on average.\12
These differences are important in assessing the cost of displacement
to each group.\13 If African Americans, for example, had relatively
short spells of unemployment, a relatively high layoff rate would not
be as serious because the losses across groups might be equalized.\14
However, these patterns in unemployment spells indicate that
displacement costs across groups are even greater than indicated by
differential layoff rates. When we examined differences in lost
wages, the differences in displacement costs appeared even more
pronounced.
Table 3.1
Number of Weeks Unemployed
Averag
e
unempl
oyment
spell
(in
Race weeks)
---------------------------------------------------- ------
White 11
African American 12
Hispanic 10
------------------------------------------------------------
The cost of displacement for workers laid off in the 1990-91
recession were substantial for all groups, but African Americans were
especially hit hard. In addition to experiencing longer spells of
unemployment, these workers also returned to proportionally lower
earnings than white and Hispanic workers. As shown in table 3.2,
upon returning to work, African American workers' average weekly
earnings fell 10.1 percent; white workers lost 9.5 percent and
Hispanics lost 5.3 percent.\15
Table 3.2
Wage Loss for Displaced Workers Who Are
Reemployed
Percen
t loss
from
predis
placem
ent
Race wage
---------------------------------------------------- ------
White 9.5
African American 10.1
Hispanic 5.3
------------------------------------------------------------
--------------------
\12 Numbers for Asians were not included in our examination of the
cost of displacement because the number of available observations was
too small to estimate unemployment duration and reemployment earnings
accurately.
\13 Interpreting the differences in racial means for unemployment
spells and reemployment wages requires caution. A large number of
displaced workers had not been reemployed at the time they were
surveyed. Differences in unemployment spells and reemployment wages
depend not only on the new job opportunities offered to individuals
but also on the displaced workers' search behavior for new
employment. Some displaced workers might search longer for a new job
to match their previous wage rate. If behavior differs
systematically across racial groups, then considering differences in
reemployment wages alone potentially misstates actual differences in
the cost of displacement across groups. For a detailed discussion of
this issue, see Daniel S. Hamermesh, "What Do We Know About Worker
Displacement in the U.S.?" Industrial Relations, Vol. 28, No. 1
(1989) pp. 51-59.
\14 Of course, both the private and social costs of displacement
would still be substantial.
\15 We computed wage losses by first taking the natural logarithm of
the worker's average weekly earnings (deflated by the Consumer Price
Index) in both the current and predisplacement job and then
subtracting current earnings from prior earnings. The difference may
be interpreted as the percentage change in earnings.
LOSSES IN HEALTH CARE
COVERAGE ACROSS GROUPS
------------------------------------------------------- Appendix 3:1.1
Part of the compensation loss experienced by displaced workers is in
fringe benefits. If benefits are lower upon reemployment, the
private cost to the worker is higher than shown by the change in
average weekly earnings. Unfortunately, the Current Population
Survey and the Displaced Worker Surveys do not routinely collect
detailed information on fringe benefits. The DWS does, however, ask
workers if in their previous jobs they were covered by a group health
plan and if they are currently covered by a group health plan other
than Medicare or Medicaid. Table 3.3 shows the responses.\16
African Americans were less likely to have health coverage upon
reemployment. While over 50 percent were covered in the
predisplacement job, only about 38 percent were covered upon
reemployment. About 56 percent of white workers had coverage in
their predisplacement job, and upon reemployment, 60 percent had
health coverage. Only 48 percent of Hispanic workers were covered
before displacement, and 37 percent were covered upon reemployment.
Table 3.3
Displaced Workers' Health Insurance
Coverage
Percen Percen
t t
covere covere
d in d in
previo curren
Race us job t job
-------------------------------------------- ------ ------
White 56.0 59.7
African American 53.4 37.6
Hispanic 48.0 37.0
------------------------------------------------------------
--------------------
\16 Note that the survey question was asked of displaced workers who
had not returned to work at the time of the survey as well as of
those who were reemployed. Some of the differences across racial
groups could result from individuals obtaining group health coverage
through sources other than employment, although employment is the
chief source of coverage.
RACIAL DIFFERENCES IN WORKER
DISPLACEMENT OVER TIME
=========================================================== Appendix 4
Because we investigated relative differences in displacement rates
across racial groups during the 1990-91 recession, the temptation is
to conclude that the recession caused these disparities. However, we
found that African American workers were disproportionately affected
by layoffs even in years when the economy was growing: (1) African
American layoff rates always exceeded white layoff rates; (2) African
American workers remained unemployed longer once they were displaced;
and (3) African American workers experienced relatively large wage
losses after returning to work, especially by the early 1990s.
Cyclical downturns may exacerbate these racial differences, but the
differences exist independently of the business cycle.
African American layoff rates always exceeded white layoff rates,
although in 1984-85 and 1988-89, the differences were not
statistically significant.\17 Table 4.1 shows the probability that a
worker of a particular race would be laid off in each wave of the
Displaced Worker Surveys, controlling for age, gender, educational
attainment, and industrial and occupational affiliation. The
probabilities of layoff for all groups were highest in the recessions
of the early 1980s and 1990s. During this decade, however, African
American workers were always at least as likely to be displaced as
white workers, but the differential was smaller in years of economic
growth. Hispanic workers were less likely to be laid off than whites
in the previous recession and in years of economic growth. In the
most recent recession, Hispanic workers experienced layoff rates
approximately matching those of African American workers.\18
Table 4.1
Probability of Layoff Over Time, by Race
1982- 1984- 1986- 1988- 1990-
Race 83 85 87 89 91
-------------------- ------ ------ ------ ------ ------
White 5.3% 4.2% 4.1% 3.9% 5.7%
African American 6.3 4.6 4.7 3.9 6.6
Hispanic 4.7 3.7 3.6 3.5 6.8
------------------------------------------------------------
In addition to relatively high probabilities of layoffs during the
1980s, African Americans also experienced longer periods of
unemployment in this period. In 1982-83, African American workers
were unemployed 4 weeks longer than white workers, as shown in table
4.2. However, this gap narrowed over the decade, and by the 1990-91
timeframe, the difference in the length of unemployment spells for
white and African American workers was about a week.\19
Table 4.2
Average Number of Weeks Unemployed
1982- 1984- 1986- 1988- 1990-
Race 83 85 87 89 91
-------------------- ------ ------ ------ ------ ------
White 17 12 11 9 11
African American 21 23 12 11 12
------------------------------------------------------------
In the early and middle 1980s, displaced African American workers
experienced smaller wage losses than white workers, but over the
decade, African American wage losses grew and exceeded those of white
workers. Table 4.3 shows the wage losses for each group over the
decade. Wage losses upon reemployment were generally smaller for
both groups in years of economic growth than in recessionary years,
but in 1982-83 and 1986-87, reemployed African American workers
experienced smaller wage losses than white workers. In subsequent
years, however, African American wage losses were larger than white
wage losses.
Table 4.3
Percentage Wage Loss for Displaced
Workers Who Are Reemployed
1982- 1984- 1986- 1988- 1990-
Race 83 85 87 89 91
-------------------- ------ ------ ------ ------ ------
White 7.6% 4.9% 9.4% 5.9% 9.5%
African American 7.2 7.2 8.5 7.4 10.1
------------------------------------------------------------
--------------------
\17 In 1988-89, the layoff rates for white and African American
workers round to 3.9 percent, but in fact, the African American rate
is slightly higher though not statistically different from the white
layoff rate.
\18 Other racial groups are not included in this analysis because in
the first three DWSs, the CPS obtained racial information on whites,
African Americans, and other groups. Additionally, the survey
collected information on ethnic origin. As a result, we could not
compare layoff rates for Asians over time.
\19 The results for Hispanic workers were not included here because
in several years the number of workers reporting unemployment spells
was too small for accurate estimates.
LITERATURE REVIEW
=========================================================== Appendix I
JOHN BOUND AND RICHARD B.
FREEMAN (1992)
--------------------------------------------------------- Appendix I:1
This paper shows a widening in African American-white earnings and
employment gaps among young men from the mid-1970s through the 1980s.
Earnings gaps increased most among college graduates and in the
Midwest, while gaps in employment-population rates grew most among
dropouts. The authors attribute the differential widening to shifts
in demand for subgroups due to shifting industry and regional
employment, the falling real minimum wage and deunionization, the
growing supply of African American to white workers that was marked
among college graduates, and to increased crime among dropouts. The
different factors affecting subgroups highlight the economic
diversity of African Americans. The authors analyzed CPS data for
the years 1963 through 1989.
WILLIAM J. CARRINGTON AND ASAD
ZAMAN (1994)
--------------------------------------------------------- Appendix I:2
A representative displaced worker is reemployed at about a 13-percent
weekly wage cut; a worker with 10 years of predisplacement tenure
loses about 12 percent more than a similar worker with no tenure; a
worker with 20 years of experience loses about 9 percent more than a
similar worker with no experience. Postdisplacement wage reductions,
tenure profiles, and experience profiles of wage reduction vary
substantially across industries. Industry characteristics explain
some of the variation in mean wage reductions but not in tenure or
experience profiles. Displacement-induced wage reductions tend to be
largest in those industries that are highly unionized, pay high
wages, have large firms, and frequently provide informal on-the-job
training. The authors used CPS-DWS data from 1984, 1986, and 1988
for their analysis.
HENRY S. FARBER (1993)
--------------------------------------------------------- Appendix I:3
The author finds that older and more educated workers were more
likely to suffer job loss in the 1990s than in the 1980s.
Nonetheless, job loss remained concentrated among younger and less
educated workers. He also finds that job loss became more common in
some important service industries and relatively less common in
manufacturing during the latter part of the period. He finds that
displaced workers, relative to nondisplaced workers, were less likely
to be employed and, if employed, were more likely to be employed part
time. These effects declined with time since displacement. There is
no systematic secular change in these costs of displacement, either
in the aggregate or for particular groups. Finally, he examined the
earnings losses of full-time reemployed displaced workers by
comparing their earnings change with the earnings change of full-time
employed workers who were displaced. He found, consistent with what
others have found, that these earnings losses are substantial. The
author analyzed CPS-DWS data from 1984, 1986, 1988, 1990, and 1992;
he also used mobility supplements to the January CPS, 1983, 1987, and
1991 in his analysis.
DANIEL S. HAMERMESH (1987)
--------------------------------------------------------- Appendix I:4
This study identifies part of the social loss attendant upon
displacement as the remaining value of the assets specific to the
severed employment relationship. If information is good, the
wage-tenure profile will flatten as displacement approaches. For
workers separated between 1977 and 1981, wage-tenure profiles are
found not to change. This suggests that either workers, or both
firms and workers, are surprised by the displacement. The present
value of the part of the social loss attributable to the worker's
share of the firm-specific capital is around $7,000 (1980 dollars).
The author analyzed data from the PSID for the years 1977 through
1981.
DANIEL S. HAMERMESH (1989)
--------------------------------------------------------- Appendix I:5
The secular increase in job displacement is independent of the
business cycle. Average earnings losses due to long spells of
unemployment and to subsequent reduced wages are substantial.
Minorities suffer an above-average rate of displacement, but their
earnings losses are not unusually high. Women and older workers are
no more likely than others to become displaced or to suffer greater
earnings losses, but high-tenure workers lose more. The author's
conclusions are based on a review of selected literature from 1976
through 1987.
LOUIS S. JACOBSON, ROBERT J.
LALONDE, AND DANIEL G.
SULLIVAN (1993)
--------------------------------------------------------- Appendix I:6
High-tenure workers separating from distressed firms suffer long-term
losses averaging 25 percent per year. The authors find that
displaced workers' losses begin mounting before their separations,
depend only slightly on their age and gender, depend more on local
labor-market conditions and their former industries, are not limited
to those in a few sectors, and are large even for those who find new
jobs in similar firms. They analyze 52 quarters of Pennsylvania
administrative data on workers' earnings histories merged with
firm-specific data.
LORI G. KLETZER (1991)
--------------------------------------------------------- Appendix I:7
African American workers bore a relatively heavier burden of
widespread job displacement during the 1980s because of the
industries and occupations in which they were concentrated; they also
were less likely to be reemployed and were out of work longer. The
author analyzes CPS-DWS data for 1984 and 1986.
CHRISTOPHER J. RUHM (1994)
--------------------------------------------------------- Appendix I:8
Three to 5 years after job displacements, workers receiving the
advance notice mandated by current law earn approximately 10 percent
more than their nonnotified counterparts. This differential is not
the result of firms' systematically notifying persons with favorable
reemployment prospects--early warnings are disproportionately
obtained by individuals expected to earn relatively low wages in
subsequent employment. The notification differential may occur
because the advance notice is frequently provided by employers
offering other kinds of adjustment assistance such as job counseling,
skill retraining, supplemental unemployment benefits, or outplacement
assistance. The author analyzed CPS-DWS data from 1988 and 1990.
ROBERT H. TOPEL AND MICHAEL P.
WARD (1992)
--------------------------------------------------------- Appendix I:9
During the first 10 years in the labor market, a typical worker will
hold seven jobs, about two-thirds of his career total. The evolution
of wages plays a key role in this transition to stable employment:
wage gains at job changes account for at least a third of
early-career wage growth, and the wage is the key determinant of job
changing decisions among young workers. Job changing is a critical
component of workers' movement toward the stable employment relations
of mature careers. The worker does not know in detail the nature of
the job which he is obtaining nor does he know his own capacities.
Nevertheless, it is the principal method by which workers at the
present time improve their condition on their initiative. The
authors analyze the Longitudinal Employee-Employer Data file for the
years 1957 through 1972.
STATISTICAL ANALYSIS OF WORKER
DISLOCATION
========================================================== Appendix II
THE DATA
-------------------------------------------------------- Appendix II:1
The data for this study came from the Displaced Worker Surveys that
were administered in January of 1984, 1986, 1988, 1990, and 1992.
These surveys are supplements to the Current Population Survey; they
are administered if the respondent answered "yes" to the following
question: "In the past five years, have you lost or left a job
because of a plant closing, an employer going out of business, a
layoff from which you were not recalled, or other similar reasons?"
For those answering "yes," the survey collects information on the
predisplacement job and the worker's experience since
displacement.\20
A key feature of these data is that workers are being asked about
events that occurred up to 5 years before the survey date. This
retrospective sample design imparts a variety of biases to the data,
the most prominent of which is "recall bias." This term refers to the
fact that workers are more apt to recall traumatic events that result
in serious economic or psychological costs. In these data, the most
likely effect of recall bias is that displaced workers who adjusted
easily to their job loss are less likely to report the displacement
than are workers who found adjusting difficult. This means that the
DWS probably overstates the average wage loss associated with
displacement.\21
While recall bias is a limitation of these data, DWS data have an
advantage over other data sets, such as the Panel Survey of Income
Dynamics (PSID), another data set used to analyze the cost of worker
displacement. The DWS is a much larger sample, allowing greater
precision in estimating worker characteristics. The PSID is not
subject to recall bias, however, because it is a panel data set that
contemporaneously tracks households over several years.\22
--------------------
\20 For a succinct description of these data, see William J.
Carrington and Asad Zaman, "Interindustry Variation in the Costs of
Job Displacement," Journal of Labor Economics, Vol. 12, No. 2
(1994), pp. 243-275.
\21 For detailed discussion of recall bias and additional references
on the subject, see William J. Carrington, "Wage Losses for
Displaced Workers: Is It Really the Firm That Matters?" Journal of
Human Resources, Vol. 28, No. 3 (1993), pp. 435-62.
\22 For a discussion of the advantages and disadvantages of the DWS
versus the PSID, see Hamermesh, 1989.
ESTIMATION OF DISPLACEMENT
PROBABILITIES
-------------------------------------------------------- Appendix II:2
To calculate the probability that a worker would be displaced (as in
tables 1.9 and 3.1), we estimated a logit model. This model is a
multivariate statistical technique that allows the estimation of a
relationship between a worker's characteristics (such as race, age,
or education) and the outcome of some event (such as worker
displacement). Table II.1 shows our estimated model for workers
displaced in 1990-91.
The dependent variable in this model is a binary variable equal to 0
if a worker is displaced and equal to 1 if not. While the DWS asks
the worker about displacement in the last 5 years, we classified only
workers who lost their jobs in the last 2 years as displaced
workers.\23 We followed this approach to minimize recall bias.
Additionally, we identified workers as displaced only if they lost
work because of a plant closing, slack work, or an abolished
position.\24 We did not classify workers stating other reasons for
job loss as displaced because we wanted our analysis to reflect
layoffs as the sole reason for job displacement.
The model's coefficients, shown in table II.1, show the impact that
each variable has on the probability of not being displaced. To
calculate the adjusted probability of layoff for each group in tables
1.9 and 3.1, we performed the following calculations: (1) first, we
multiplied the model coefficients by the variable mean for all the
variables except race; (2) for the group whose probability is being
calculated (for example, African Americans), we multiplied the
coefficient by 1 and the other groups' coefficients by 0; (3) we
summed all the products just calculated; and (4) we performed the
logit transformation.\25 The resulting number is the probability that
a worker who is a member of a group (African Americans, in this case)
will remain on the job. The probability that a worker in this group
will be displaced is 1 minus the probability of remaining on the job.
Table II.1
Logit Estimates of Layoff Model
Standa
Coeffi rd
Variable cient error Mean
------------------------------------ ------ ------ ------
Year: 1984
Constant 2.45 0.11 --
Age 0.02 0.00 37.80
Female 0.05 0.04 0.45
High school graduate 0.08 0.05 0.62
College graduate 0.34 0.08 0.11
Graduate degree 0.34 0.11 0.07
African American -0.17 0.06 0.08
Other race 0.16 0.11 0.03
Hispanic 0.13 0.08 0.06
Agricultural -0.50 0.14 0.02
Mining -1.34 0.11 0.02
Construction -0.73 0.08 0.06
Manufacturing -0.71 0.07 0.28
Transportation -0.20 0.10 0.04
Communications -1.37 0.09 0.03
Wholesale -0.53 0.09 0.05
Retail 0.17 0.08 0.17
Finance 0.58 0.13 0.07
Medical 0.92 0.14 0.08
Education 1.18 0.32 0.02
Executive -0.07 0.09 0.11
Professional 0.09 0.11 0.09
Technical -0.04 0.13 0.03
Sales -0.24 0.09 0.12
Clerical 0.15 0.09 0.15
Precision production -0.26 0.08 0.14
Machine operator -0.39 0.09 0.11
Mover -0.14 0.11 0.05
Handler -0.56 0.09 0.05
Midwest -0.16 0.06 0.25
West -0.38 0.06 0.24
South -0.17 0.06 0.30
Year: 1986
Constant 2.69 0.12 --
Age 0.02 0.00 37.81
Female 0.00 0.05 0.46
High school graduate 0.08 0.05 0.63
College graduate 0.30 0.09 0.12
Graduate degree 0.16 0.11 0.07
African American -0.09 0.07 0.09
Other race 0.23 0.12 0.03
Hispanic 0.13 0.09 0.05
Agricultural -0.54 0.15 0.02
Mining -1.21 0.12 0.02
Construction -0.64 0.09 0.06
Manufacturing -0.61 0.07 0.27
Transportation -0.21 0.11 0.04
Communications -1.43 0.09 0.03
Wholesale -0.46 0.10 0.05
Retail 0.35 0.09 0.17
Finance 0.58 0.13 0.07
Medical 0.95 0.15 0.08
Education 1.75 0.41 0.02
Executive 0.04 0.10 0.11
Professional 0.08 0.11 0.09
Technical -0.21 0.13 0.03
Sales -0.16 0.10 0.12
Clerical 0.44 0.10 0.16
Precision production -0.03 0.09 0.14
Machine operator -0.42 0.09 0.11
Mover -0.07 0.12 0.04
Handler -0.41 0.10 0.05
Midwest -0.20 0.06 0.25
West -0.41 0.06 0.20
South -0.19 0.06 0.30
Year: 1988
Constant 3.43 0.13 --
Age 0.01 0.00 38.09
Female 0.02 0.05 0.46
High school graduate 0.07 0.06 0.63
College graduate 0.38 0.09 0.12
Graduate degree 0.18 0.11 0.08
African American -0.14 0.07 0.09
Other race 0.19 0.13 0.03
Hispanic 0.12 0.09 0.06
Agricultural -0.51 0.18 0.02
Mining -1.35 0.14 0.01
Construction -1.10 0.09 0.07
Manufacturing -0.52 0.08 0.25
Transportation -0.38 0.11 0.04
Communications -1.46 0.10 0.02
Wholesale -0.52 0.11 0.05
Retail -0.43 0.08 0.18
Finance -0.01 0.11 0.08
Medical 0.41 0.13 0.08
Education -0.15 0.20 0.02
Executive -0.22 0.10 0.12
Professional 0.10 0.12 0.10
Technical -0.39 0.14 0.03
Sales -0.12 0.10 0.13
Clerical -0.02 0.10 0.16
Precision production -0.26 0.10 0.13
Machine operator -0.44 0.10 0.10
Mover -0.03 0.12 0.05
Handler -0.25 0.11 0.04
Midwest -0.42 0.07 0.25
West -0.64 0.07 0.20
South -0.46 0.06 0.30
Year: 1990
Constant 2.95 0.13 --
Age 0.01 0.00 38.09
Female -0.02 0.05 0.48
High school graduate 0.02 0.06 0.63
College graduate 0.09 0.10 0.12
Graduate degree 0.05 0.12 0.07
African American 0.00 0.08 0.09
Indian 0.11 0.26 0.01
Asian 0.74 0.19 0.03
Other race -0.15 0.39 0.00
Hispanic 0.10 0.09 0.07
Agricultural -0.02 0.21 0.02
Mining -0.73 0.19 0.01
Construction -1.06 0.10 0.07
Manufacturing -0.49 0.08 0.25
Transportation -0.33 0.12 0.04
Communications -1.36 0.11 0.02
Wholesale -0.41 0.12 0.05
Retail -0.36 0.08 0.18
Finance -0.06 0.11 0.08
Medical 0.50 0.14 0.08
Education -0.10 0.19 0.02
Executive 0.09 0.10 0.12
Professional 0.46 0.13 0.10
Technical 0.15 0.15 0.03
Sales 0.17 0.10 0.12
Clerical 0.06 0.09 0.16
Precision production 0.04 0.10 0.13
Machine operator -0.16 0.11 0.09
Mover 0.13 0.13 0.05
Handler 0.32 0.13 0.05
Midwest 0.09 0.07 0.24
West -0.16 0.07 0.21
South -0.06 0.06 0.30
Year: 1992
Constant 2.34 0.10 --
Age 0.01 0.00 38.21
Female 0.12 0.04 0.48
High school graduate 0.01 0.05 0.59
College graduate 0.07 0.07 0.15
Graduate degree -0.10 0.10 0.05
African American -0.15 0.06 0.09
Indian -0.14 0.19 0.01
Asian 0.22 0.12 0.03
Other race 0.36 0.37 0.00
Hispanic -0.19 0.07 0.07
Agricultural -0.01 0.18 0.01
Mining -0.82 0.16 0.01
Construction -1.15 0.08 0.06
Manufacturing -0.38 0.06 0.23
Transportation -0.28 0.10 0.04
Communications -1.19 0.09 0.03
Wholesale -0.43 0.10 0.04
Retail -0.22 0.07 0.19
Finance -0.10 0.09 0.08
Medical 0.99 0.12 0.09
Education 0.66 0.20 0.02
Executive 0.05 0.08 0.12
Professional 0.18 0.10 0.10
Technical 0.04 0.12 0.04
Sales 0.08 0.08 0.12
Clerical 0.02 0.08 0.17
Precision production -0.04 0.08 0.13
Machine operator -0.34 0.09 0.09
Mover 0.20 0.11 0.05
Handler -0.09 0.10 0.05
Midwest 0.44 0.05 0.25
West 0.24 0.05 0.21
South 0.26 0.05 0.29
------------------------------------------------------------
Note: The dependent variable is a dummy variable equal to 1 if an
individual is not displaced during 1990-91 and 0 otherwise.
--------------------
\23 Also using this approach is Henry S. Farber, "The Incidence and
Costs of Job Loss: 1982-91," Brookings Papers on Economic Activity:
Microeconomics 1993 (Washington, D.C.: 1993), p. 73-132.
\24 Workers who classified themselves as displaced did so in some
cases when completing seasonal work or closing self-operated
businesses. Others provided no specific reason for displacement.
\25 The logit transformation is
X represents a matrix of the independent variables in the model, and
� represents a vector of the estimated model coefficients. X'� is
the sum of the variables multiplied by their estimated coefficients,
computed in step 3. For a thorough discussion of logit models, see
Jan Kmenta, Elements of Econometrics, Second Edition (New York:
Macmillan Publishing Company, 1986), pp. 550-53.
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=========================================================== Appendix 0
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