Chapter 9 The Gender Gap in Earnings: Explanations Part II Discrimination Models Other Explanations Discrimination Models Other Explanations

An economist’s definition two people with same  productivity  preferences  but different group (race, sex, age) receive different outcomes in labor market  wages, hiring, promotion two people with same  productivity  preferences  but different group (race, sex, age) receive different outcomes in labor market  wages, hiring, promotion

NOT the same as prejudice  prejudice is a cause of discrimination  but discrimination can happen without it NOT the same as prejudice  prejudice is a cause of discrimination  but discrimination can happen without it

sex vs. race discrimination  w/ race there is segregation & a total unwillingness to associate with that group  but men and women share households sex vs. race discrimination  w/ race there is segregation & a total unwillingness to associate with that group  but men and women share households

Theories of Discrimination With competitive, free markets with rational firms, consumers  no discrimination should exist With competitive, free markets with rational firms, consumers  no discrimination should exist

why?  firms that discrimination will be driven out of business by firms that do not  consumer that discriminate may end up paying more  employees that discriminate may end up with lower wages why?  firms that discrimination will be driven out of business by firms that do not  consumer that discriminate may end up paying more  employees that discriminate may end up with lower wages

So, if discrimination exists then  firms, consumers, employees have a preference for it  markets are not competitive  imperfect information about prospective workers So, if discrimination exists then  firms, consumers, employees have a preference for it  markets are not competitive  imperfect information about prospective workers

Any theory of discrimination should explain  lower wages for women  occupational segregation  long run persistence Any theory of discrimination should explain  lower wages for women  occupational segregation  long run persistence

A Taste for Discrimination Gary Becker Discrimination can occur due to preferences of  employer  employees  customers Gary Becker Discrimination can occur due to preferences of  employer  employees  customers

Employer Discrimination employer wants to  maximize profits AND  engage in discrimination due to his/her prejudice  willing to accept lower profits in order to discriminate employer wants to  maximize profits AND  engage in discrimination due to his/her prejudice  willing to accept lower profits in order to discriminate

what happens?  pays “desired” employees more to attract them and avoid hiring the undesired group  lower wages for undesired group what happens?  pays “desired” employees more to attract them and avoid hiring the undesired group  lower wages for undesired group

long run?  non discriminating employers have lower costs, drive discriminating employers out of business  UNLESS there is not a lot of competition long run?  non discriminating employers have lower costs, drive discriminating employers out of business  UNLESS there is not a lot of competition

Employee Discrimination employees dislike working with a certain group so  demand higher wages to work in an integrated work site OR  less productive in an integrated work site employees dislike working with a certain group so  demand higher wages to work in an integrated work site OR  less productive in an integrated work site

Note: employers responding to employee prejudice, not their own  trying to avoid paying higher wages  wanting to maximize productivity Note: employers responding to employee prejudice, not their own  trying to avoid paying higher wages  wanting to maximize productivity

employee discrimination would cause segregation lower wages for women?  if they appear to be less productive  (but really the prejudiced workers are less productive) employee discrimination would cause segregation lower wages for women?  if they appear to be less productive  (but really the prejudiced workers are less productive)

long run?  this would persist as employee attitudes change slowly over time  and if attitudes are widespread long run?  this would persist as employee attitudes change slowly over time  and if attitudes are widespread

Customer Discrimination customers willing to pay higher price to be serviced by desired group  so firms avoid hiring undesired group (to get a higher price) OR  firms pay undesired workers less to make up for price cut customers willing to pay higher price to be serviced by desired group  so firms avoid hiring undesired group (to get a higher price) OR  firms pay undesired workers less to make up for price cut

segregation  women waiters in cheaper restaurants,  male waiters in fancy restaurants  High % male representation in car sales, repair long run?  yes, since attitudes change slowly segregation  women waiters in cheaper restaurants,  male waiters in fancy restaurants  High % male representation in car sales, repair long run?  yes, since attitudes change slowly

Statistical discrimination a.k.a. imperfect information model employers have imperfect information on potential hires  do not know for certain their individual productivity a.k.a. imperfect information model employers have imperfect information on potential hires  do not know for certain their individual productivity

so increase their odds of a “good” hire by  taking average characteristics of group (sex, race, etc.)  applying it to individual so increase their odds of a “good” hire by  taking average characteristics of group (sex, race, etc.)  applying it to individual

exampleexample women have higher turnover rates on average it is expensive to train new workers employers end up preferring men, who are less likely to quit, ON AVERAGE women have higher turnover rates on average it is expensive to train new workers employers end up preferring men, who are less likely to quit, ON AVERAGE

who is hurt?  women who are highly attached to the labor force who benefits?  men who are not who is hurt?  women who are highly attached to the labor force who benefits?  men who are not

Differences in average characteristics may be perceived or actual some actual differences  women have more absences (especially married women)  men more likely to have substance abuse problem may be perceived or actual some actual differences  women have more absences (especially married women)  men more likely to have substance abuse problem

discrimination here is not due to dislike of certain group but desire to max. profits given the uncertainty about hiring if employer had perfect info, then he/she would not do this discrimination here is not due to dislike of certain group but desire to max. profits given the uncertainty about hiring if employer had perfect info, then he/she would not do this

Indirect vs. direct discrimination direct  discriminating among individuals with same skills, preferences indirect  certain groups have fewer skills because of discrimination direct  discriminating among individuals with same skills, preferences indirect  certain groups have fewer skills because of discrimination

Why occupational segregation? Difference in tastes/abilities across gender women less willing/able to do certain jobs men less willing/able to do certain jobs Difference in tastes/abilities across gender women less willing/able to do certain jobs men less willing/able to do certain jobs

possible examples firefighter, combat soldier  do women lack the strength? kindergarten teacher  do men lack the patience? firefighter, combat soldier  do women lack the strength? kindergarten teacher  do men lack the patience?

Human capital and occupation choice of type/amount of human capital will affect occupation choices if women expect to be less attached to LF:  choose HC w/ lower rates of depreciation choice of type/amount of human capital will affect occupation choices if women expect to be less attached to LF:  choose HC w/ lower rates of depreciation

consider teaching & nursing  small promotion ladder  small penalty for lost years of experience consider gender differences in  medical specialties consider teaching & nursing  small promotion ladder  small penalty for lost years of experience consider gender differences in  medical specialties