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Age Discrimination across the Business Cycle

Age Discrimination across the Business Cycle. Gordon B. Dahl Matthew M. Knepper. NBER Working Paper No. 27581. Issued in July 2020: “A key prediction of discrimination models is that competition in the labor market serves as a moderating force on employer discrimination. In the presence of market frictions, however, recessions create excess labor supply and thus generate opportunities to engage in discriminatory behaviors far more cheaply. A natural question arises: does discrimination increase during recessions? We focus on age discrimination and test this hypothesis in two ways. We first use employee discrimination charges filed with the Equal Employment Opportunity Commission (EEOC), along with an objective measure of the quality of those charges. For each one percentage point increase in a state-industry’s monthly unemployment rate, the volume of age discrimination firing and hiring charges increases by 4.8% and 3.4%, respectively. Even though the incentive to file weaker claims is stronger when unemployment is high, the fraction of meritorious claims also increases significantly when labor market conditions deteriorate. This is a sufficient condition for real (versus merely reported) discrimination to be increasing under mild assumptions. Second, we repurpose data from a correspondence study in which fictitious resumes of women were randomly assigned older versus younger ages and circulated across different cities and time periods during the recovery from the Great Recession. Each one percentage point increase in the local unemployment rate reduces the relative callback rate for older women by 14%.”

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