Labor Market Discrimination Discrimination By Employer, Customer, and Employee

Labor Market Discrimination The definition of Labor Market Discrimination is: It exists when 2 equally qualified individuals are treated differently solely on the basis of their gender, race, ethnicity, disability, etc.

Feed Back If such behavior is encountered it is only logical that those being affected by this labor market discrimination view the returns on human capital investment to be lower Consequently they will have less incentive to invest in human capital

Feed Back Furthermore, if this feed-back is widely spread such as to be known by younger individuals it could even lead to many dropping out of school or not pursuing higher education or advanced degrees

Subtle and Not so Subtle Barriers In 1991 a jury found in favor of a woman executive at Texaco who was not promoted because of concerns that the promotion would have required her to travel to Latin America and South Africa where she might be raped or murdered.

Subtle and Not so Subtle Barriers Woman working for GTE (now Verizon) California was promoted between 1977 and 1982 but was then told by her boss that no further promotions would be possible since "women were not suited for managerial positions as they lacked military training".

Glass Ceiling In 1991 as part of the Civil Rights Act of member committee was formed and chaired by the Labor secretary to determine if there was a glass ceiling in the upper management of American firms

Glass Ceiling In terms of the findings of the commission There is a glass ceiling and the derives from three sources: Societal/Non-Market Business Government

Glass Ceiling In terms of those reasons under the control of business are: Outreach and recruitment practices that do not seek out or reach or recruit minorities and women Corporate climates that alienate and isolate minorities and women Pipeline Barriers that directly affect opportunity for advancement Initial placement and clustering in staff jobs or in highly technical and professional jobs that are not on the career track to the top

Glass Ceiling In terms of those reasons under the control of business are (continuation): Lack of mentoring Lack of management training Lack of opportunities for career development, tailored training, and rotational job assignments that are on the revenue-producing side of the business

Glass Ceiling In terms of those reasons under the control of business are (continuation): Little or no access to critical develop mental assignments such as memberships on highly visible task forces and committees Special or different standards for performance evaluation

Glass Ceiling In terms of those reasons under the control of business are (continuation): Biased rating and testing systems Little or no access to informal net-works of communication Counterproductive behavior and harassment by colleagues

Glass Ceiling In terms of those reasons under the control of government are: Lack of vigorous, consistent monitoring and law enforcement Weaknesses in the formulation and collection of employment-related data which makes it difficult to ascertain the status of groups at the managerial level and to disaggregate the data Inadequate reporting and dissemination of information relevant to glass ceiling issues

Measuring Discrimination However, measuring discrimination is not that simple For instance, Looking at only wages does not represent the true level of discrimination since it is likely that personal characteristics may account for some of that disparity

Measuring Discrimination Gender Wage Ratio

The Overcrowding Model The labor market exhibits SEGREGATION Consequently: Some jobs are male jobs other are female jobs Some jobs are white jobs other are minority jobs

The Overcrowding Model Assume that workers F and M (female and male) are perfect substitute for each other (i.e. they are homogenous) Let the labor market be divided into two type of jobs. Job type F accounts for a quarter of the jobs available and job type M accounts for three quarters of the jobs available.

The Overcrowding Model At first assume that both jobs on average pay the same wage. Under this circumstances then we would have the following graph

The Overcrowding Model F type JobsM type Jobs w $ $ L L S S D D

The Overcrowding Model Now assume that at least one of the following is possible: M workers can move easily between job types, yet F workers can not. F workers can find F type jobs but can enter into M type jobs. F workers prefer to work only F type jobs Employers of M type jobs will not hire F workers Some other reason that will concentrate F workers only to F type jobs

The Overcrowding Model Based on the previous scenarios: Workers will begin to concentrate in F type jobs There will be less available workers for M type jobs In a sense, F type jobs become less important than M type jobs or F type jobs become subservient to M type jobs

The Overcrowding Model F type JobsM type Jobs w $ $ L L S S D D wFwF wMwM LFLF LMLM

The Overcrowding Model After the overcrowding in the F type jobs the result is that The wages in the F type jobs are lower than the wages in the M type jobs (i.e. w M >w F ) This time, F type jobs account now for more than a quarter of the jobs available (L F ) and M type jobs accounts for less than three quarters of the jobs available (L M ).

Models of Labor Market Discrimination Tastes for Discrimination Gary Becker conceptualized discrimination as a personal prejudice U=U(,W,B) Where U is the utility of the employer are the profits W is the number of White workers And B is the number of Black workers

Gary Becker He then assumed that U/ > 0 U/ W > 0 U/ B < 0 Assuming that both White and Black workers are homogenous

Gary Becker The normal assumption that workers will be paid MP* L = w* Will then become MP* L = w* W MP* L = w* B (1 + d) Where d>0

Gary Becker Hence, w* W = w* B (1 + d) or w* m = w f* (1 + d) Where d>0 or w* f / w* m = 1/(1 + d)

EMPLOYEE DISCRIMINATION COEFFICIENTS AND WILLINGNESS TO HIRE EMPLOYERd NET WAGE [w X (1+ d j )], IF w f = $10.00 MAXIMUM WAGE WILLING TO PAY WOMEN, IF w m = $10.00 A0$10.00 B0.25$12.50$8.00 C1$20.00$5.00 D3$40.00$2.50 E9$100.00$1.00

THE DEMAND FOR WOMEN WORKERS, EMPLOYERS A TO E $10.00 $8.00 $5.00 $2.50 $ WfWf SUPPLY DEMAND NUMBER OF WOMEN

WOMENS WAGES WHEN EMPLOYERS DISCRIMINATION COEFFICIENTS DIFFER DEMAND SUPPLY W f /W m NUMBER OF WOMEN 1/(1+d*)

MARKET EQUILIBRIUM BEFORE AND AFTER ENTRY SUPPLY DEMAND BEFORE ENTRY DEMAND AFTER ENTRY NUMBER OF WOMEN W f /W m 1/(1+d*) 1

Gary Becker If the market was purely competitive the Becker discrimination model would not persist However, it can persist if: If the firm has monopsony power If supervisors are discriminating If the employees are discriminating If the costumers are discriminating

Statistical Discrimination Similar in Context to Racial Profiling Statistical Discrimination against the individual If the preconceptions is based on accurate average observations Then there are feed-back effects that increase the level of discrimination

Customer Discrimination If Customers do not care who the employees are then the price will be the same whether the employee is male or female (white or black; asian or hispanic) thus p f * = p m *

Customer Discrimination If on the other hand the customer prefers male employees than p f *(1 + d) = p m * If the customer prefers females than p m *(1 + d) = p f * The one characteristic of this model is that there is market reason for the discrimination to be eradicated.

Employee Discrimination If m type worker does not like working alongside with f type worker than w* m = w m (1 - d) Thus, the gross wage of the m type worker would be lowered If there are two types of jobs (1 and 2) and workers in 1 are only m type and workers in 2 are both m and f, then

Employee Discrimination If there are two types of jobs (1 and 2) and workers of both type (m and f) in each job type but only m type workers in job type 2 do not care to work with f type workers,then w* 1m = w 2m (1 - d) such that w* 1m < w 2m

Statistical Models Statistical Discrimination The employer may use generalized information about the employee and may due to that discriminate even based on what may be actual or perceived information such that wages differ

STATISTICAL DISCRIMINATION BASED ON DIFFERENT DISTRIBUTIONS OF LABOR FORCE ATTACHMENT FOR MEN AND WOMEN PERCENT ATTACHMENT TO LABOR FORCE WOMENMEN WM

STATISTICAL DISCRIMINATION WHEN THE DISTRIBUTION BY GENDER ARE VERY SIMILAR PERCENT ATTACHMENT TO LABOR FORCE WOMEN MEN WM

Human Capital Theory Solomon Polachek discussed the idea of jobs that provide a smaller or larger penalty of leaving the workforce for some amount of time If both jobs have the same level skill but one gives a larger penalty for exiting the job for a given period of time (occupation k)

THE HUMAN CAPITAL EXPLANATION OF OCCUPATIONAL SEGREGATION BY GENDER-THE ROLE OF WAGE PENALTIES TO PERIODS OF NONWORK W TIME (A) OCCUPATION j A C D D B E A C D D B E (B) OCCUPATION k W TIME

Institutional Models These models assume that the discrimination occurs as part of the organizations internal structure. It is based on the notion that firms management structure is build upon internal institutional arrangements that have either deliberate or unintentional discrimination repercussions

Institutional Models There are primarily there Institutional models (which can work separately or in conjunction) The internal Labor Market Primary and Secondary Jobs Feedback Effects

Internal Labor Market The assumption is that certain firms will generally only promote from within. If for whatever reason, entry level jobs attracted a certain type of worker or if only certain type of worker will be retained or if only certain type of worker will stay in that job Then upper management will be composed of that type of worker that remains in that entry level position

Internal Labor Market Wages ($) Job Ladder Firm-Specific Training

Primary and Secondary Jobs The assumption is that certain firms will generally only promote from a certain type of entry jobs. In other words, some entry jobs will only allow the workers to reach certain heights within the organization

Internal Labor Market Wages ($) Job Ladder Primary Secondary

Feedback Effects Some times employees and employers may discriminate by bringing into the work place the behavior exhibited in the household So gender roles played in the household labor are parallel in the work labor

Feedback Effects Gender Division of Labor in the family Gender Differences in Labor Market outcomes