Department of Quantitative Social Science Ethnic parity in labour market outcomes for benefit claimants in Great Britain

Accurate estimates of the extent of ethnic parity amongst benefit claimants are very important for policymakers who provide interventions for these groups. We use new administrative data on benefit claimants in Great Britain to document differences in labour market outcomes between Ethnic Minority and White claimants, both before and after controlling for rich observable characteristics. We do so using a variety of methods, from OLS to propensity score matching to difference-in-differences. We find that, in many cases, Minorities and Whites are simply too different for satisfactory estimates to be calculated, and that results are sensitive to the methodology used. This calls into question previous results based on simple regression techniques, which may hide the fact that observationally different ethnic groups are being compared by parametric extrapolation. For Income Support and Incapacity Benefit claimants, however, we could calculate satisfactory results. For these groups, large and significant raw penalties almost always disappear once we appropriately control for pre-inflow characteristics. JEL classification: J08, J15.