GENDER, RACE AND ETHNICITY
IN THE LABOR MARKET
Subject: Labor economics, ECON 455
Assistant Professor, Dr. Riđić Goran
Done by:
Čengić Ajla, 150201031
December, 2018
CONTENT
Abstract ..................................................................................................................................... 3
Introduction .............................................................................................................................. 3
Earnings differences by gender .............................................................................................. 3
Earnings differences between Black and White Americans ................................................... 4
Earnings differences by ethnicity ........................................................................................... 4
Theories of Market Discrimination ........................................................................................ 5
Personal prejudice models ...................................................................................................... 5
Employer discrimination..................................................................................................... 5
Customer discrimination ..................................................................................................... 6
Employee discrimination .................................................................................................... 6
Statistical discrimination ........................................................................................................ 7
Noncompetitive models .......................................................................................................... 8
Conclusion ............................................................................................................................... 10
Federal programs to end discrimination ............................................................................... 10
References ............................................................................................................................... 10
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December, 2018
ABSTRACT
In this research paper, we will have an opportunity to learn more about measured and
unmeasured sources of earnings differences, such as earnings differences by gender, between
Black and White Americans, and by ethnicity. Also, theories of market discrimination are
important segment of chapter 12 including personal prejusdice models: employer, customer and
employee discrimination and noncompetitive models of discriminations. To conclude with,
discrimination can be ended by usage of Federal programs.
INTRODUCTION
In the labor market all around the world, there are many forces affecting demographic choices.
There are three major demographic groups and there are Hispanics, women and black, who still
earn much less than an average white male working full-time. The best way to explain these
remarkable changes is to divide earning differences between these demographic groups.
EARNINGS DIFFERENCES BY GENDER
As we can see from the Table, female/male earnings ratios tend to fall with age for the three
educational levels. Statistics show that within the same occupation, women earn less than men.
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EARNINGS DIFFERENCES BETWEEN BLACK AND WHITE AMERICANS
Even though we live in Europe, it is
known
that
Americans
have
differences based on color. Also, these
differences
can
impact
earnings
between the two. We can see, that
unemployment rate almost doubled
for Black Men, while for other
categories, it gradually increased. On
the other side, Employment rate of both, Black and White, Men decreased, while for Women
increased, imposing the better gender situation through years from 1970, until 2012. All in all,
black workers suffer the loss of full earnings – earnings the white Americans have.
EARNINGS DIFFERENCES BY ETHNICITY
As much as earnings can differ
by gender and color, also it is
important
to
understand
differences based on ethnicity.
Recent studies have found
evidence that there exist very
important intergenerational transfers of ethnic human capital which can manifest and lead to
extremly divergent rates of return to education, next leading to huge differentiation in earnings.
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THEORIES OF MARKET DISCRIMINATION
There are generally three sources of labor market discrimination: personal prejudice models,
statistical prejudgment and noncompetitive forces in the labor market.
PERSONAL PREJUDICE MODELS
Personal prejudice models can be based on employer, customer of employee discrimination.
This means that all three groups of personal prejudice models have preferences for not
associating with members of certain demographic groups.
a) Employer discrimination
This discrimination model implies that employers who are discriminators maximize utility
– satisfying their prejudice preferences, instead of profits, and as result we can put under
the question their survival, becuase with the presence of competitive forces such as
nondiscriminatory forces, who would make more profits and end up buying these
discriminatory firms and taking over the market. This means, what in order to engage in
discriminatory manner, one firm must be
a monopoly in certain sector. The model
of employer discrimination has two
implications as illustrated in this Figure
and Formula. Discriminatory employer
will hire less women/minority at N0.
Formula: MRP = WF + d
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December, 2018
b) Customer discrimination
Sometimes, employers want to work only with white women, for an example. Other times,
customers can demand the same. This demand is considered as discrimination based both
on gender and color. Customer discrimination will lead to segregation in the occupations
with high customer contact. One study found out that there has been a rise in voting for
professional basketball games in US when they increased the number of white players.
c) Employee discrimination
In order to understand if there is employee discrimination, we can conclude the direct test
for its presence by using a study that found out young white males earned more in racially
integrated workplaces, than those who worked in segregated environments. Employees can
demand from their employers not to work with specific groups such as minorities. It is hard
to overcome this problem, especially if it arises from the side of white workers who create
90% of total workforce. Employees who have discriminatory preferences might have
difficulties to work in nondiscriminatory environments.
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STATISTICAL PREJUDGMENT DISCRIMINATION
As we just learned about three types of personal characteristics of discrimination, there is also
and statistical prejudgment discrimination, which occurs when in addition to using these
personal characteristics, the average characteristic of the group are divided into hiring decision.
It is common discrimination, when there are no personal characteristics to be a perfect
predictors. When hiring, managers use group data which rises market discrimination, because
people with the same measured productive characteristics such as test scores, education,
experience and etc. will be treated differently depending on group affiliation. Lets us imagine
that we have to hire a worker who types fast and has good educational level.
If we decide to make hiring decision process only based on words typed per minute, we would
have really good keyboarders (scored 55+) and bad keyboarders (scored less than 55 words per
minute). But, some of „bad keyboarders“ have high educational level, while some of „good
keyboarders“ have low, which means that all statistical data should be used before starting the
process of evaulation and hiring decisions.
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NONCOMPETITIVE FORCES
These discrimnatory models reflect the possibility of individualistic firms to affect the wages
they pay. They can influence it either through collusion or source of monopolistic power. There
are also some policies, such as crowding policy, which has an effect to lower wages in certain
occupations (for an example, occupational segregation by gender: male or female jobs?!). ž
Furthermore, as a variant of crowded hypothesis, the more recent view is that labor market is
divided into two noncompeting sectors called primary and secondary labor markets, who create
dual labor market together. In the primary labor market we have high wages, stable
employment, good working conditions and advancement opportunities. On the other hand, in
the secondary labor market we have low wages, unstable mployment, dead-end jobs with bad
working conditions. As s discriminatory part of the secondary labor market, women and
minorities are seen as unstable and undesired workers with a little, or even no, hope for reaching
primary labor markets or sectors. To continue with, there is and third model covering restricted
mobility, called the search-related monopsony. It is present around the employers who refuse
to hire women and minorities becuase of three reasons: their own prejudices, prejudices of their
customers or even prejudices of their employees.
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December, 2018
This search-related monopsony invites two comments:
a) When we have small or uncertain responses of employment to mandate wage increases
under minimum wage laws, we use monopsony model as potentional explanation. This
model explains the lack of employment decline
associated with mandated wage
increases for women under the Equal Act.
b) Job matches will be of lower quality for women and minorities, than job matches for
white men. This means that if prejudice increases the job search, these groups (women
and minorities) are less likely to search for alternative offers of employment.
All these models of discrimination agree on one thing: persistence of labor market
discrimination is the result of forces that are either noncompetitive or very slow to adjust to
competitive forces. And also, no model is superior to the others in explaining the facts, the
various theories and the facts they seek to explain suggest that government intervention might
be useful in eliminating the noncompetitive influences.
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December, 2018
CONCLUSION
In order to stop all this discriminatory acts, the government has taken two approaches to combat
the causes or effects of discrimination:
a) Mandate nondiscrimination – race, ethnicity or gender must not play a role in hiring,
promoting or compensating workers.
b) Affirmative action – requires employers to be aware of race, ethnicity or gender in
personal decision making process and ensure that those groups are not
underrepresented.
Federal courts have two standards of discrimination that may be applied when discriminatory
employment practices are alleged – disparate treatment and disparate impact. Many firms use
and seniority as consideration in allocating promotion opportunities and in layoff situations –
hired last, first fired. Because occupations are so segregated by gender and that men and women
equal work, some have come to support the goal of equal pay for jobs considered to be of
comparable worth, which relies on job-rating schemes with internal labor markets.
REFERENCES
1. Ehrenberg R. and Smith R. (2015), Modern Labor Economics: Theory and Public
Policy, 12th edition
2. National Academy of Sciences, America Becoming: Racial Trends and Their
Consequences, Volume II (2001)
3. Unknown (2018); Chapter: 4. Race and Ethnicity in the Labor Market: Trends Over
the Short and Long Term
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