This essay reviews and briefly summarizes three theoretical models used most often to explain two decades of persistently high unemployment among black youth and declining rates of male labor-force participation: neoclassical, Keynesian/neo-Keynesian, and radical perspectives. Based on a review of these models, it offers an alternative approach to explaining and analyzing black youth unemployment

Williams, Rhonda M.

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Trotter ReviewVolume 8Issue 1 Race and Economic Development: Challengesand ProspectsArticle 73-21-1994Theoretical Explanations of Persistent Black YouthUnemploymentRhonda M. WilliamsUniversity of Maryland - College ParkFollow this and additional works at: http://scholarworks.umb.edu/trotter_reviewPart of the African American Studies Commons, Community-based Research Commons,Economic Theory Commons, and the Race and Ethnicity CommonsThis Article is brought to you for free and open access by the William Monroe Trotter Institute at ScholarWorks at UMass Boston. It has been acceptedfor inclusion in Trotter Review by an authorized administrator of ScholarWorks at UMass Boston. For more information, please contactlibrary.uasc@umb.edu.Recommended CitationWilliams, Rhonda M. (1994) "Theoretical Explanations of Persistent Black Youth Unemployment," Trotter Review: Vol. 8: Iss. 1,Article 7.Available at: http://scholarworks.umb.edu/trotter_review/vol8/iss1/7TheoreticalExplanations ofPersistentBlack YouthUnemploymentby Rhonda M. WilliamsThis essay reviews and briefly summarizes three theo-retical models used most often to explain two decades ofpersistently high unemployment among black youth anddeclining rates of male labor-force participation: neoclas-sical, Keynesian/neo-Keynesian, and radical perspectives.Based on a review of these models, it offers an alternativeapproach to explaining and analyzing black youth unem-ployment.Neoclassical ModelCompetitive neoclassical theory conceptualizes unem-ployment in the context of a "skills-auction" labor market.Utility-maximizing worker-consumers invest in and sellbundles of skills; profit-maximizing capitalist firms pur-chase those skills. The skills-auction market "clears"through wage fluctuations that eliminate excess labor sup-ply or demand. If unemployed, surplus workers bid downwages; if firms want more workers than are forthcomingat the prevailing wage, they increase their wage offers. Inthe competitive model, long-run equilibrium unemploy-ment is a theoretical impossibility. 1When confronted with high rates of black youth unem-ployment, economists working within this perspectivetend to claim either that conventional figures overstate theproblem or that employment problems are a manifestationof the inadequacies of black youth. For example, MartinFeldstein and David Ellwood argue that sustained unem-ployment (more than twenty-six weeks) affects only asmall minority of the youth population. They dismiss thenotion that many black youth are discouraged workerswho have abandoned the employment search because of alack of jobs and, instead, note survey data indicating thatmany unemployed and out-of-school black youth live athome and, thus, do not really need to work. 2 The "inade-quacy" or "culture of poverty" camp argues that blackyouth either are unwilling to take available low-wagejobs—they suffer from too high a "reservation wage"—orlack the cultural values (including a strong work ethic)necessary for success in the capitalist labor market. 3Are young black people unemployed because of poorwork attitudes? This recurrent claim harkens back to thedecades-old "culture of poverty thesis": African-Americanyouth fare poorly in U.S. labor markets because they beara cultural heritage that does not reproduce the necessaryvalues for success in capitalist societies. Black economistsThomas Sowell and Glenn Loury have loomed largeamong economists of the past decade who have revital-ized this cultural critique of blacks.4 Vigorous critics ofthis explanatory tradition have rigorously detailed the log-ical, economic, historical, and philosophical limitations ofthe "blacks-are-dysfunctional" school of thought. 5Nonetheless, the popular media exudes confirmations ofthe thesis that poor urban blacks are intrinsically "patho-logical."6Keynesian and Neo-Keynesian ModelsJohn Maynard Keynes's conceptualization of unem-ployment differed substantially from that of both theeconomists of his day and subsequent generations of neo-classical theorists. Keynes's peers thought unemploymentwas caused by the inflexibility of wages. In the first twenty-five pages of his book, The General Theory ofEmployment,Interest, and Money, Keynes indicates that his concern isneither the unemployment that results from the imbal-ances of supply and demand of specialized resources northe unemployment associated with unemployed workers'inability or unwillingness to underbid currently employedworkers. 7 On the contrary, his concern is unemploymentwhich can only be reduced by an expansion of aggregatedemand, regardless of what happens to wages, whethernominal or real. For Keynes, this is the definition ofinvoluntary unemployment}In sharp contrast, neo-Keynesians equate involuntaryunemployment with wage rigidity, or market "imperfec-tion." 9 Wages are "sticky downward," markets cannotclear, and unemployment is the result. The neo-Keyne-sians offer a variety of explanations for wage rigidity:workers' efforts' to preserve relative wages; the reluctanceof employers and firms to change wages if they can not bechanged again easily without cost; employers' belief thatworkers work harder with higher wages (the premise ofthe ascendant efficiency wage literature); a customary fairwage prevails and employers who seek to reduce wagesbelow this level suffer social sanction.The Keynesian perspective on black youth unemploy-ment is, thus, one that emphasizes the relationshipbetween aggregate demand and employment. The neo-Keynesian model also allows for the existence of blackyouth who seek work at the going wage, but in this case,they cannot secure employment because of wage inflexi-bility. Although the reasoning differs, the two traditionsagree that blacks are unemployed because of insufficientlabor demand by capitalist firms. Keynesians also believelabor market discrimination reduces black youth employ-ment opportunities.Marxist Models and PerspectivesRadicals are united in their conclusion that unemploy-ment is part and parcel of the normal functioning of capi-talist economies. Because workers are only hired by capitalistfirms when the latter expect to profitably produce andsell a commodity, the demand for labor power (workers'capacity to work) varies with capitalists' profit expecta-tions. However, because economic growth in capitalistsocieties often increases the capital intensity of production18(a high capital-labor ratio), a given rate of economicgrowth need not imply a similar increase in labor demand.Indeed, workers expelled from technologically advancedsectors are desperate and available for employment. Suchwas the case for African Americans following the lastwave of the mechanization of cotton production in thepost-World War II years.The imposition of capitalist property relation—forexample, the privatization of communally held lands dur-ing colonization—repeatedly expands the global ranks ofthe "reserve army" of the unemployed. The reserve armyboth disciplines employed workers and provides a readilyavailable pool of cheap labor from which firms can drawduring periods of economic growth. In the post-WorldWar II years, capitalists have regularly deployed domestic(primarily southern) and global reserves in their efforts tothwart unionized U.S. workers seeking to increase wagesand improve working conditions.Like liberals, radicals believe that discrimination is animportant factor in explaining the racial youth employ-ment gap. However, liberals view discrimination as anti-thetical to employers' interests, since it prevents themfrom having access to qualified workers. In sharp con-trast, Marxists believe discrimination persists because itbenefits (white) capitalists and/or racially dominant whiteworkers.An Alternative PerspectiveAn alternative perspective within the Marxist traditionis offered by Steven Shulman, William A. Darity, Jr., andRhonda M. Williams. 10 It challenges the argument thatmost white workers are unambiguously hurt by racism.Although they concur that capitalists deploy racial"divide-and-conquer" strategies, these economists empha-size that, all else equal, white workers are more likely tobe employed than blacks. In other words, African Ameri-cans are disproportionately represented within the reservearmy of the unemployed.Alternately referred to as "neo-Marxists" or "classicalMarxists," these thinkers accord centrality to capital accu-mulation's consequences for workers. Capitalist competi-tion produces both unemployment and a wage hierarchy.Workers seeking to secure a living wage are in competi-tion with one another to avoid unemployment and securea viable living standard. In the United States (and manyother capitalist societies), the legacies of colonization,slavery, and white supremacy collaborate to ensure thatmuch of this job competition occurs along gender-mediated racial lines. White solidarity— the formal(unions) and informal (family, kinship, and commumisnetworks) channels whites use to influence employmentdecisions—enhances white employment probabilities.Employers periodically accommodate white powerbecause there are costs associated with ending discrimina-tion. These costs include lost productivity due to changingwhite wage/employment expectation; the costs associatedwith disrupted teamwork and the changing of recruitment,hiring, and training practices; and the potential costs of amore racially united work force.Evidence from the 1980s suggests that employmentdiscrimination against African Americans is increasing.Shulman discovered a recent and substantial shift in thecyclical behavior of racial employment differentials; inthe 1950s and 1960s, black employment displayed greatercyclical variability than white employment." In otherwords, blacks suffered greater relative employment lossesduring recessions, but enjoyed greater relative gains dur-ing periods of economic growth. After 1970, however,blacks' postrecession recovery gains declined with eachpassing upswing. In the 1982-84 recovery, black men andwomen actually suffered relative employment losses. Theexamination by Williams of 1980-85 employmentchanges in twelve manufacturing industries echoes Shul-man's findings at the microlevel. 12 Williams discoveredthat black employment declined considerably faster thanwhite employment in five of the seven sectors showingdramatic employment losses. In four of the five sectorswhich showed increased overall employment, blackemployment declined.Keynesians believe labor market discriminationreduces black youth employment opportunities.The neo-Marxist/classical Marxist analysis thus chal-lenges those radicals who insist that white workers aresimply acting against their own best interest. Indeed, then-work suggests that radicals must critically assess the his-torical evolution of racialized working class formation inthe United States. 13 The neo-Marxian challenge is not onewhich unambiguously calls for substituting the primacy ofrace-based struggles over class-based alliances. Rather, itcalls upon radicals to reassess the ideological, political,and economic saliency of white supremacy and ethnicconflict in advanced capitalist societies.19Notes'This section explores only the competitive model. The third section address-es models of imperfect competition.2Martin Feldstein and David Ellwood, 'Teenage Unemployment: What is theProblem?" in The Youth Labor Market Problem, edited by Richard Freeman andDavid Wise (Chicago: University of Chicago Press, 1982).3Formally speaking, "reservation wage" is the lowest wage at which an indi-vidual will accept a job offer."Glenn C. Loury, "Internally Directed Action for Black Community Develop-ment: The Next Frontier for the 'Movement,'" The Review of Black PoliticalEconomy (Summer/Fall 1984); Thomas Sowell, The Economics and Politics ofRace (New York: William Morrow, 1983); and Civil Rights: Rhetoric or Reality?(New York: William Morrow, 1984).sWilliam A. Darity, Jr., and Rhonda M. Williams, "Peddlers Forever?: Cul-ture, Competition, and Discrimination," American Economic Review 75, No. 2(1985); Rhonda M. Williams, "Culture as Human Capital: Methodological andPolicy Implications," Praxis International 7, No. 2 (1987); Robert Gooding-Williams, "Black Neo-Conservatism: A Critical Introduction," Praxis Interna-tional 7, No. 2 (1987); and, Lorenzo Simpson, "Values, Respect, and Recognition:On Race and Culture in the Neo-Conservative Debate," Praxis International 7,No. 2 (1987).6Recall the 1986 Bill Moyers special, "The Vanishing Black Family: Crisis inBlack America" (25 January 1986).7 John M. Keynes, The General Theory of Employment, Interest, and Money,Reprint (New York: Harcourt, Brace and World, 1964 [1936]).8William A. Darity, Jr., and Bobbie L. Horn, "Involuntary UnemploymentReconsidered," Southern Economic Journal 49, No. 1 (1983); and, "InvoluntaryUnemployment Independent of the Labor Market," Journal of Post KeynesianEconomics 10, No. 2 (1987-88).'William A. Darity, Jr., "Efficiency Wage Theory: Critical Reflections on theNeo-Keynesian Theory of Unemployment and Discrimination," in NewApproaches to Economic and Social Analyses of Discrimination, edited byRichard Cornwall and Phanindra Wunnara (New York: Praeger, 1991)."William A. Darity, Jr., "What's Left of the Economic Theory of Discrimina-tion?," in The Question of Discrimination: Racial Inequality in the U.S. LaborMarket, edited by William A. Darity and Steven Shulman (Wesleyan: WesleyanUniversity Press, 1989); Steven Shulman, "Competition and Racial Discrimina-tion: The Employment Effects of Reagan's Labor Market Policies," Review ofRadical Political Economics 16, No. 4 (1984); Rhonda M. Williams, "Capital,Competition, and Discrimination: A Reconsideration of Racial Earnings Inequali-ty," Review of Radical Political Economics 19, No. 2 (1987); "Beyond 'BadLuck': The Racial Dimensions of Deindustrialization," (Washington, D.C.: JointCenter for Political Studies, 1990); and, "Competition, Discrimination, and Dif-ferential Wage Rates: On the Continued Relevance of Marxian Theory to theAnalysis of Earnings and Employment Inequality," in Cornwall and Wunnara,New Approaches."Shulman, "Competition and Racial Discrimination."12Williams, "Beyond 'Bad Luck.'""Herbert Hill, "Black Labor and Affirmative Action: An HistoricalPerspective," in Shulman and Darity, The Question ofDiscrimination.Rhonda M. Williams is a political economist and associateprofessor in the Afro-American Studies Program at the Univer-sity of Maryland at College Park.20

Theoretical Explanations of Persistent Black Youth Unemployment

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Theoretical Explanations of Persistent Black Youth Unemployment

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