This paper analyzes the effects of social networks on employment and inequality. It develops a model where agents obtain job information through social contacts and shows that employment is positively correlated across time and agents. Unemployment exhibits persistence, as the probability of finding a job decreases with the length of unemployment. The model also examines inequality between groups, showing that groups with worse initial employment status have higher drop-out rates and persistently lower employment prospects. The paper discusses how social networks influence employment dynamics, leading to positive correlations in employment status among connected agents. It also shows that unemployment duration dependence is a result of network effects, where longer unemployment spells increase the likelihood that an agent's connections are also unemployed, reducing the probability of receiving job information. The model demonstrates that social networks can lead to persistent inequality in employment rates between groups, even when their economic characteristics are similar. This is because groups with worse initial employment status are more likely to drop out of the labor force, leading to sustained differences in employment outcomes. The paper also discusses policy implications, showing that concentrating subsidies in tightly connected groups can have a greater impact on employment outcomes than spreading them out. This is because concentrated subsidies can lead to contagion effects, where agents connected to subsidized agents are more likely to stay in the labor market. The paper concludes that social networks play a significant role in shaping employment and inequality, and that understanding these dynamics is crucial for developing effective policies.This paper analyzes the effects of social networks on employment and inequality. It develops a model where agents obtain job information through social contacts and shows that employment is positively correlated across time and agents. Unemployment exhibits persistence, as the probability of finding a job decreases with the length of unemployment. The model also examines inequality between groups, showing that groups with worse initial employment status have higher drop-out rates and persistently lower employment prospects. The paper discusses how social networks influence employment dynamics, leading to positive correlations in employment status among connected agents. It also shows that unemployment duration dependence is a result of network effects, where longer unemployment spells increase the likelihood that an agent's connections are also unemployed, reducing the probability of receiving job information. The model demonstrates that social networks can lead to persistent inequality in employment rates between groups, even when their economic characteristics are similar. This is because groups with worse initial employment status are more likely to drop out of the labor force, leading to sustained differences in employment outcomes. The paper also discusses policy implications, showing that concentrating subsidies in tightly connected groups can have a greater impact on employment outcomes than spreading them out. This is because concentrated subsidies can lead to contagion effects, where agents connected to subsidized agents are more likely to stay in the labor market. The paper concludes that social networks play a significant role in shaping employment and inequality, and that understanding these dynamics is crucial for developing effective policies.