Report on COVID-19’s Economic Impact on African Americans Predicts Stark Inequitable Recovery

Analysis predicts unemployment rate for African Americans twice the rate for white individuals

Chicago, (July 27, 2020) – A new report from Chicago State University (CSU) faculty experts forecasts grim, inequitable outcomes for Black and Brown communities’ employment and wages unless decision-makers ensure economic recovery bills provide minority-owned businesses access to capital. Faculty from the CSU College of Business (Dr. Coupet and Dr. Yamani) predict that as coronavirus cases mount, African American and Hispanic workers nationwide and in the City of Chicago will face higher unemployment rates, longer periods of unemployment, and lower wages than white individuals.

“If we let history repeat itself, the coronavirus pandemic will deepen the Black and Brown wealth divide with African Americans on the South and Southeast sides of Chicago experiencing twice as high unemployment as whites,” said Ernst Coupet, PhD., CSU Professor of Accounting & Finance. “Our research finds that shocks to our economy, like the 2008 financial crisis, harm everyone. Yet the impact on white people pales to the shock on African-American employment.”

In the report, the authors quantify the economic impact of COVID-19 on the labor market by conducting two empirical analyses. One analysis reviewed previous external shocks to the economy, namely the 9/11 terrorist attack and the 2008 global financial crisis, to understand the impact COVID-19 will have on unemployment nationwide and in the City of Chicago. The second analysis examines at the neighborhood level how COVID-19 will impact earnings in Chicago. The analyses were disaggregated by race.

The report found discriminatory hiring patterns that worsen during economic downturns. Nationwide, employers hire African American and Hispanic people last and pay them less, even after controlling for education. Employment for African Americans and Hispanics increases only after employment of white individuals stabilizes and rises.

“From lower wages to being the last hired and first fired, our research confirms that there is a tale of two labor markets between white individuals and Black and Brown people,” said Ehab Yamani, Ph.D., CSU Associate Professor of Accounting & Finance. “There is discriminatory hiring and wage patterns that intensify during economic downturns triggered by events like COVID-19. The findings predict a bleak long road to economic recovery for communities already disproportionately bearing the health impacts of the COVID-19 pandemic.”

Coupet and Yamani find two policy interventions are necessary in the immediate future to prevent African Americans and Hispanic communities from unnecessarily facing a protracted period of disparate unemployment and low wages and prevent this pattern of discrimination from continuing.

1. First, African Americans need access to capital in the form of subsidized loans to allow investment in businesses owned by and employing African Americans. This direct investment strategy will offset discriminatory hiring patterns and result in more and faster economic development in predominately African-American communities.
2. Secondly, the authors recommend enforcing fair wages to address the clear findings that African Americans earn unfair, below-market wages even after taking into account education. These strategies will increase and stabilize employment, increase household incomes and address equitable wages within Black and Brown communities. 

“The work and analysis of CSU Professors, Dr. Coupet and Dr. Yamani, makes clear that systemic racism remains a major and detrimental force against inclusion in America,” said Zaldwaynaka Scott, Esq., President of Chicago State University. “Chicago State University is implementing programs that increase access to college, recognizing that a college degree can improve outcomes for black and brown students and our communities. However, a college degree has to be followed by equal access to quality healthcare, jobs and other opportunities. Corporate and civic leaders have the power to improve outcomes and open doors for all citizens.”

World Business Chicago were integral partners in this research, providing thought partnership, identifying analysis strategies, and providing data needed for the empirical analysis outlined in the report.

“Chicago State University’s report demonstrates that while we’re all in this crisis together, we are not experiencing its impact in the same way,” said Andrea L. Zopp, President & CEO, World Business Chicago.  “This is a call-to-action moment for us, equity and inclusion are an imperative that we must embrace. And we see this even more urgently when we look at the report’s forecast.”

Access the full report here.

 

ABOUT CHICAGO STATE UNIVERSITY

Chicago State University (CSU), founded in 1867, is the oldest public university in the Chicago Metropolitan area. The University’s five colleges offer over 70 undergraduate and graduate degree-granting and non-degree programs. CSU is committed to equity in education, serving as the only U.S. Department of Education-designated four-year Predominantly Black Institution in Illinois and ranked by a Havard economist in the top 4% of public and private universities nationwide in supporting our graduates’ economic mobility. The University serves as a prominent civic space on the greater South Side of Chicago by hosting a multitude of athletic, educational, cultural, and recreational activities. The University is located near public transit that provides convenient access to the campus.

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