Politics & Policy

Really a Racial Recession?

Discrimination is an insufficient explanation for black unemployment.

Are blacks in America suffering a Great Depression, suffering worse than other Americans because of undeniable employment discrimination? Kevin Hassett thinks so. He made his case here, and NRO asked some economics and civil-rights analysts to share their thoughts on the topic.

ROGER CLEGG

I have no problem with Kevin’s prescriptions per se, even though I am skeptical about his diagnosis in two respects.

First, the default explanation for unexplained racial disparities ought not to be discrimination. I don’t view that explanation as particularly “simple,” let alone as an application of “Occam’s Razor.” Accepting for the sake of argument the study that Kevin cites, why would corporate America be happy to discriminate against lower-wage black workers but not against higher-wage black workers — what’s simple about that?

Second, I don’t think it is fair to suggest that conservatives “deny” or won’t “admit” that that discrimination still exists. Of course it still exists, and there will always be discrimination and prejudice (and bigots of all colors) in a free society.

I don’t see my two criticisms as inconsistent: Yes, there is discrimination, and we should enforce the laws prohibiting actual disparate treatment (versus disparate impact), but we have to look elsewhere to explain most racial disparities.

In any event — and here I agree with Kevin — the way to fight non-p.c. discrimination is not by institutionalizing p.c. discrimination. And, for the same reason, public policies should be adopted on their merits, and without regard to the skin color of their beneficiaries.

Roger Clegg is general counsel of the Center for Equal Opportunity in Sterling, Va.

NICOLE GELINAS

Kevin Hassett writes that black Americans have disproportionately suffered during the Great Recession; conservative policies could ease their suffering. The nation’s bipartisan housing policy certainly hurts black Americans by favoring home ownership at the expense of renters. As of 2005, according to the Census, 48.2 percent of black families owned their homes, as opposed to 72.7 percent of white families.

It’s not just that the federal mortgage-interest tax deduction disproportionately benefits upper-income taxpayers (a group in which black families still have low representation). The deduction offers a huge taxpayer subsidy to middle-income families who desert rental neighborhoods. Lower-income families, then, lose the benefit of having stable middle-class neighbors around.

The tax code shouldn’t discriminate between renting and owning. New York City, where two-thirds of households still rent, proves that you don’t need universal homeownership to have stable, healthy neighborhoods. You need good public safety and good physical infrastructure.

Furthermore, the mortgage-interest tax deduction has helped to push house prices up, along with another piece of tax-policy favoritism: the government’s exemption of the first half-million dollars that sellers reap from a home sale from capital-gains taxes. Without these distortive policies, home prices would be lower. More black families, then, could afford a traditional down payment, and could have avoided the no-money-down mortgages and exotic payment plans that helped fuel the housing bubble.

Nicole Gelinas, contributing editor of the Manhattan Institute’s City Journal, is author of After the Fall: Saving Capitalism from Wall Street — and Washington.

AMITY SHLAES

Kevin makes an important point. Interestingly, labor scholars Richard Vedder and Lowell Gallaway found in their brilliant book Out of Work that before the Great Society and before the New Deal, back in 1930, a period essentially without big federal programs, black unemployment was closer to white unemployment. The two data points diverged after the New Deal, with the dramatic results we know. One factor: The black population that migrated north in the 20th century was less skilled or educated than the blacks already in the north. Another factor, however, was government intervention in the labor force. Under the Davis-Bacon Act, signed by Herbert Hoover, companies building public-works projects had to pay the prevailing wage in areas where they worked — i.e., on the high side. This forced them to discriminate against less-skilled workers: Given the wage they had to pay, they need a lot of productivity. This in turn hurt blacks. So, of course, did FDR’s and Robert Wagner’s Wagner Act. The unions sometimes shut out blacks. They did a second kind of damage by driving the wage rate up. Minorities, especially, lost out. And that about sums it up for our postwar period.

Amity Shlaes is author of The Forgotten Man: A New History of the Great Depression.

SAMUEL R. STALEY

Kevin Hassett’s excellent article points out the devastating effect of the Great Recession on minority unemployment rates, a phenomenon too often overlooked. While rising tides do in fact lift all boats, falling tides can strand many of these boats on the beach. This is playing out in the Great Recession. The real issue is whether an economic rebound can boost minority employment high enough so that it can begin to close the gap.

On this point, Mr. Hassett’s assertion about discrimination, while valid, may be too facile. There should be no doubt that racial (and ethnic) discrimination persists in the labor market. I have no doubt that discrimination against African Americans is more persistent than that against other minorities. The key to lifting the economic fortunes of African Americans (and perhaps a clue to the persistent gap in employment) is imbuing an entrepreneurial ethic, and providing a policy climate, that allows them to offset the negative impacts of racial discrimination using their own skills and aptitudes.

Unfortunately, entrepreneurship appears to be declining among African Americans while it has increased for Latinos and recent immigrants. This is the missing link often ignored in employment data and trends, yet it is vital for understanding the success of individuals as well as groups.

Research has consistently shown that small businesses are the primary source of job creation. Start-up firms tend to be more niche-oriented, more nimble, and less susceptible to the whims of discrimination than more established firms that grapple with existing organizational cultures and hierarchies.

Unfortunately, the current economic-policy climate tends to focus less on entrepreneurship — indeed, the focus is on punishing wealth creation and economic risk-taking — and more on enshrining the very institutional and organizational structures (e.g., big companies) that keep minorities locked in traditional economic roles and even less able to take advantage of a rising economic tide.

Samuel R. Staley is Robert W. Galvin Fellow and director of Urban & Land Use Policy at the Reason Foundation.

STEPHAN THERNSTROM

Hassett argues that disproportionately high black unemployment today is the result of discrimination practiced by employers. I am not convinced that the studies he cites support his conclusion. It is true that many investigations find that “a large share of variation is unexplained by things we can measure”; it does not follow that discrimination is the likely missing variable.

Many investigations, for example, attempt to control for racial differences in education with the only crude indicator available to them — years of school completed. But black high-school seniors are four years behind their white classmates in both reading and math skills, and that skills gap may substantially determine who gets laid off. In the cited studies, has previous work experience been adequately factored in? Were measures of absenteeism and infractions of work rules available? Mr. Hassett seems much too ready to infer discrimination.

If discrimination is indeed the problem, except in the top quartile of the wage distribution, what follows? Of course, it would be desirable to “improve minority education,” and I heartily favor expansion of charter schools. But the treatment does not seem to mesh with the diagnosis. Discrimination is not a problem when it comes to the highest-skilled jobs, he asserts, but no expansion of charter schools will put all blacks — or all whites — in the top quartile. He contends that minority workers who are already well qualified are being let go in this recession and that less-qualified whites are being retained. If so, federal and state employment-discrimination laws should be more vigorously enforced. Hassett also wants marginal tax rates lowered; blue-collar wages and employment would increase, he argues. Unfortunately, that is a policy prescription the Obama administration is very unlikely to follow.

Stephan Thernstrom is Winthrop Research Professor of History at Harvard University, and the coauthor of America in Black and White: One Nation, Indivisible and No Excuses: Closing the Racial Gap in Learning.

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