Labor Market Discrimination

1. Labor Market Discrimination Discrimination By Employer, Customer, and Employee

2. Labor Market Discrimination • The definition of Labor Market Discrimination is: • It exists when 2 equally qualified individuals are treated differently solely on the basis of their gender, race, ethnicity, disability, etc.

3. Feed Back • If such behavior is encountered it is only logical that those being affected by this labor market discrimination view the returns on human capital investment to be lower • Consequently they will have less incentive to invest in human capital

4. Feed Back • Furthermore, if this “feed-back” is widely spread such as to be “known” by younger individuals it could even lead to many dropping out of school or not pursuing higher education or advanced degrees

5. Subtle and Not so Subtle Barriers • In 1991 a jury found in favor of a woman executive at Texaco who was not promoted because of concerns that the promotion would have required her to travel to Latin America and South Africa where “she might be raped or murdered.”

6. Subtle and Not so Subtle Barriers • Woman working for GTE (now Verizon) California was promoted between 1977 and 1982 but was then told by her boss that no further promotions would be possible since "women were not suited for managerial positions as they lacked military training".

7. Glass Ceiling • In 1991 as part of the Civil Rights Act of 1991 21 member committee was formed and chaired by the Labor secretary to determine if there was a “glass ceiling” in the upper management of American firms

8. Glass Ceiling • In terms of the findings of the commission • There is a glass ceiling and the derives from three sources: • Societal/Non-Market • Business • Government

9. Glass Ceiling • In terms of those reasons under the control of business are: • Outreach and recruitment practices that do not seek out or reach or recruit minorities and women • Corporate climates that alienate and isolate minorities and women • Pipeline Barriers that directly affect opportunity for advancement • Initial placement and clustering in staff jobs or in highly technical and professional jobs that are not on the career track to the top

10. Glass Ceiling • In terms of those reasons under the control of business are (continuation): • Lack of mentoring • Lack of management training • Lack of opportunities for career development, tailored training, and rotational job assignments that are on the revenue-producing side of the business

11. Glass Ceiling • In terms of those reasons under the control of business are (continuation): • Little or no access to critical develop mental assignments such as memberships on highly visible task forces and committees • Special or different standards for performance evaluation

12. Glass Ceiling • In terms of those reasons under the control of business are (continuation): • Biased rating and testing systems • Little or no access to informal net-works of communication • Counterproductive behavior and harassment by colleagues

13. Glass Ceiling • In terms of those reasons under the control of government are: • Lack of vigorous, consistent monitoring and law enforcement • Weaknesses in the formulation and collection of employment-related data which makes it difficult to ascertain the status of groups at the managerial level and to disaggregate the data • Inadequate reporting and dissemination of information relevant to glass ceiling issues

14. Measuring Discrimination • However, measuring discrimination is not that simple • For instance, • Looking at only wages does not represent the true level of discrimination since it is likely that personal characteristics may account for some of that disparity

15. Measuring DiscriminationGender Wage Ratio

16. The Overcrowding Model • The labor market exhibits SEGREGATION • Consequently: • Some jobs are male jobs other are female jobs • Some jobs are white jobs other are minority jobs

17. The Overcrowding Model • Assume that workers F and M (female and male) are perfect substitute for each other (i.e. they are homogenous) • Let the labor market be divided into two type of jobs. Job type F accounts for a quarter of the jobs available and job type M accounts for three quarters of the jobs available.

18. The Overcrowding Model • At first assume that both jobs on average pay the same wage. • Under this circumstances then we would have the following graph

19. The Overcrowding Model S S $ $ w D D L L F type Jobs M type Jobs

20. The Overcrowding Model • Now assume that at least one of the following is possible: • M workers can move easily between job types, yet F workers can not. • F workers can find F type jobs but can enter into M type jobs. • F workers prefer to work only F type jobs • Employers of M type jobs will not hire F workers • Some other reason that will concentrate F workers only to F type jobs

21. The Overcrowding Model • Based on the previous scenarios: • Workers will begin to concentrate in F type jobs • There will be less available workers for M type jobs • In a sense, F type jobs become less “important” than M type jobs or • F type jobs become subservient to M type jobs

22. The Overcrowding Model S S $ $ wM w wF D D LF L LM L F type Jobs M type Jobs

23. The Overcrowding Model • After the overcrowding in the F type jobs the result is that • The wages in the F type jobs are lower than the wages in the M type jobs (i.e. wM>wF) • This time, F type jobs account now for more than a quarter of the jobs available (LF) and M type jobs accounts for less than three quarters of the jobs available (LM) .

24. Models of Labor Market Discrimination • Tastes for Discrimination • Gary Becker conceptualized discrimination as a personal prejudice • U=U(,W,B) • Where U is the utility of the employer •  are the profits • W is the number of White workers • And B is the number of Black workers

25. Gary Becker • He then assumed that • U/ > 0 • U/W > 0 • U/B < 0 • Assuming that both White and Black workers are homogenous

26. Gary Becker • The normal assumption that workers will be paid • MP*L = w* • Will then become • MP*L = w*W • MP*L = w*B(1 + d) • Where d>0

27. Gary Becker • Hence, w*W = w*B(1 + d) • or w*m = wf*(1 + d) • Where d>0 • or • w*f / w*m = 1/(1 + d)

28. EMPLOYEE DISCRIMINATION COEFFICIENTS AND WILLINGNESS TO HIRE

29. Wf SUPPLY $10.00 $8.00 $5.00 $2.50 $1.00 DEMAND 10 20 30 40 50 NUMBER OF WOMEN THE DEMAND FOR WOMEN WORKERS, EMPLOYERS A TO E

30. Wf/Wm SUPPLY 1/(1+d*) DEMAND NUMBER OF WOMEN WOMEN’S WAGES WHEN EMPLOYERS’ DISCRIMINATION COEFFICIENTS DIFFER

31. Wf/Wm SUPPLY DEMAND AFTER ENTRY 1/(1+d*) DEMAND BEFORE ENTRY NUMBER OF WOMEN MARKET EQUILIBRIUM BEFORE AND AFTER ENTRY 1

32. Gary Becker • If the market was purely competitive the Becker discrimination model would not persist • However, it can persist if: • If the firm has “monopsony” power • If supervisors are discriminating • If the employees are discriminating • If the costumers are discriminating

33. Statistical Discrimination • Similar in Context to Racial Profiling • Statistical Discrimination against the individual • If the preconceptions is based on accurate average observations • Then there are feed-back effects that increase the level of discrimination

34. Customer Discrimination • If Customers do not care who the employees are then the price will be the same whether the employee is male or female (white or black; asian or hispanic) • thus • pf* = pm*

35. Customer Discrimination • If on the other hand the customer prefers male employees than • pf*(1 + d) = pm* • If the customer prefers females than • pm*(1 + d) = pf* • The one characteristic of this model is that there is market reason for the discrimination to be eradicated.

36. Employee Discrimination • If m type worker does not like working alongside with f type worker than • w*m = wm(1 - d) • Thus, the gross wage of the m type worker would be lowered • If there are two types of jobs (1 and 2) and workers in 1 are only m type and workers in 2 are both m and f, then

37. Employee Discrimination • If there are two types of jobs (1 and 2) and workers of both type (m and f) in each job type but only m type workers in job type 2 do not care to work with f type workers,then • w*1m = w2m(1 - d) • such that • w*1m < w2m

38. Statistical Models • Statistical Discrimination • The employer may use “generalized” information about the employee and may due to that discriminate even based on what may be “actual” or “perceived” information such that wages differ

39. PERCENT WOMEN MEN ATTACHMENT TO LABOR FORCE W M STATISTICAL DISCRIMINATION BASED ON DIFFERENT DISTRIBUTIONS OF LABOR FORCE ATTACHMENT FOR MEN AND WOMEN

40. PERCENT MEN WOMEN ATTACHMENT TO LABOR FORCE W M STATISTICAL DISCRIMINATION WHEN THE DISTRIBUTION BY GENDER ARE VERY SIMILAR

41. Human Capital Theory • Solomon Polachek discussed the idea of jobs that provide a smaller or larger penalty of leaving the workforce for some amount of time • If both jobs have the same level skill but one gives a larger penalty for exiting the job for a given period of time (occupation k)

42. (A) OCCUPATION j (B) OCCUPATION k W W B D’ B D’ E C C E D A A D TIME TIME THE HUMAN CAPITAL EXPLANATION OF OCCUPATIONAL SEGREGATION BY GENDER-THE ROLE OF WAGE PENALTIES TO PERIODS OF NONWORK

43. Institutional Models • These models assume that the discrimination occurs as part of the organizations internal structure. • It is based on the notion that firms management structure is build upon internal institutional arrangements that have either deliberate or unintentional discrimination repercussions

44. Institutional Models • There are primarily there Institutional models (which can work separately or in conjunction) • The internal Labor Market • Primary and Secondary Jobs • Feedback Effects

45. Internal Labor Market • The assumption is that certain firms will generally only promote from within. • If for whatever reason, entry level jobs attracted a certain type of worker • or if only certain type of worker will be retained • or if only certain type of worker will stay in that job • Then upper management will be composed of that type of worker that remains in that entry level position

46. Internal Labor Market Wages ($) Firm-Specific Training Job Ladder

47. Primary and Secondary Jobs • The assumption is that certain firms will generally only promote from a certain type of entry jobs. • In other words, some entry jobs will only allow the workers to reach certain heights within the organization

48. Internal Labor Market Wages ($) Primary Secondary Job Ladder

49. Feedback Effects • Some times employees and employers may discriminate by bringing into the work place the behavior exhibited in the household • So gender roles played in the household labor • are parallel in the work labor

50. Feedback Effects Gender Division of Labor in the family Gender Differences in Labor Market outcomes