Announcements for Monday, November 5, 2001
For Wednesday:
 Read Chapter 14
 Reading quiz over chapter 14
For Today:
 Collect Reaction Papers to Speakers
 Lecture over Discrimination
IV. Discrimination in the Labor Market (Chapter
10)
A. Racial Discrimination (November 5, 2001)
B. Sex Discrimination (November 7, 2001)
V. Equal Opportunity Policies-Chapter 14 of text
pages 258-264 (November 7, 2001)
IV. Discrimination in the Labor Market
"Labor Market Discrimination - A barrier to the utilization of
human capital"
Table 5.10 of Ferber
1998 Average Earnings for Males by Race
White
$38,638
African-American
$25,437
Hispanic
$25,125
Approximate $13,000 Racial Gap (a weight to
potential sources)
1)
2/3 of this gap attributable to
nonmarket discrimination
-quality and quantity of schooling prior to entering labor
market
-geographic region of residence
2)
1/6 of this gap attributable to
Past Labor Market Discrimination that affects current
accumulation and wealth/assets as well as current work
skills and work experience
3)
1/6 attributable to
Current labor market discrimination
Components of Earnings Disparities
Employment
On average, minority workers come to the labor market
with less education and less work experience (past
discrimination)
Therefore, they are less likely to get hired and they are
more likely to be the first to go during a downturn.
Occupations
Occupational segregation - minorities more likely to
end up in certain occupations (typically don't pay as well or
have as many opportunities for upward mobility.
Not let into occupations due to lack of education and
experience - but can't get experience because can't get in.
Some blatant discrimination - if majority employer views
minority employee as inappropriate for the job.
See table 10.3 from text for occupation differences by
race.
Wages
Job disparities within occupations (so even holding
occupation constant) can be seen through differences in
wages. (Or two people can be in the same job, but in
different types of industries.)
Table 10.4


Training
When employers provide on-the-job training or pay for
education, they are investing in employees.
The investment is costly, but they do it hoping to see the
return to the investment in their workplace.
Whites receive double the training the minorities receive
Forms of Employment Discrimination
1) Institutionalized Discrimination
Not intentional discrimination by an individual, but more
built into the current system.
Word-of-mouth recruitment practice - hiring people that
are known by people already working in a company perpetuates majority hiring, but detrimental to minorities.
Existing patterns of behavior
Reluctance of minorities to seek work at predominantly
majority firms out of experience of past rejection.
2) Labor Unions
Unions control access to better-paid jobs
AFL - American Federation of Labor - overt
discrimination early on - founded on principle of racial
worker solidarity (craft type labor-involves skill, training,
and experience)
Discrimination against races and immigrants - because the
were labor competition for jobs.
CIO - Congress of Industrial Organization - 1935
- assembly line workers
- jobs that required less training and skill than craft jobs
- more concentrated in the north
- had nondiscrimination policy (if excluded minorities they would take jobs during strikes)
1955 AFL-CIO merger
Founded on anti-discrimination policy although many local
affiliates maintained their own practices
But this organization was eventually involved in
battle for civil rights
3) Employers
A. Hiring Practices
i)
Word-of-Mouth Hiring - traditional hiring
practices
- networking
- limited advertising
ii) Tests and Education Credentials
-hiring criteria based on employment tests or past
education
-employment test might not have any link to job
productivity
The case of Griggs v. Duke Power Company (1971), established the notion that the "effect"
of a hiring procedure may result in unfair discrimination (i.e., that persons not selected on the
basis of some test score could have equivalent opportunities for job success as those selected
by the test). Griggs also stipulated that tests must be job related and not abstract, and that if
the plaintiff demonstrates disparate impact, the burden of persuasion for indicating how a
selection procedure is valid shifts to the defendant. Moreover, even if a defendant can
validate a test, it must adopt less discriminatory selection procedures if such procedures exist.
iii) Statistical Discrimination
-picking workers based on average qualifications of their
race or gender
-low cost/easy recruitment technique if you don't have
other screening methods.
-hurts worker by not looking at their individual merits and
helps the majority worker since average majority education
and skills higher than the minority average.
iv) Personal Prejudice
-of employer
-of employees
-of customers
B. Competitive Pressures
In a perfectly competitive market - a discrimination
employer would be driven out of business - not using most
efficient workers and/or paying more to less efficient
workers
So discriminating employers must have some degree of
market power (some monopoly power.)
Does the party not experiencing discrimination gain
at the expense of the victims of discrimination?
Overcrowding Model
Discrimination in market A, drives those being
discriminated against out of market A and into market B.
This change in market location of workers will reduce the
supply of workers in market A (hence increasing wages)
and increase the supply of workers in market B (hence
driving wages down.)
Market A
Where discrimination occurs
Wage
Rate
Market B
Where workers move to from A
Wage
Rate
So
So
Wo
Wo
D
Q(# of workers)
D
Q(# of workers)
This can be costly to the discriminating employer if they
are dealing with a less productive white employee.
Larger loss to society of minority creativity and
productivity. (social loss and loss in output)
(Bob Brown and Sandy Canon mentioned some estimates
of the financial loss in productivity due to discrimination. I
am not sure how these numbers are calculated.)
$231 increase in GDP if discrimination eliminated and $400
million dollar loss to Lexington due to discrimination.