The Great Recession and ethnic inequality in the us labour force

Abstract

Financial and managerial occupations are essentially characterised by a white labour force. Looking at the Current Population Survey (2009), the financial crisis has reinforced existing patterns of the us labour force in favour of the dominant identity: white. Using an identity model (Akerlof and Kranton 2010), this paper argues that the decision of principal (employers) to hire an agent (employee) is influenced by the identity to which they belong, and especially to the related social norms attached to their identity. As a result of the financial crisis, in increasing uncertain times, principals have adopted a survival strategy of their dominant identity rather than following the rationale behaviour of hiring the traditional agent i.e., the cheaper and more flexible part of the labour force: the young, female, non-white workforce.