Intermetropolitan Variation in the Labour Force Participation Rates of White and Black Men in the United States

Abstract

We decompose the variance in black and white male labour force participation rates across US metropolitan areas in 1990 into three effects: that due to variation in labour force participation within labour force categories across metropolitan areas (local labour market effects); that due to variation in the distribution of those categories across metropolitan areas (labour force structure effects); and that due to the covariation between these two effects. Variation in labour force participation rates within labour force categories (local labour market effects) accounts for 56 per cent of the variance in labour force participation rates across metropolitan areas for white men but over 75 per cent for black men. Variation in the frequency of membership in each labour force category is a relatively unimportant factor for both groups. The covariance between labour force effects and local effects is negligible for black men but accounts for 25 per cent of the intermetropolitan variance in white male participation rates. This covariance is a measure of how well adjusted the labour force characteristics of metropolitan areas are to local economic conditions; our results indicate that this adjustment is greater for white men than black men. We also use this decomposition to identify the causes of variation in the difference between black and white labour force participation rates. Black-white differences in response to local labour market effects conditions generate most of this variance. These different local labour market effects are greatest among young single men with less than a high school education.