The Economics of Discrimination
Prof. G. Loury
EC 1370
March 16, 2010
EC 1370 Lecture Summary: The Economics of Discrimination, 3/16/2010
1. Standard economic theory (Becker) suggests wage discrimination cannot
persist as an equilibrium phenomenon in competitive labor markets.
2. Gross wage and employment differences by race are large and persistent.
3. Attitude measures show declining but still persistent “racial prejudice”.
4. Measures of cognitive skills show large and persistent racial differences.
5. So, is the racial wage/employment gap due to discrimination or
to skill differences between the groups?
6. We examine evidence from five recent studies which suggest that racial
discrimination in the labor market remains a serious problem:
a. Charles and Guryan document role of “racial prejudice”
b. Urzua investigates role of cognitive and non-cognitive skills.
c. Lang and Manove show that blacks of given ability get more
education than do comparable whites.
d. Vigdor shows racial wage convergence in US South largely due
to improved quality of education for younger cohorts
e. Pager use of “testers” reveals employers’ discriminatory choices.
Per Capita Annual Hours of Employment for Native-Born Non-Hispanics
Aged 25 to 59; 1968 to 2007
2,100
White Men
PER CAPITA HOURS OF EMPLOYMENT
1,900
1,700
Black Men
1,500
1,300
1,100
Black Women
900
White Women
700
500
1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Median Wage and Salary Earnings for Native-Born Non-Hispanics Reporting Earnings
$60,000
$55,000
$50,000
White Men
$45,000
$40,000
$35,000
Black Men
$30,000
$25,000
White Women
$20,000
Black Women
$15,000
$10,000
1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
(Showing that racial prejudice still affects black/white wage gap, and
that what really matters is degree of prejudice of the marginal, not
the average employer.)
Racial Attitudes of National Samples of Whites; General Social Survey, 1972 to 2004
100%
90%
Would vote for a black
candidate
80%
Would vote for
Open Housing
Law
70%
60%
50%
Believe blacks
shouldn't
push
40%
30%
20%
Oppose interracial
marriage
10%
Believe whites have right to segregate their
neighborhoods
0%
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Dependent Variable = ln(wages); “x” indicates “factors controlled for”
2008
(Showing the importance of non-cognitive skills when accounting
for black/white wage differences.)
(Documenting that, conditional on cognitive ability score, black US
workers, male and female, obtain more education than do whites.)
(Accounting for trends in black/white wage gaps in the South and
establishing a key role for schooling quality in explaining the trend.)
(Together with Pager (2003) using “tester” experimental data to establish
the reality of racial discrimination in the labor market for young unskilled
males in NYC and Milwaukee, emphasizing the debilitating effects for blacks
of having a criminal record.)
Similar Results with Milwaukee Data