Metro area unemployment hits communities of color hardest, puts state’s long-term growth at risk

October 27, 2011

Racial disparities in employment are widespread and systemic. It’s true across the country, but it is particularly true for the Twin Cities, where black unemployment hit 21 percent in 2010, more than triple the rate for whites, according to a recent report from the Economic Policy Institute (EPI). The Twin Cities ranked second worst among 29 large metropolitan areas in black-white unemployment disparities in 2010, according to the EPI report. And although Twin Cities Hispanic unemployment was relatively low compared to the rate in other major metropolitan areas, it was still nearly double the white unemployment rate, a separate EPI study found.

People of color are a growing part of the state’s population, and failure to address underlying causes of these significant disparities puts Minnesota’s prosperity at risk.

The problem is in part an educational issue. The achievement gap between white students and students of color is well documented in Minnesota – and research finds that individuals with less education are more likely to be unemployed. However, employment disparities exist even when accounting for educational attainment. For example, for Minnesotans under age 35, blacks without a high school diploma had an unemployment rate of 59 percent in 2009, nearly triple the 22 percent rate for whites without a diploma.

We were glad to see a panel at the recent 27th Annual Conference on Policy Analysis shine a spotlight on racial disparities in unemployment. It’s everyone’s problem.

Panelist Carolyn Roby, vice president for Wells Fargo Foundation Minnesota, said racial disparities exist at every educational level. “It’s not enough to say that education is the answer,” she said. “We are leaving talent and potential on the table, untapped.”

Roby urged people to address the impact of “unexamined internal bias.” People need to  become more aware of their own biases, and then examine their impact on hiring and promotion decisions, she said.

Panelist Luz Maria Frias, St. Paul’s director of human rights and equal opportunity, raised several issues concerning racial disparities in employment. One was the issue of long-term unemployment. Communities of color are not only disproportionately unemployed, they tend to be unemployed for a longer period of time, Frias said. One way of helping overcome unemployment disparities would be to make it illegal for employers to screen out applicants with a history of long-term unemployment. Excluding them from the applicant pool adds to a vicious unemployment cycle.

Frias also supported policies making it illegal for employers to screen out candidates with criminal records. The legislation, called “Ban the Box,” refers to the part of employment applications that applicants check off if they have criminal histories.

Minnesota was the first state to pass Ban the Box legislation that applies to hiring public employees. The Second Chance Coalition is working to expand it to private sector employers, too.

Criminal history screening perpetuates racial employment disparities. People of color are involved disproportionately with the criminal justice system. As the Organizing Apprenticeship Project explains in its Legislative Report Card on Racial Inequity, those criminal justice disparities are rooted in unequal disciplinary action between white youth and youth of color for similar crimes.

Business, political and community leaders can pursue multiple avenues to address employment disparities. Reducing educational disparities is one step. But eliminating employment barriers that put communities of color at a disadvantage and being vigilant and courageous in addressing internal biases are also important. Such approaches will help ensure equal opportunities for all and help build stronger communities.

-Scott Russell


Unemployment rate is high, but still underestimates the challenges facing many Americans

September 2, 2011

As we approach Labor Day, it is sobering to remember that the national unemployment rate stands at 9.1 percent. For comparison, during the last two recessions, the rate never rose above 7.8 percent. Experts are predicting that unemployment will remain above eight percent for five years running.

And sadly, a new report from the Economic Policy Institute (EPI) suggests the human impact is even worse than the monthly unemployment figures suggest.

Many more Americans are underemployed, including individuals who have accepted part-time work when they really want full-time work, or individuals who have become so discouraged that they have given up actively seeking work. While these individuals are not counted in the official unemployment rate, they represent a group of workers who are not finding adequate employment in the current job market. As of July, 16.1 percent of American workers were unemployed or underemployed. An amazing 31 percent of the workforce was unemployed or underemployed during some part of the year in 2009.

The recession has hit people of color the hardest. In 2009, 36 percent of blacks and 41 percent of Hispanics were unemployed or underemployed during some part of the year. Currently, unemployment or underemployment affects roughly one out of four minority workers.

For many, the search for work has been a long one. Almost half of all unemployed people have been out of work for more than six months.

The depth and breadth of the current unemployment crisis has serious consequences for all Americans, including those who are employed. The nation has experienced the slowest wage growth in the last three decades, a decline in median household income, and a substantial rise in poverty. According to the EPI report,

[T]he adverse effects…also include long-term “scarring”: young people who cannot get a proper footing at the start of their careers suffer lower lifetime earnings, older workers see their retirement security vanish, and the productive potential of the economy falls as innovation and investment suffer.

Here in Minnesota, the jobs picture remains troubling. According to EPI, Minnesota continues to face a “jobs deficit.” We have 124,600 fewer jobs today than we did when the recession started in December 2007. We would need to add another 73,300 jobs to keep up with population growth since the recession began. That means Minnesota needs to add 197,900 jobs just to regain our pre-recession employment rate – a number roughly equal to the populations of Rochester and Duluth combined.

But that’s not likely to happen anytime soon. The most recent job vacancy survey shows the state has one job opening for every 3.6 people looking for work. While this is an improvement from one year ago, many of these openings are for part-time, temporary or seasonal employment. The median wage offer for all vacancies was just $10 an hour.

This Labor Day, let’s not forget about the people behind the numbers. Most Americans have been affected in some way by this deep and prolonged period of unemployment. So, instead of focusing on the latest news from the stock market, policymakers should turn their attention to addressing the challenges facing the nation’s millions of unemployed and underemployed workers.

-Scott Russell

Let high-income tax cuts expire, redirect money to stimulate economy

September 2, 2010

The Center on Budget and Policy Priorities makes a strong case for letting $40 billion in Bush tax cuts for high-income households expire as scheduled at the end of this year. That $40 billion could instead be redirected to help stimulate the weak national economy.

According to the nonpartisan Congressional Budget Office (CBO), if this money were used for job-creation tax credits, continued federal aid to states and extended unemployment insurance benefits, it would create more jobs and generate more economic growth than simply extending the Bush tax cuts for the top income households in the nation (i.e., those with incomes over $250,000 a year). Why? Because higher income households are more likely to save this extended tax windfall than spend it. What the economy needs right now, however, is more consumer spending.

In fact, “CBO found extending the tax cuts for high-income households to be the worst of all options under consideration for preserving or creating jobs and boosting economic growth while the economic is weak,” the Center on Budget and Policy Priorities notes.

In the near term, the CBO found that some actions would create more economic growth and more jobs per dollar spent than extending the high-income tax cuts. For example:

  • A temporary jobs tax credit (a temporary payroll reduction on new hires).
  • Extending federal fiscal aid to states to help them avoid bigger and deeper spending cuts. (Congress in fact has recently taken this action, which may provide $430 million for health care and education in Minnesota.)
  • Extended unemployment insurance benefits for the unemployed. This provides the greatest “bang for the buck,” as benefits paid out to the unemployed would undoubtedly be injected right back into the local economy in spending by the unemployed to meet basic living needs.

When Congress returns from its summer recess in September, expect a fierce debate over the future of the expiring tax cuts (along with whether or not Congress will extend tax credits targeted to low- and moderate-income working families, such as the Child Tax Credit and the Earned Income Tax Credit). Extending the tax cuts for high-income households is the worst option for spurring economic growth, and would add $1 trillion to the national debt over the next ten years. Congress should allow the Bush tax cuts to expire. In the short-term, Congress should redirect that money toward initiatives that will truly stimulate the economy and help struggling working families. Once the nation’s economy is on more solid footing, the resources can be used to make a dent in the nation’s deficit.

-Steve Francisco

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Minneapolis unemployment rates show highest racial disparity in the nation

June 10, 2010

A new study released by the Economic Policy Institute (EPI) finds that blacks in Minneapolis are 3.1 times as likely to be unemployed as whites – the worst level of disparity among the 50 largest metropolitan areas in the nation. These findings are consistent with data from the U.S. Bureau of Labor Statistics that show that last year, “Minnesota had the nation’s second largest gap between unemployment rates for whites and African-Americans and between whites and Latinos” (MPR, May 24, 2010).

In a state that prides itself on being above average, the reality of significant disparities among Minnesotans is too often overlooked. It is already widely known that Minnesota has one of the largest educational achievement gaps in the nation. But the gaps in educational attainment don’t explain the wide disparities in unemployment. EPI found that among blacks and whites with similar levels of education, blacks were still much more likely to be unemployed in Minneapolis.

It is more than just educational differences that is making it difficult for African-Americans to find employment in our state. According to U.S. Census data, Minnesota remains a very white state. Couple a largely homogenous population with significant cutbacks in public services for vulnerable populations, and experts say minority communities face signficant challenges. It’s likely the unemployed are finding it difficult to get adequate and appropriate job training, lack the social connections that are so important in job hunting during a recession, and are coming up against prejudice during the hiring process.

This isn’t just a moral problem, it’s also an economic problem. Remember, Minnesota’s demographics are changing. In the coming years a large segment of our workforce will be retiring, and the future workforce will be far more diverse. Ensuring that all Minnesotans succeed in school and succeed in work is vital for the future economic success of the state. Business leaders agree. The Itasca Project, an alliance of private sector CEOs and public officials, has been examining strategies to ensure Minnesota’s future economic competitiveness. One of their priorities is addressing disparities in the state. 

If we are going to build a state that will thrive in the coming decades, we need to take a look around to make sure everyone in the state is ready to contribute.

-Christina Wessel

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Congressional action needed to ensure that emergency unemployment benefits do not expire

February 4, 2010

Minnesota’s December unemployment rate was down from its 8.4 percent June peak, but many Minnesotans remain out of work and unable to find it. In January, the state said there were approximately 141,000 Minnesotans collecting state unemployment insurance. Another 88,000 Minnesotans had run out of state unemployment benefits and were receiving federal emergency unemployment benefits through the American Recovery and Reinvestment Act. But important improvements in assistance for struggling Minnesotans will end this month unless Congress takes action.

Unemployment insurance (UI) plays a critical role in a recession. In addition to providing replacement income for unemployed workers who lost their jobs through no fault of their own, it maintains consumer purchasing power in an economic downturn. The state’s UI program replaces approximately half of a qualifying worker’s gross income for up to 26 weeks. Minnesota recipients get a maximum of $585 a week – the equivalent of 40 percent above the 2009 federal poverty line for a family of four.

The federal Recovery Act provided several key supports to unemployed workers, including:

  • Additional weeks of UI benefits (in Minnesota, the maximum is now 86 weeks between state and federal resources).
  • A $25-per-week supplemental payment to all UI checks. In 2009, that provision was estimated to provide $180 million to unemployed Minnesota residents, and by extension to the state’s economy.
  • A federal income tax exemption for the first $2,400 of UI payments in tax year 2009.
  • Assistance for unemployed workers to continue their health insurance coverage through COBRA.

After February 28, eligibility ends for the federal emergency UI extension, the $25 a week supplementary payment and the COBRA support. Those getting benefits as of February would get a “soft landing” continuation. Those applying March 1 or later would not qualify.

Since unemployment remains high, Congress is considering extending the emergency UI assistance and federal COBRA extensions. These would likely be part of a jobs bill moving through Congress in February. (The National Employment Law Project is a good resource with information about efforts to extend eligibility through 2010.)

There is a strong argument for such extensions. Despite some recent positive economic signs, Minnesota’s December unemployment rate was 7.4 percent, still a high figure. The job situation remains severe and the outlook, “is still grim,” according to Minnesota’s November 2009 economic forecast:

Economists often stress that job creation can lag an economic turnaround by as much as 6 to 9 months … Tight credit conditions, sluggish demand, and no clear evidence that the recovery is sustainable will force employers to squeeze more productivity from remaining workers and hold back hiring for much of 2010.

Without a federal UI extension, thousands of Minnesotans are likely to run out of benefits before they find work. Their spending will drop, a further drag on the economy, and they will increase demands on other parts of the broader social service network. Last fall, approximately 500 Minnesotans a week were exhausting their federal and state UI benefits before the federal government added more weeks of eligibility.

After February 28, the impact on individual unemployed workers would depend on where they are in the system. They would qualify for some extended benefits, but not the current level.

Those who qualified for the COBRA health insurance support by the end of February would be allowed to continue their eligibility in the following months. As it works now, unemployed workers pay for 35 percent of the COBRA premium for themselves and their family. Families remain eligible for up to 15 months. (Minnesota also has a state COBRA Premium Subsidy that covers 35 percent of the COBRA premium. It has tighter income and asset limits than the federal program.)

The economy seems to be slowly turning the corner, but not quickly enough to help thousands of unemployed Minnesotans. Congress needs to continue extended unemployment benefits and COBRA support until the economy is on stronger footing. It not only helps people on the financial edge, but their increased spending will help support the recovery.

-Scott Russell

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Analysis of the November forecast: job and wage losses driving deficits

January 7, 2010

Minnesota’s economy is starting to heal, but it is going to be a long, slow recovery according to the state’s most recent budget forecast (released early in December). Minnesota is estimated to have a new $1.2 billion shortfall in the current biennium, driven by a larger-than-expected drop in income tax revenue. The state now faces an estimated $6.6 billion deficit for FY 2012-13 (including inflation).

The Minnesota Budget Project has just released our analysis of the state’s November forecast. In addition to highlighting the overall numbers (which we blogged about in December) and the deficit problems facing the Health Care Access Fund (which we blogged about this week), this analysis looks at the underlying economic problem driving our state’s budget problems – jobs and wages.

The forecast offers this discouraging assessment:

“Employment in Minnesota is now expected to fall by more than 150,000 jobs between the first quarter of 2008 and the first quarter of 2010, 30,000 more than projected last February. If this forecast holds true, more than a decade of job creation will be lost.”

When economists tally the final numbers, Minnesota is expected to have four percent fewer jobs in 2009 than in 2008 and non-farm wages are predicted to drop nearly six percent. It’s the first time the state’s wages and salaries have dropped from one year to the next since the state began tracking data in 1970.

And that has taken a big toll on the state’s finances. While this year’s general fund spending is actually tracking slightly lower than projections, income tax revenue is predicted to drop an additional $827 million for this biennium (FY 2010-11). That loss accounts for nearly 70 percent of the new $1.2 billion deficit.

Among the other forecast findings: the economy is stabilizing but firms will be slow to hire, choosing instead to increase hours for existing workers. The national employment numbers are not expected to return to pre-recession levels until 2013.

Minnesota Management and Budget will release the next major economic forecast in late February, after the legislative session has begun.

-Scott Russell and Christina Wessel

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Friday’s data covers only a sliver of the Economic Recovery Act’s impact

October 29, 2009

Data to be released on Friday, October 30, about jobs created by the American Recovery and Reinvestment Act (ARRA) will only cover a small portion of the economic activity generated by that legislation. It’s important to understand what’s included in that report and what is left out. Here’s some of what I learned from the Center on Budget and Policy Priorities’ extremely helpful paper on the topic.

What’s in: About 16 percent of Recovery Act funds spent through September 30 are covered under the reporting system that will generate this jobs data. But only a portion of the jobs created through this portion of spending will be counted. The data will include jobs created or retained by recipients of ARRA grants and loans, but not the indirect impact of these dollars, such as the jobs created by subcontractors or suppliers involved in those projects.

What’s left out: About 84 percent of Recovery Act funds through September 30 are not included in the job reporting requirements. These include important areas of the act that have had a positive economic impact, such as:

  • Unemployment Insurance and other direct aid to individuals hurt by the economic downturn. By the end of August, more than $30 billion had been spent on unemployment benefits for laid-off workers and an increase in Food Stamps. These provisions have a great “bang for the buck” as the struggling families who receive them spend those dollars in local grocery stories and businesses. Economist Mark Zandi finds that every $1 spent on unemployment insurance generates $1.63 in economic activity and each $1 spent on additional Food Stamps generates $1.73 in activity. The jobs created or retained through this additional activity are not included in the jobs data. Minnesotans have received an estimated $356 million in additional unemployment insurance benefits and $42 million in Food Stamps through September from the Recovery Act.
  • Additional Medicaid funds to the states. About $31 billion by the end of September has gone for additional Medicaid for the states – Minnesota’s share is $782 million. We’ve written repeatedly about how crucial these dollars were in preventing thousands of Minnesotans from losing health care in the 2009 Legislative Session and by preventing other painful cuts to balance the state’s budget shortfall. These Medicaid dollars are used to pay health care providers of various kinds. But those health care jobs, and the impact of those health care workers’ spending in the economy, is not included in the jobs data.

More complete estimates will come later this year or early next year. The President’s Council of Economic Advisors is required to make comprehensive quarterly estimates about the full impact of the Economic Recovery Act on jobs. The report they released last month estimated that between 600,000 and 1.1 million jobs were created or retained in the third quarter of this year from the Recovery Act. In Minnesota, 20,100 jobs were estimated to be created or retained in the third quarter. (In contrast, 3,300 to 4,700 jobs are estimated to be lost through June 2011 due to state spending cuts under unallotment.)

-Nan Madden

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