Black Woman and Man working on a laptop

Why Ongoing Labor Shortages Could Boost Employment and Earnings for African Americans

Labor shortages have played an outsized role in black American history, from slavery to the world wars to the present. Although labor shortages in the early colonies formed the rationale for bringing enslaved Africans to the Americas to begin with, labor shortages since then have become the most powerful drivers of forward leaps in employment and earnings among African Americans.

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That is because labor shortages inspire efforts to recruit new workers—often those previously excluded from the workforce, such as women and minorities. They motivate employers to offer better wages and working conditions, especially to previously undervalued workers. And they shift economic power to employees and job seekers, with effects that spill over into politics and culture.

In an essay titled “The Labor Problem at Jamestown, 1607-18,” historian Edmund S. Morgan explains that the founders of the earliest permanent English settlements in Virginia discovered tobacco, but could not motivate English indentured servants to work the fields. So they looked across the Atlantic to a new supply of labor in the form of enslaved Africans.

300 years after labor shortages in the early colonies drew Africans into exploitation, labor shortages triggered by the First World War helped draw them out. The war caused migration from Europe to grind to a halt, cutting off the supply of cheap immigrant labor. So businesses took to recruiting African American workers from the South. Those efforts helped bring about the Great Migration of 6 million African Americans out of the Jim Crow South and to the cities of the North and West.

The Great Migration created a new black middle class and changed American culture forever. The Harlem Renaissance was born, as black artists and musicians emerged from a flourishing community in New York. Blues music migrated north along the Mississippi River, to Memphis and Chicago; jazz emerged as an American art form.

The migration largely stalled during the Great Depression when work dried up. While Americans of all backgrounds suffered job losses and economic devastation, politicians often made sure that New Deal programs and patronage primarily benefited white Americans, especially in the South.

But soon, the Second World War created a new labor shortage that changed the direction of black history once again. The need for millions of soldiers led the Armed Forces to recruit African Americans. Their participation in the war effort created new pressure on the government to end racial discrimination in the armed forces, which President Harry S. Truman banned by executive order in 1948.

Though many black Americans were excluded from the full benefits of the GI Bill, which helped veterans attend college and purchase homes, the skills and the status that black Americans had earned through their service opened up new opportunities in shipyards, factories, and government offices.

Wartime labor shortages back home also pushed businesses to open manufacturing jobs to blacks. The experience of blacks and whites working together in wartime industry and military service caused a watershed in race relations and spawned the Civil Rights Movement, while simultaneously growing the black middle class.

Ever since, African American employment and wages have improved most rapidly during periods of very low unemployment. When the national unemployment rate fell below 4% in 2018 and 2019, for example, wage growth for minorities outpaced that for white workers by the widest margins recorded in the Atlanta Fed’s Wage Growth Tracker. Even declining black home ownership rates finally turned around.

The coronavirus pandemic arrested that progress. And again, as during the Great Depression, African Americans were most severely affected by job losses and least helped by the government programs designed to provide relief and stimulus, such as expanded unemployment insurance benefits and the Paycheck Protection Program.

But the pandemic also created the starkest labor shortage in the post-war period, driving the number of unemployed job seekers per job opening to the lowest on record. Unprecedented hiring challenges are prompting employers to relax job requirements and cast a wider net in their recruiting efforts, while simultaneously raising pay and offering greater flexibility. Those changes are already boosting labor force participation for the youngest workers and those with disabilities—two groups that typically experience the steepest employment barriers.

Given how damaging the pandemic was, for black American women in particular, it is difficult to imagine a full and equal economic recovery. But history should give us hope. The Great Depression interrupted the Great Migration, but afterwards, the “migratory stream turned into a flood,” to quote one scholar. The pandemic could be an even shorter-lived setback. The unemployment rate is already back to where it was in early 2018. And an unprecedented labor shortage is just the thing to get black employment and earnings back on track and take them to new heights.

Written by

Julia Pollak is Chief Economist at ZipRecruiter. She leads ZipRecruiter's economic research team, which provides insights and analysis on current labor market trends and the future of work.

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