LABOR MARKET DISCRIMINATION

1. LABOR MARKET DISCRIMINATION Labor Economics Series

2. Tokoh Pejuang Wanita Indonesia Raden Adjeng Kartini 21 April 1879 – 17 September 1904

3. Pemikiran Raden Adjeng Kartini • Dunia wanita hanya sebatas tembok rumah. • Tidak bebas mendapatkan akses pendidikan. • Dipingit dan dinikahkan dengan pria yang tidak dikenal. Adanya keinginan untuk memperbaiki kondisi kaum wanita yang disebabkan kungkungan adat, antara lain :

4. Fakta di Indonesia

5. Penduduk yang Bekerja (2007)

6. Penduduk yang Bekerja (2007)

7. Rata-rata Upah (2006)

8. Rata-rata Upah (2006)

9. Penduduk yang Bekerja Berdasarkan Jam Kerja Tahun 2007

10. Konsep Diskriminasi

11. Konsep Diskriminasi George Borjas : Differences in EARNINGS and EMPLOYMENT OPPORTUNITIES among equally skilled workers employed in the same job simply because of the worker’s race, gender, national origin, sexual orientation, or other seemingly irrelevant characteristics.

12. Konsep Diskriminasi Discrimination means treating people differently and less favourably because of characteristics that are not related to their merit or the requirements of the job. These include race, colour, sex, religion, political opinion, national extraction and social origin.

13. The Discrimination Coefficient

14. The Discrimination Coefficient Lauched for the first time by Gary S. Becker The Economics of Discrimination(1957)

15. The Discrimination Coefficient • Basic Concept : Taste Discrimination • Assumption Two types of workers : • White workers : wage wW • Black workers : wage wB

16. The Discrimination Coefficient • If the employer is prejudiced againts black, employer gets disutility from hiring black workers. • Disutility : employer will act as if costs for black worker wB(1 + d), where d is positive number and is called : The Discrimination Coefficient

17. The Discrimination Coefficient • Suppose that wB= $10, and that d =0,5 ; the employer will then act as if hiring a black worker costs $ 15 • The greater the prejudiced, the greater is the disutility from hiring black workers, and the greater is the discrimination coefficient d.

18. The Discrimination Coefficient • If these black employers prefer to hire black workers, they will act as if hiring a black worker is cheaper than it actually is. Nepotism CoefficientwB(1 – n )

19. Labor Market Discrimination Analysis

20. Employer Discrimination

21. Skill and Labor Market Outcomes (2001)

22. Fact : White Wage > Black Wage

23. Employer Discrimination • Assumption : White Workers and Black Workers are Perfect Subtitutes in Production. • Firms’s output depends on the total number of workers hired, regardless of their race  have the same Marginal Product of Labor ( MPE )

24. Employer Discrimination Production function: q = f ( EW + EB ) q firm’s output EW number of white workers hired EB number of black workers hired

25. Employment in a non Discriminatory Firm

26. Employment in a non Discriminatory Firm • Both groups of workers have the same Value of Marginal Product, a non discriminatory firms will hire whichever group is Cheaper • Suppose that wW > wB , a firms that doesn’t discriminate will hire black workers up to the point where wB = VMPE 

27. The Employment Decision of a Firm That Does Not Discriminate ? Black workers wage is less than white wage VMPE Dollar wB = VMPE How many worker will be hired..?? Employment

28. Employment in a Discriminatory Firm

29. Employment in a Discriminatory Firm • The employer act as if black wage is not wB , but instead equal to wB(1 + d). Where d is discrimination coefficient. • The employer’s hiring decision based on a comparison wWand wB(1 + d) • Hire only blacks if wB(1 + d) <wW • Hire only white if wB(1 + d) >wW

30. Employment in a Discriminatory Firm • As long as black and white workers are perfect subtitutes, firms have a segregated workforce. • Employer’s who have little prejudice and hence have small discrimination coefficient, will hire only BLACKS (called “Black Firm”). • Employer’s who are very prejudice and have very large discrimination coefficient, will hire only WHITES (called “White Firm”).

31. Employment in a Discriminatory Firm WHITE FIRM • The white firm hires workers up to the point where : wW = VMPE • Assumption : wW > WB • The white firm is paying an excessively high price for its workers and hires relatively few workers ( )

32. The Employment Decision of a Prejudiced Firm Dollar White Firm VMPE Employment

33. Employment in a Discriminatory Firm BLACK FIRM • Non discriminatory firms : wB = VMPE • If discrimination coefficient d0 : • Price of Black Labor wB ( 1 + d0 ) • Amount of Labor hired : wB ( 1 + d0 ) = VMPE

34. Employment in a Discriminatory Firm BLACK FIRM The number of black workers hired, therefore, is smaller for firms that have larger discrimination coefficient.

35. The Employment Decision of a Prejudiced Firm Dollar Discrimination Coefficient Black Firm VMPE Employment

36. Discrimination and Profits

37. Discrimination and Profits Firms that discriminate lose on two counts : • The prejudiced employer could have hired the same number of black worker at lower wage. Because black and white workers are perfect subtitutes. • Discriminatory black firms are hiring too few workers ( or )  they are giving up profits in order to minimize contact with black workers.

38. Profit and Discrimination Coefficient Dollar max Max Profit w Black Firm White Firm 0 Discrimination Coefficient dw

39. Discrimination and Profits The Most Profitable Firm  Zero Discrimination

40. Labor Marker Equilibrium

41. Discrimination and Profits • Firm dengan Discrimination Coefficient : • Rendah  cenderung Black Firm • Tinggi  cenderung White Firm • Asumsi : Supply Black Worker Perfectly Inelastic sejumlah N Black person tidak terpengaruh tingkat upah.

42. Labor Market Equilibrium Black-White Wage Ratio S D’ 1 R D 0 N Black Employment

43. Employee Discrimination

44. Employee Discrimination • Diskriminasi dilakukan oleh “Fellow Worker” • Misal : White worker yang bekerja pada Black Firm dengan upah wW akan merasa mendapat upah wW (1- d). • Tidak berpengaruh terhadap “Profitability of Firms” karena white worker dan black worker adalah perfect subtitutes sehingga firm membayar jumlah upah yang sama.

45. Customer Discrimination

46. Customer Discrimination • Dikemukakan oleh Harry J. Holzer dan Keith R. Ihlanfeldt (1998)  research di Atlanta, Boston, Detroit dan Los Angeles. • Keputusan membeli tidak ditentukan oleh Actual Price ( p ) tapi oleh The Utility-Adjusted Pricep (1 + d). • Employer dapat mengatur tenaga penjualan sesuai kondisi.

47. Customer Discrimination

48. Customer Discrimination and NBA Lawrence Kahn and Peter Sherer 1998) : A study of attenance records indicates that replacing a black player with an eqqually talented white player bring in about 9,000 additional fans per year. At $50 a head (a very conservative estimate of ticket prices and concession revenues), the racial switch would increase annual team revenues by roughly $450,000

49. Measuring Discrimination

50. Measuring Discrimination • Asumsi : Tenaga kerja terdiri dari • Male, dengan average wage • Female, dengan average wage Diskriminasi : selisih average wage, yaitu :