Illinois’ Black workers unemployed at near double U.S. rate
Black workers in Illinois face much higher unemployment rates than other Black workers in the nation and than their white peers in Illinois. Investing in MAP grants rather than spending more on public pensions could make a difference.
In January 2022, the unemployment rate for prime working-age Black Illinoisans was 11.1% compared to just 6.1% on average in the United States, according to data from the Current Population Survey. The unemployment rate of white Illinoisans was nearly at the U.S. average for white Americans. Furthermore, the gap between whites and Blacks in Illinois was almost 8 percentage points.
Attributing this gap to racial discrimination would be misleading because it does not account for other factors that are linked to employment. For example, if white workers live closer to cities where the jobs are located, or if they have higher levels of education on average, then we would expect white workers to find themselves unemployed less often than Black workers.
When we compare similar individuals, we learn Black Illinoisans are 6 percentage points less likely to be employed than white Illinoisans. The U.S. average racial employment gap between Black and white Americans is 2.2 percentage points for job seekers.
Illinois’ unemployment gap predates the pandemic
In 2019, while the U.S. economy was thriving and the national Black unemployment rate fell below 6% for the first time ever, Illinois’ Black unemployment rate stood at 7%. Even then, there was no difference between white unemployment rates in Illinois and the U.S. average. The gap between the Illinois’ Black unemployment rate and the average unemployment rate of Black Americans already existed.
While the COVID-19 pandemic disproportionately hurt the employment chances of Black workers compared to white workers, the gap increased even more for Black Illinoisans than other Black Americans.
Bad economic times disproportionately hurt Black workers more than white workers
Historically, Black workers have faced a comparatively higher risk of job loss at the first sign of economic downturn. A tight labor market tends to reduce the racial and ethnic unemployment gaps. This is because stiffer competition for workers among employers raises the cost of discrimination.
In 2021, there were on average 1.1 job openings for every job seeker in the U.S. Illinois barely managed 0.9 job openings per job seeker. That’s less than one job per job seeker, meaning there weren’t nearly enough jobs for unemployed Illinoisans.
A tighter labor market could help improve outcomes for Illinois’ Black population. Higher job opening rates and persistent labor shortages in other states are contributing to more Blacks finding work in those states.
Longer unemployment durations for Black workers will do lasting damage to Illinois’ economy because higher joblessness among Black Illinoisans represents lost production, forgone investments and reduced economic potential.
How to spur job creation in Illinois
Research shows labor market institutions affect job creation and productivity growth. Labor market institutions that favor growth include portable pension and health insurance plans, and individualized and flexible wage-setting.
The evidence supports that limiting government intervention in labor markets and constraints on government union collective bargaining agreements lead to higher employment opportunities and higher productivity growth.
Illinois has the third-highest regulatory burden in the U.S., which means there are higher costs associated with forming businesses and creating jobs.
Illinois is also highly unionized, and cumbersome public-sector collective bargaining agreements, as well as the state’s constitutional public employee pension protection, mean spending and tax policy cannot quickly adapt to reflect changing economic conditions.
The state’s constitutional public employee retirement protection has already resulted in skyrocketing pension costs, crowding out core government services and other necessary investments.
For example, the state could do more to close skills gaps by expanding its Monetary Award Program grants that are available to Illinois residents with financial needs.
Most MAP grant recipients are low-income Black or Hispanic students whose parents never graduated from college.
Research shows an additional $2,000 in MAP grants increases the likelihood the recipient finishes a 4-year degree by 4 percentage points. MAP grants also raise the annual wages of recipients after graduation.
Although MAP grant recipients receive on average 25% more funding than they did 20 years ago, MAP spending as a share of general funds expenditures has decreased.
This election year, Gov. J.B. Pritzker is proposing to increase MAP funding by 36%. While this a step in the right direction, it is still $42.4 million short of what MAP spending would have been had the program’s share of government spending remained at its fiscal year 2001 level.
The economic cost of racial and ethnic inequality
Government spending not only reveals politicians’ true priorities, but it also has consequences for the state’s economy. Investments that help to close racial gaps in labor market outcomes should be the priority because these persistent gaps in opportunity come with a huge economic price tag – not just for those who are being sidelined, but for all Illinoisans.
Research shows racial and ethnic inequalities have cost the U.S. economy $51 trillion in lost economic output in the past 30 years. From labor alone, the losses add up to $22.9 trillion since 1990.
Although racial unemployment gaps in the labor market persist, investments in Black students and workers coupled with policies that lower barriers to entry and reward productive market activity will be the first steps toward improving the lives of Black Illinoisans.