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Americans Would Rather Do Business With White People Than Black People

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"Americans Would Rather Do Business With White People Than Black People"

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Black business owner

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There is deep racial bias in our economy, as evidenced by the fact that online buyers shy away from doing business with black sellers and offer them less money when they do interact.

In a year-long experiment, researchers posted ads on online marketplaces like Craigslist selling an old iPod with a picture of the seller holding it, with either a black person or white person’s hand pictured. They also posted ads with a white hand that had a wrist tattoo, which the authors posited might experience similar discrimination to black people and could serve as a control group.

Screen Shot 2014-05-30 at 10.25.02 AM

CREDIT: Jennifer L. Doleac & Luke C.D. Stein

“Our paper asks the following question,” the authors write. “When the typical person engages in a consumer transaction (usually as a buyer), does he or she try to avoid dealing with minority sellers, and does she treat minority sellers differently?” The answer appears to be yes.

Black sellers got 13 percent fewer responses to their ads than white sellers overall. When they did get responses, they got 17 percent fewer offers. Then the offers were 2 to 4 percent lower, or $1.87 less on average than those made to white sellers. The best offers were also $3.56 lower than for white people.

The researchers also found that buyers were less respectful and more distrustful with black sellers. About 7 percent fewer people signed their names when responding to a black person. They were 44 percent less likely to accept delivery by mail and 56 percent more likely to be concerned about paying long distance, such as through PayPal, both of which include a bit more risk than an in-person hand off.

And even those who weren’t responding treated black sellers differently. Ads on these sites can be flagged as inappropriate and they will be taken down if enough people flag them. And black people’s ads were removed in this way 2.7 percent more often that for white people, so “the likelihood is thus almost twice as high that a black seller’s ad will be removed,” the authors note.

These findings my seem incidental, occurring just between online sellers and buyers, but they indicate something larger. As the authors explain, “First, a large amount of commerce takes places through these kinds of transactions. Second, discrimination by consumers may in fact underlie other forms of discrimination.” Given that most online sales require an eventual real life meet up to complete the transaction, “we expect that our results will be informative about discrimination offline,” they write. And if people shy away from buying things from black sellers, that could shape decisions made by actual retail companies when hiring sales people. One study found that consumer discrimination is the most likely cause of racial differences in the economy.

The results of the study can help illuminate why unemployment has consistently been significantly higher for black people than for white people, both during recessions and boom times. This is true even for college graduates, who have had higher unemployment rates for decades. Even 40 percent of recent college who do get jobs end up working in low-paying positions that don’t make use of their degrees.

Studies have helped to unearth racial bias holding black people back, rather than laziness or lacking a “culture of work.” Companies that drug test employees are more likely to hire black workers because in the absence of tests, employers assume black people use drugs and screen them out. When applications are sent in to postings for entry-level jobs, equally qualified black applications are half as likely as white ones to get a call for an interview or a job offer. But most of the bias that black people face today is subtle, not manifesting in outright hostility but in white people giving favorable treatment to those who look like them.

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