(Editor's note: This case was first published at Illinois Policy Institute).
In Illinois, college-educated Whites were 7.1% more likely to be employed than similar Blacks – more than twice the national average.
While COVID-19 and the public health responses to the crisis caused racial employment gaps to increase everywhere, the gap widened more in Illinois when compared to Illinois’ border states and the rest of the country. Job seekers’ education and other observable characteristics can explain little of the employment differences between racial and ethnic groups.
Black workers face comparatively higher risk of job loss at the first sign of economic weakness. As a result, a robust expansion has historically reduced disparities. Unfortunately, Illinois’ economy has persistently underperformed relative to the rest of the country. Even prior to the COVID-19 pandemic, Illinois’ labor market under Pritzker suffered one of the worst first-year performances of any elected governor in recent history. In the time since, Illinois’ economy has continued to lag the rest of the nation, with both the gaps between Illinois and other states widening and the gaps between groups of Illinoisans continuing to widen.
COVID-19 exposed large racial disparities that existed well before the pandemic. Although large employment and wage disparities exist between whites and Blacks, they may not necessarily be tied to racist attitudes. Statistical discrimination could arise from employers having little reliable information about Black workers, but that could not explain why employment gaps for similar workers are much larger in Illinois when compared to the rest of the country.
Despite consistent improvements over time, discrimination in the labor market remains a problem in America today, especially among large employers. Research shows while most employers barely discriminate, a few discriminate heavily. That same research also shows while local demographics do not matter for discriminatory hiring decisions, local sentiment does. Racial discrimination is more severe in geographic locations with more prejudiced populations.
Although more competition will not completely eliminate discriminatory practices, research shows more competitive markets mitigate discrimination. When market competition for candidates is high, minority candidates fare better. Sustained periods of economic strength also tend to reduce the rate of job loss for Blacks leading to a reduction in the white-Black employment gap.
While state-level anti-discrimination laws have had a small positive impact on the earnings gap between whites and Blacks, they have had no impact on the employment of Blacks relative to whites. Instead, anti-discrimination policies can even increase hiring discrimination. In the case of the 1950’s state level “fair employment” laws, young Black men appeared to have fared substantially worse relative to white counterparts in “fair employment” when compared to young Black men in states with no such laws. “Ban the box” policies that restrict employers from asking about applicants’ criminal histories tend to cause employers to make assumptions about applicants based on their race, leading to more statistical discrimination.
State government could help by monitoring hiring outcomes, by providing information to employers about the local workforce, by de-biasing interventions in schools, by investing in struggling communities to narrow productivity gaps, and by encouraging the use of technology for screening job applicants’ resumes in order to help reduce the expression of cognitive biases.
The fact that racial employment gaps were higher in Illinois relative to the rest of the country even before COVID-19 may be an indictment of Illinois government’s failure to prioritize racial disparities as a problem while at times favoring policies that have been shown to make the problem worse.
While criminal justice reform legislation – a large part of Pritzker’s focus – has an immediate positive impact on labor supply, Illinois continues to punish job creators. The punishment ranges from corruption – which acts as a direct tax on investment – to the lack of adequate public investments because of rising pension costs despite yearly increases in the state’s overall tax burden.
Research shows corruption is also a factor that contributed to the state’s pension crisis. Reducing corruption provides the largest potential impact for welfare gain through its impact on the allocation of government revenues. Although inflating pensions fails to deliver value for taxpayers, a corrupt culture in Illinois makes it easier for Illinois politicians to use pensions as rewards for the campaign cash delivered by public employee unions.
By preserving the status quo – raising taxes to pay for pension debt and new public sector union demands at the expense of Illinois’ current workforce needs – Pritzker has failed to improve the condition of Illinois labor markets. With no apparent change in public policy strategy on the horizon, Illinoisans can expect more of the same should Pritzker win his reelection bid.