Young, minority men who didn't earn much to begin with are hit hardest by unemployment.
More than 4 million Americans have been fired since last fall, and the job losses are far from over. April began with yet another stunningly bad report—663,000 jobs lost. The unemployment rate, now 8.5 percent, is likely to hit double digits over the coming months. Some economists say that even if the economy begins to recover later this year, it may not pick up enough steam to bring down unemployment until well into 2010. Few regions of the county have been spared, and the headlines have been dire. IN EPIDEMIC OF LAYOFFS, NO ONE IS IMMUNE, blared The Philadelphia Inquirer. SILICON VALLEY UNEMPLOYMENT RATE JUMPS TO A FRIGHTENING 9.4 PERCENT, wrote the San Jose Mercury News. Nearly everyone seems to know a horror story—the Wall Street banker abruptly escorted from his office; the small-business owner forced to close her shop on Main Street; the auto worker who spent decades on the same factory floor where his father once worked.
But there is a dirty secret about unemployment. We may feel united by a common anxiety about losing our jobs, but we are not all in this together. Unemployment is not a scythe that cuts equally through different sectors of society, felling white collar and blue collar, African-American and Hispanic, male and female, in equal measure.
Young, minority men working in jobs that didn't pay much to begin with are suffering more than their white-collar counterparts. The unemployment rate for those over 25 with a college degree was 4.3 percent—half the national rate, according to the most recent Bureau of Labor Statistics report. For those college-educated and white, the number was 2.3 percent at the end of 2008, the most recent available for that demographic. On the other end of the spectrum, the unemployment rate for African-Americans over the age of 16 was 13.3 percent, and for Hispanics, 11.4 percent. For anyone without a high-school diploma, the rate was 13.3 percent. Minorities and the less educated have always suffered more during downturns, but the disparity has become more stark.
The job ax is falling hard on men in general. For men over 20, the unemployment rate is 8.8 percent; for women, it is 7 percent. In the mid-1970s, by way of comparison, the figures were nearly opposite. In today's market, the sectors that are shedding employees—construction, manufacturing, industry—have a higher proportion of male workers, many of whom do not need advanced degrees for their jobs. These industries are being hit not simply by the current crisis but by the combined effects of technology and globalization.
The unemployment statistics raise uncomfortable questions about race and economic inequities. Failure to recognize the implications of the data has serious ramifications not just for social policy, but also for economic forecasting. Such a failure can lead to faulty predictions about consumer spending, credit-card defaults, commercial real-estate prices and retail-business bankruptcies. When we portray job loss as indiscriminate, we are in danger of overestimating its economic consequences while downplaying its social costs.
This is where the discussion enters politically treacherous waters. When you consider information from the Census Bureau along with unemployment numbers, another division becomes clear: many of those who have lost their jobs weren't earning much money to begin with. As of 2008, the highest quintile of income earners in the United States accounted for 50 percent of all income in the country, while the bottom 40 percent of the population accounted for 12 percent. Unemployment is predominantly affecting those who were struggling long before the current crisis. While loss of an income can be a tragedy for those families, they were never the primary source of consumer spending, small-business creation or any other crucial aspect of economic activity.
As a result, neither spending nor the financial system may be as severely affected as expected. Already, consumer-spending numbers for January and February were positive. People ultimately tend to spend what they earn, and those who still have jobs are the higher earners. The primary impediment to their spending hasn't been debt (which also falls hardest on the same group that is being hit by unemployment), but fear of job loss and uncertainty about the viability of the economy.
A more honest discussion of the links between unemployment, race and gender would force a rethinking of the economic models that draw connections between unemployment and systemic consequences. Certainly, higher unemployment adds to the population without health insurance, which becomes yet another social spending burden, but even here, many who have lost jobs had only limited health benefits to begin with, if any at all. Still, those costs may be offset by higher tax revenues that flow to state and federal coffers from companies that are more profitable because of lower payroll.
There is a final looming challenge. The Obama administration has staked its reputation on restoring jobs, and is spending aggressively to do so. Even as unemployment worsens in the months ahead, as it almost certainly will, economic data may well start to show growth—even robust growth. As companies continue their move away from industrial and manual-labor jobs, and accelerate the migration to a service-based, global economy, we may find a permanent pool of millions of unemployed in the midst of an economy that is otherwise doing well. The massive spending plans may succeed in preserving better jobs, yet do little to bring back the jobs that have been lost. Obama and Congress could face millions of angry and disillusioned, unemployed men—men who are young but still old enough to vote. For now, they are placing their hopes and their faith in a visionary leader. But if they see none of the benefits of those actions, they may turn elsewhere, and the dirty little secret of unemployment will be a secret no more.
Karabell is president of River Twice Research.