chapter 9 labor market discrimination

Chapter 9 Labor Market Discrimination

God, what gorgeous staff I have. I just can’t understand those who have ugly people working for them, I really can’t. Just call me a pathetic aesthetic.—Jade Jagger (Mick’s daughter)

9.1 Gender and Racial Differences

Ratio of Female to Male Hourly Earnings


Ratio of African-American to White Weekly Earnings


Unemployment Rate


Occupational Distribution by Gender, 2006


Occupational Distribution by Race, 2006


Educational Attainment, 2005


Earnings by Education, Race, and Sex, 2005


Non-Discrimination FactorsRaw racial and gender differentials on ea

rnings, occupational distribution, and unemployment data must be interpreted with caution.

Factors other than discrimination such as individual choice may play a role.

9.2 Discrimination and Its Dimensions

DiscriminationDiscrimination exists when female or min

ority workers—who have the same abilities, education, training, and experience as white male workers—are accorded inferior treatment with respect to hiring, occupational access, promotion, wage rate, or working conditions.


Types of Discrimination Wage discrimination Female or black workers are paid less than ma

le (white) workers for doing the same work. Employment discrimination Blacks and women bear a disproportionate sh

are of unemployment. Occupational job discrimination Blacks and women are arbitrarily restricted fro

m entering some occupations, even though they are as capable as male (white) workers.


Types of Discrimination Human capital discrimination Blacks and women have less access to productivity-in

creasing opportunities such as formal schooling or on-the-job training.

Post-market discrimination Occurs after a person has entered the labor market. Wage discrimination Employment discrimination Occupational job discrimination


Types of DiscriminationPre-market discrimination

Occurs before a person has entered the labor market.

Human capital discrimination

9.3 Taste for Discrimination Model

Taste for Discrimination Becker’s taste for discrimination assumes that

discrimination is a “taste” for which a discriminator is willing to pay. Society’s taste for discrimination implies that it is wil

ling to forego output and profits as the price of discrimination.

Tastes for discrimination arise from sources: Employers Consumers Employees


Discrimination Coefficient If black and white workers are equally producti

ve, a non-discriminatory employer will randomly hire black and white workers if the wages are the same.

The strength of a employer’s prejudice against black workers is measured by the discrimination coefficient--d. For prejudiced employers, the cost of hiring a black

worker is the worker’s wage (Wb) plus the psychic cost of hiring a black worker (d).


Discrimination CoefficientPrejudiced employers will be indifferent bet

ween white and black workers when:Ww = Wb + d

A given employer will hire black workers, if the market white-black wage gap is greater than d.


Wage Discrimination in the Labor Market


GeneralizationsA change in the shape or location of the

demand curve will alter the black-white wage ratio.A decrease in discrimination will lengthen th

e horizontal portion of the demand curve and reduce the slope of the downward sloping portion.

This will raise the black-white wage ratio.


GeneralizationsThe size of the black-wage gap varies dir

ectly with the supply of black labor. If the supply of black labor is small that it int

ersected the horizontal portion on the demand curve, then no wage gap would exist.


Winners and Losers White workers gain since they are protected fr

om competition from black workers. Black workers lose since they receive lower w

ages. Employers that discriminate lose since they inc

ur higher wage costs than if they did not discriminate. Competition will decrease discrimination as lower c

ost non-discriminating firms will drive discriminating firms out of business.

9.4 Theory of Statistical Discrimination

Statistical Discrimination Statistical discrimination exists when employer

s base decisions upon the average characteristics of the group to which they belong. Ex: Young males pay higher insurance rates since t

hey have more accidents on average. Employers base hiring decisions on imperfect

predictors of productivity. Age, education, and experience provide some infor

mation about productivity


Statistical DiscriminationEmployers may use race and gender as wel

l since they also provide information.Gender may provide information on job commitm

ent since women on average have higher turnover rates.

Race may provide some information about schooling quality since blacks on average go to inferior schools than whites.


Implications Employers are not harmed when they practice statistic

al discrimination. They gain since they minimize hiring costs.

Employers are not being malicious in practicing this type of discrimination. The problem is that workers who have characteristics different

from the average are harmed. Statistical discrimination will diminish if the average ch

aracteristics of the groups converge over time. Male-female turnover rates are converging.

9.5 The Crowding Model: Occupational Segregation

Occupation Crowding


Ending DiscriminationEnding occupational crowding would ena

ble females to enter male occupations.Raise the wage rates of women and lower t

he wage rates of men.There would be a net gain to society as do

mestic output and efficiency would increase.


Index of Occupational Segregation by Gender


Index of Occupational Segregation by Race

9.6 Cause and Effect: Nondiscriminatory Factors

Rational Choice Some economists argue that part of the gende

r wage gap is the result of rational choices made by women.

Women tend to have interrupted work careers to childbearing. Due to their shorter work careers, it is rational for w

omen to invest less in education and training. Their stock of human capital will deteriorate will the

y are out of the labor force.


Rational Choice Occupational segregation may be due to women choosing oc

cupations, such as nursing and teaching, with skills that are useful in home production.

The wage gap may be the result of compensating wage differentials. Women may prefer safer jobs, less effort-intensive jobs, and s

horter commute times. Women work fewer hours than men.

More likely work part-time. Full-time women work fewer hours than full-time men.


Discrimination as a CauseSome argue that women invest less in h

uman capital because of discrimination.Women stay out of the labor force because

of the low pay in the labor market. If discrimination declined, then more women

may decide to remain single or childless.Sexual harassment may cause women t

o drop out of the labor force.


Evidence Male-female pay gap

Researchers decompose the pay gap into the portion explained by differences in productivity characteristics and the portion unexplained (discrimination).

Blau-Kahn find that two-thirds of the pay gap can be explained by differences in experience, industry, occupation, etc.

Pay gap has been falling equally due to a rise in relative productivity characteristics of women and a decline in the unexplained gap.


Evidence Black-white pay gap

Blau-Kahn find that 89 percent of the pay gap can be explained by differences in productivity characteristics.

The pay gap has not changed much over time. The black-white difference in education has diminished an

d thus shrunk the gap. The payoff to education has risen which has expanded the

gap.


ControversyEconomists differ on whether the unexpl

ained portion over or understates the amount of discrimination.Economists differ on whether unobserved pr

oductivity characteristics favor men or women.

Do the observed productivity characteristics (such as occupation) reflect discrimination?

9.7 Antidiscrimination Policies and Issues

Equal Pay Act of 1963The Equal Pay Act of 1963 requires that

men and women doing the same job to be paid the same.Firms could avoid the law’s requirements co

nducting employment discrimination (e.g., not hiring females for jobs held by males) .


Civil Rights Act of 1964 The Civil Rights Act of 1964 outlaws bot

h wage discrimination and employment discrimination.Applies to race, gender, color, religion, and

national origin.Applies to private employers, labor unions,

and governments.


Executive Orders Executive orders in 1965 and 1968 attempted to elimin

ate discrimination by businesses holding government contracts.

Firms with more than $50,000 of government contracts must develop affirmative-action programs. Firms must a develop plan to hire more women and minorities

if the firm has a smaller of proportion of women and minorities than in the available labor force.

These programs have been under legal and political attack.


Controversy Interventionist view

The market has failed to eliminate discrimination. Minorities and women have been discriminated aga

inst in the acquisition of human capital. Current legislation against discrimination does not c

orrect for the effects of past discrimination. More than equal opportunity must be given to close the cu

rrent gap.


Have Anti-Discrimination Policies Worked? The empirical evidence on whether governme

nt policies have narrowed the gender and racial pay gaps is mixed. It is difficult to separate the effects of the laws from

other factors that are changing. The affirmative-action laws did appear to have

improved the employment opportunities for women and minorities in the 1970s but this progress ended in the 1980s.

chapter 9 labor market discrimination

Documents

discrimination modeltaste

price of discrimination

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male white workers

gender differentials

racial differencesearnings

workers wage wb

white male workersare