Racial differences in the effects of job contacts: Conflicting evidence from cross-sectional and longitudinal data

Recent research has argued that using job contacts to find work restricts the opportunities of Black workers. Although this makes sense in light of literature on urban poverty that contends that inner-city Blacks are isolated from effective job networks, this paper argues that there are two reasons why these findings may be misleading. First, the existence of discrimination in the labor market means that contacts may be an efficient method of job search for Black workers. Second, because the use of contacts may be an endogenous variable, we need to look at longitudinal data. In the analysis, I compare cross-sectional and longitudinal results on the relationship between contacts and wages. While the cross-sectional data indicate a negative relationship between contacts and wages, the longitudinal data suggest this merely reflects lower levels of opportunity among workers who use contacts rather than the effect of contacts per se.