Wage discrimination over the business cycle

Using CPS data from 1979–2009 we examine how cyclical downturns and industry-specific demand shocks affect wage differentials between white non-Hispanic men and women, Hispanics and non-Hispanic whites, and African-Americans and non-Hispanic whites. Women’s relative earnings are harmed by negative shocks; the wage disadvantage of African-Americans drops with negative shocks, while the impact on Hispanics’ wages is unclear. A theory of job search suggests two opposite-signed mechanisms that affect these wage differentials. It suggests greater absolute effects among job-movers, which is verified using the longitudinal component of the CPS.