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
9.1 Gender and Racial Differences
Ratio of African-American to White Weekly Earnings
9.1 Gender and Racial Differences
Unemployment Rate
9.1 Gender and Racial Differences
Occupational Distribution by Gender, 2006
9.1 Gender and Racial Differences
Occupational Distribution by Race, 2006
9.1 Gender and Racial Differences
Educational Attainment, 2005
9.1 Gender and Racial Differences
Earnings by Education, Race, and Sex, 2005
9.1 Gender and Racial Differences
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.
9.2 Discrimination and Its Dimensions
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.
9.2 Discrimination and Its Dimensions
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
9.2 Discrimination and Its Dimensions
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
9.3 Taste for Discrimination Model
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).
9.3 Taste for Discrimination Model
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.
9.3 Taste for Discrimination Model
Wage Discrimination in the Labor Market
9.3 Taste for Discrimination Model
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.
9.3 Taste for Discrimination Model
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.
9.3 Taste for Discrimination Model
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
9.4 Theory of Statistical Discrimination
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.
9.4 Theory of Statistical Discrimination
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
9.5 The Crowding Model: Occupational Segregation
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.
9.5 The Crowding Model: Occupational Segregation
Index of Occupational Segregation by Gender
9.5 The Crowding Model: Occupational Segregation
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.
9.6 Cause and Effect: Nondiscriminatory Factors
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.
9.6 Cause and Effect: Nondiscriminatory Factors
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.
9.6 Cause and Effect: Nondiscriminatory Factors
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.
9.6 Cause and Effect: Nondiscriminatory Factors
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.
9.6 Cause and Effect: Nondiscriminatory Factors
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) .
9.7 Antidiscrimination Policies and Issues
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.
9.7 Antidiscrimination Policies and Issues
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.
9.7 Antidiscrimination Policies and Issues
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.
9.7 Antidiscrimination Policies and Issues
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.