This paper assesses whether racial prejudice and labour market discrimination is counter-cyclical.
This may occur if prejudice and discrimination are partly driven by competition over scarce resources,
which intensifies during periods of economic downturn. Using British Attitudes Data spanning three
decades, we find that prejudice does increase with unemployment rates. We find greater countercyclical
effects for highly-educated, middle-aged, full-time employed men. For this group, a 1%-point
increase in unemployment raises self-reported racial prejudice by 4.1%-points. This result suggests
that non-White workers are more likely to encounter racially prejudiced employers and managers in
times of higher unemployment. Consistent with the estimated attitude changes, we find using the
British Labour Force Survey that racial employment and wage gaps increase with unemployment. The
effects for both employment and wages are largest for high-skill Black workers. For example, a 1%-
point increase in unemployment increases Black-White employment and wage gaps for the highly
educated by 1.3%-points and 2.5%. Together, the attitude and labour market results imply that nonWhites
disproportionately suffer during recessions. It follows that recessions exacerbate existing
racial inequalities