Chapter 9. Discrimination Definition Types of Evidence Theories Combating Definition Types of Evidence Theories Combating

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

Types of Evidence Direct testimony individual experiences with a large number of victims, it shows a pattern with a small number, it hinges on credibility issue of unreported cases Direct testimony individual experiences with a large number of victims, it shows a pattern with a small number, it hinges on credibility issue of unreported cases

Auditing matched pairs of testers (identical except for sex or race), sent for interviews may find discrimination in hiring, entry wages, but not in raises or promotion Auditing matched pairs of testers (identical except for sex or race), sent for interviews may find discrimination in hiring, entry wages, but not in raises or promotion

Statistical evidence wage regressions control for worker differences (education, experience, etc.) estimate unexplained wage differences by sex for firm, industry Statistical evidence wage regressions control for worker differences (education, experience, etc.) estimate unexplained wage differences by sex for firm, industry

large sample shows pattern but measurement problems, and sample selection bias (does not include women not hired) large sample shows pattern but measurement problems, and sample selection bias (does not include women not hired)

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 Preference for Discrimination Gary Becker, PhD dissertation Nobel Prize winner (1992) Discrimination can occur due to preferences of employer employees customers Gary Becker, PhD dissertation Nobel Prize winner (1992) 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 segregation between employers who discriminate and those who do not what happens? pays “desired” employees more to attract them and avoid hiring the undesired group lower wages for undesired group segregation between employers who discriminate and those who do not

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 lower wages? if undesired worker paid less or if crowding (ch. 6) segregation women waiters in cheaper restaurants, male waiters in fancy restaurants High % male representation in car sales, repair lower wages? if undesired worker paid less or if crowding (ch. 6)

long run? yes, since attitudes change slowly long run? yes, since attitudes change slowly

Models w/out prejudice monopsony rent-seeking imperfect information monopsony rent-seeking imperfect information

Monopsony Model = one buyer (of labor) employers band together set below market wages in jobs with high % female motivated by desire to min. costs, max. profits implies wage gap Lemons v. City of Denver = one buyer (of labor) employers band together set below market wages in jobs with high % female motivated by desire to min. costs, max. profits implies wage gap Lemons v. City of Denver

problemsproblems monopsonies are local, not national with increasing labor mobility, move to area with better pay but women ARE less mobile women’s labor supply is more elastic w.r.t. wages more likely to not work if wage too low monopsonies are local, not national with increasing labor mobility, move to area with better pay but women ARE less mobile women’s labor supply is more elastic w.r.t. wages more likely to not work if wage too low

Rent-seeking models one group bands together to improve their well-being at the expense of others desired group preserves best jobs for themselves motivated by greed, not prejudice but could be combined w/ prejudice one group bands together to improve their well-being at the expense of others desired group preserves best jobs for themselves motivated by greed, not prejudice but could be combined w/ prejudice

more likely a model for racial discrimination because men and women share households, but races are more segregated in all areas more likely a model for racial discrimination because men and women share households, but races are more segregated in all areas

Imperfect Information Model a.k.a. statistical discrimination employers have imperfect information on potential hires do not know for certain their individual productivity a.k.a. statistical discrimination 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

why isn’t this prejudice? 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

the law in about 19 states, illegal to ask about marital, family status in an interview and may be prohibited under federal law too Technically, it is illegal for an interviewer to ask anything personal that is not directly job-related. in about 19 states, illegal to ask about marital, family status in an interview and may be prohibited under federal law too Technically, it is illegal for an interviewer to ask anything personal that is not directly job-related.

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

Combating Discrimination Government regulation Private sector alternatives Government regulation Private sector alternatives

Government Regulation laws against discrimination pros: improve efficiency, productivty improve equity works more quickly than changing societal attitudes laws against discrimination pros: improve efficiency, productivty improve equity works more quickly than changing societal attitudes

cons: compliance costs costs of litigation cons: compliance costs costs of litigation

Federal Laws Equal Pay Act of 1963 The Civil Rights Act of 1964 The ERA (not passed) Equal Pay Act of 1963 The Civil Rights Act of 1964 The ERA (not passed)

The Equal Pay Act of 1963 prohibits wage discrimination for women and men performing work for same employer of similar skill effort responsibility working conditions prohibits wage discrimination for women and men performing work for same employer of similar skill effort responsibility working conditions

restrictive how to define “similar”? covers almost all employers restrictive how to define “similar”? covers almost all employers

exceptions if wages differ by sex due to seniority system merit pay system any factor other than sex exceptions if wages differ by sex due to seniority system merit pay system any factor other than sex

The Civil Rights Act of 1964 created EEOC to enforce the law prohibits discrimination on basis of race, sex, color, religion, national origin Title VII – employment Title IX -- education created EEOC to enforce the law prohibits discrimination on basis of race, sex, color, religion, national origin Title VII – employment Title IX -- education

Title VII hiring/firing/layoff compensation/benefits job title/promotions/tranfers ads/recruitment training/facilities disability leave all employers with > 15 workers hiring/firing/layoff compensation/benefits job title/promotions/tranfers ads/recruitment training/facilities disability leave all employers with > 15 workers

exceptions if sex, religion is legitimate job requirement “BFOQ” race is not considered a BFOQ EEOC vs. Hooters (1995) exceptions if sex, religion is legitimate job requirement “BFOQ” race is not considered a BFOQ EEOC vs. Hooters (1995)

sexual harassment illegal under title VII “quid pro quo” sex-for-job, raise, promotion hostile work environment behavior of coworkers make interferes with job illegal under title VII “quid pro quo” sex-for-job, raise, promotion hostile work environment behavior of coworkers make interferes with job

back to interview questions questions about marital, family status may violate title VII if used against women and not against men questions about marital, family status may violate title VII if used against women and not against men

pregnancy based discrimination pregnancy, childbirth and related disabilities must be treated same as other disabilities/illnesses in employer policy

Title IX education programs receiving federal aid implications for sports programs education programs receiving federal aid implications for sports programs

Title IX & sports 1972 < 30,000 female NCAA athletes 2000 > 150,000 NCAA female athletes 1972 < 30,000 female NCAA athletes 2000 > 150,000 NCAA female athletes

college sports programs schools comply by % female athletes proportional to enrollment history of expanding sports opportunities for females schools comply by % female athletes proportional to enrollment history of expanding sports opportunities for females

controversycontroversy are low-profile men’s sports cut to comply with Title IX? due to large spending on sports like men’s basketball & football are low-profile men’s sports cut to comply with Title IX? due to large spending on sports like men’s basketball & football

notenote no school has ever lost federal aid for noncompliance with Title IX

Civil Rights Act does not prohibit discrimination based on sexual orientation marital status family status but many states and municipalities do does not prohibit discrimination based on sexual orientation marital status family status but many states and municipalities do

The Equal Rights Amendment Section 1. Equality of rights under the law shall not be denied or abridged by the United States or by any state on account of sex. Section 2. The Congress shall have the power to enforce, by appropriate legislation, the provisions of this article. Section 3. This amendment shall take effect two years after the date of ratification. Section 1. Equality of rights under the law shall not be denied or abridged by the United States or by any state on account of sex. Section 2. The Congress shall have the power to enforce, by appropriate legislation, the provisions of this article. Section 3. This amendment shall take effect two years after the date of ratification.

ERAERA proposed as 28 th Amendment to the U.S. Constitution passed in 1972 by Congress must be ratified by 38 states (3/4) only ratified by 35 states by 1982 deadline (later 5 states rescinded) proposed as 28 th Amendment to the U.S. Constitution passed in 1972 by Congress must be ratified by 38 states (3/4) only ratified by 35 states by 1982 deadline (later 5 states rescinded)

why is it necessary? Civil Rights Act, Equal Pay Act they are laws by congress could easily be changed Civil Rights Act, Equal Pay Act they are laws by congress could easily be changed

14 th Amendment (1868) originally did not apply to sex, only to race (“male citizens”) courts have not consistently applied law to guarantee equal protection under law to women 1873 Court upheld ban on women lawyers 1981 Court upheld law allowing only men to be charged with statutory rape 14 th Amendment (1868) originally did not apply to sex, only to race (“male citizens”) courts have not consistently applied law to guarantee equal protection under law to women 1873 Court upheld ban on women lawyers 1981 Court upheld law allowing only men to be charged with statutory rape

Why do people oppose it? would it lead to taxpayer-funded abortion? unisex bathrooms? female draft? homosexual marriage? alimony & child support? would it lead to taxpayer-funded abortion? unisex bathrooms? female draft? homosexual marriage? alimony & child support?

18 states have ERA as part of their state Constitution

new life for the ERA? Supreme Court rulings suggest that Congress may extend deadline for state ratification All 35 previous ratifications would hold need 3 more states Supreme Court rulings suggest that Congress may extend deadline for state ratification All 35 previous ratifications would hold need 3 more states

Private Methods Unions Networking Arbitration Unions Networking Arbitration

UnionsUnions can help eliminate inequities with job classifications performance standards pay scales grievance procedures can help eliminate inequities with job classifications performance standards pay scales grievance procedures

employee-to-employee harassment? tougher for a union to handle whose side to take? employee-to-employee harassment? tougher for a union to handle whose side to take?

EEOC v. Mitsubishi Motors, women (later 300), UAW members charged sexual harassment on the assembly line multi-million dollar settlement 29 women (later 300), UAW members charged sexual harassment on the assembly line multi-million dollar settlement

NetworkingNetworking women’s groups designed to promote women in business promoting mentors for women equivalent of rent-seeking behavior for women? women’s groups designed to promote women in business promoting mentors for women equivalent of rent-seeking behavior for women?

ArbitrationArbitration settling disputes with a third party out of court cheaper than litigation but may favor employers employer may require this as a condition of employment Wall Street settling disputes with a third party out of court cheaper than litigation but may favor employers employer may require this as a condition of employment Wall Street

1996 Smith Barney class action lawsuit to get around arbitration requirement alleged hostile work environment “Boom-boom room” grew to over 2000 women in brokerage industry class action lawsuit to get around arbitration requirement alleged hostile work environment “Boom-boom room” grew to over 2000 women in brokerage industry

Chapters 6-9, revisited what does the gender earnings gap mean? explain up to 60% controlling for occupation human capital job characteristics what does the gender earnings gap mean? explain up to 60% controlling for occupation human capital job characteristics

the remainder? measurement error direct discrimination the remainder? measurement error direct discrimination

The policy issue is the gap about discrimination? both indirect and direct or is it about women making different choices? different values/preferences? different constraints? is the gap about discrimination? both indirect and direct or is it about women making different choices? different values/preferences? different constraints?

Vicky Lovell Institute for Women’s Policy Research “The question is how do we interpret the fact that women don’t have as much occupational choice as men do?....

“… Men choose to have children and choose to be admitted to the work force because they’ve already established that women will be doing the caring work, relieving them of the work-family conflict…”

“…Society has narrowed women’s choices in a way that it hasn’t narrowed men’s choices.”

SocietySociety earnings gap is NOT about “men bad, women good” sometimes women are their own worst enemies: Phyllis Schaefly led ERA opposition SAHM vs. WOHM debate earnings gap is NOT about “men bad, women good” sometimes women are their own worst enemies: Phyllis Schaefly led ERA opposition SAHM vs. WOHM debate