Additive or Multiplicative Disadvantage? The Scarring Effects of Unemployment for Ethnic Minorities

Abstract

Previous research has documented that unemployed job applicants have problems re-entering the labor market, commonly referred to as scarring effects of unemployment. Studies have also documented ethnic discrimination in the labor market. Yet we do not know how these categories jointly shape employers hiring decisions. Thus, we do not know if unemployed minorities face an additive or a multiplicative disadvantage in hiring processes. Building on experimental data from two waves of a randomized field-experiment, we test whether we find an ethnic scarring effect, which would imply that contemporary long-term unemployment is particularly harmful to native born ethnic minorities. As expected, our experiment documents scarring effects of contemporary long-term unemployment. We also found, as expected, systematically lower call-backs for applicants with Pakistani/Muslim names. Third, our results show that unemployed minorities face an additive disadvantage in the labor market. Thus, we find no evidence of an ethnic scarring effect of unemployment, which would imply different consequences of unemployment for minority and majority applicants.