Study on Effects of Manager's Race on Hiring

The Journal of Labor Economics has an interesting study in its most recent issue (October 2009) about the patterns of hiring that managers of different races exhibit. According to the study, white, Asian, and Hispanic managers tend to hire more white and fewer black employees than do black managers. The article, Laura Giuliano, David I. Levine, and Jonathan Leonard, Manager Race and the Race of New Hires not only documents the pattern but also offers some explanations:

Using more than two years of personnel data from a large U.S. retail chain, the study found that when a black manager in a typical store is replaced by a white, Asian or Hispanic manager, the share of newly hired blacks falls from 21 to 17 percent, and the share of whites hired rises from 60 to 64 percent. The effect is even stronger for stores located in the South, where the replacement of a black manager causes the share of newly hired blacks to fall from 29 to 21 percent. . . .

How strong is the impact? Consider a typical store with 40 employees located in the Southern U.S. According to the data, replacing a black manager with a non-black manager would result in the replacement of three to four black workers with white workers over the course of one year.
 
“From the viewpoint of a district manager who is observing just a small sample of stores, this change might go unnoticed or appear insignificant,” Giuliano said. “However, the change may appear more significant from the point of view of job seekers—and especially black job seekers.  In fact, the change in non-Southern stores amounts to a proportional decline of 15 percent in the number of blacks employed.”

The data used by Giuliano and her colleagues were especially well suited to sorting out the role race plays in hiring. While previous studies have also suggested that manager race plays a role, those studies have been unable to distinguish that role from other factors such as the demographic makeup of the local labor pool. Giuliano and her colleagues were able to isolate the race factor by tracking individual stores that experienced a change of manager.

“This means we can compare the hiring patterns of consecutive managers of different races in the same store,” she said. “Hence we can isolate the effect of a manager’s race by comparing the hiring patterns of managers when they hire from similar labor pools under similar conditions.”

The study also found that in locations with large Hispanic populations, Hispanic managers hire more Hispanics and fewer whites than do white managers, but that was only true when Hispanics made up 30% or more of the population of the area.

Some of the cause is related to patterns of residential segregation. Managers of all colors tended to hire people who lived close to them, so to the extent that black managers lived in neighborhoods that were predominantly black, Hispanic managers lived in neighborhoods that were predominantly Hispanic, and white managers lived in neighborhoods that were predominantly white, their hiring pools also tended to be primarily of their own race/ethnic background. Another reason that more black employees were hired by black managers may be due to white applicants self-selecting out. When a white manager is replaced by a black manager, the rate at which white workers quit rises by 15%.

So takeaways seem to be both that race of management matters when we think about real equal opportunity and that residential diversity/segregation is inextricably intertwined with employment diversity/segregation.

MM