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Chapter 9. Discrimination. Definition Types of Evidence Theories Combating . An economist’s definition. two people with same productivity preferences but different group (race, sex, age) receive different outcomes in labor market wages, hiring, promotion. NOT the same as prejudice

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Chapter 9 discrimination l.jpg
Chapter 9. Discrimination

  • Definition

  • Types of Evidence

  • Theories

  • Combating


An economist s definition l.jpg
An economist’s definition

  • two people with same

    • productivity

    • preferences

    • but different group (race, sex, age)

  • receive different outcomes in labor market

    • wages, hiring, promotion


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  • sex vs. race discrimination

    • w/ race there is segregation & a total unwillingness to associate with that group

    • but men and women share households


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Types of Evidence

  • Direct testimony

    • individual experiences

    • with a large number of victims, it shows a pattern

    • with a small number, it hinges on credibility

    • issue of unreported cases


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  • Auditing

    • matched pairs of testers (identical except for sex or race),

      sent for interviews

    • may find discrimination in hiring, entry wages,

      but not in raises or promotion


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  • Statistical evidence

    • wage regressions

    • control for worker differences (education, experience, etc.)

    • estimate unexplained wage differences by sex for firm, industry


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Theories of Discrimination

  • With competitive, free markets with rational firms, consumers

    • no discrimination should exist


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  • why?

    • firms that discrimination will be driven out of business by firms that do not

    • consumer that discriminate may end up paying more

    • employees that discriminate may end up with lower wages


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A Preference for Discrimination

  • Gary Becker, PhD dissertation

    • Nobel Prize winner (1992)

  • Discrimination can occur due to preferences of

    • employer

    • employees

    • customers


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Employer Discrimination

  • employer wants to

    • maximize profits AND

    • engage in discrimination due to his/her prejudice

    • willing to accept lower profits in order to discriminate


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  • what happens?

    • pays “desired” employees more to attract them and avoid hiring the undesired group

    • lower wages for undesired group

    • segregation between employers who discriminate and those who do not


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  • long run?

    • non discriminating employers have lower costs, drive discriminating employers out of business

    • UNLESS there is not a lot of competition


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Employee Discrimination

  • employees dislike working with a certain group so

    • demand higher wages to work in an integrated work site OR

    • less productive in an integrated work site


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  • long run? own

    • this would persist as employee attitudes change slowly over time

    • and if attitudes are widespread


Customer discrimination l.jpg
Customer Discrimination own

  • customers willing to pay higher price to be serviced by desired group

    • so firms avoid hiring undesired group (to get a higher price) OR

    • firms pay undesired workers less to make up for price cut


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  • segregation own

    • women waiters in cheaper restaurants,

    • male waiters in fancy restaurants

    • High % male representation in car sales, repair

  • lower wages?

    • if undesired worker paid less

    • or if crowding (ch. 6)


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  • long run? own

    • yes, since attitudes change slowly


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Models w/out prejudice own

  • monopsony

  • rent-seeking

  • imperfect information


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Monopsony Model own

  • = one buyer (of labor)

  • employers band together

    • set below market wages in jobs with high % female

    • motivated by desire to min. costs, max. profits

  • implies wage gap

    • Lemons v. City of Denver


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problems own

  • monopsonies are local, not national

    • with increasing labor mobility,

      move to area with better pay

    • but women ARE less mobile

  • women’s labor supply is more elastic w.r.t. wages

    • more likely to not work if wage too low


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Rent-seeking models own

  • one group bands together to improve their well-being at the expense of others

    • desired group preserves best jobs for themselves

  • motivated by greed, not prejudice

    • but could be combined w/ prejudice


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Imperfect information model l.jpg
Imperfect Information Model own

  • a.k.a. statistical discrimination

  • employers have imperfect information on potential hires

    • do not know for certain their individual productivity


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example own

  • women have higher turnover rates on average

  • it is expensive to train new workers

  • employers end up preferring men, who are less likely to quit, ON AVERAGE


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  • who is hurt? own

    • women who are highly attached to the labor force

  • who benefits?

    • men who are not


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Differences in average characteristics own

  • may be perceived or actual

  • some actual differences

    • women have more absences

      (especially married women)

    • men more likely to have substance abuse problem


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why isn’t this prejudice? own

  • discrimination here is not due to dislike of certain group

  • but desire to max. profits given the uncertainty about hiring

  • if employer had perfect info, then he/she would not do this


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the law own

  • in about 19 states, illegal to ask about marital, family status in an interview

    • and may be prohibited under federal law too

  • Technically, it is illegal for an interviewer to ask anything personal that is not directly job-related.


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Indirect vs. direct discrimination own

  • direct

    • discriminating among individuals with same skills, preferences

  • indirect

    • certain groups have fewer skills because of discrimination


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Combating Discrimination own

  • Government regulation

  • Private sector alternatives


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Government Regulation own

  • laws against discrimination

  • pros:

    • improve efficiency, productivty

    • improve equity

    • works more quickly than changing societal attitudes


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  • cons: own

    • compliance costs

    • costs of litigation


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Federal Laws own

  • Equal Pay Act of 1963

  • The Civil Rights Act of 1964

  • The ERA (not passed)


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The Equal Pay Act of 1963 own

  • prohibits wage discrimination for women and men performing work for same employer of similar

    • skill

    • effort

    • responsibility

    • working conditions


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  • restrictive own

    • how to define “similar”?

  • covers almost all employers


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The Civil Rights Act of 1964 own

  • created EEOC to enforce the law

  • prohibits discrimination on basis of race, sex, color, religion, national origin

  • Title VII – employment

  • Title IX -- education


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Title VII own

  • hiring/firing/layoff

  • compensation/benefits

  • job title/promotions/tranfers

  • ads/recruitment

  • training/facilities

  • disability leave

  • all employers with > 15 workers


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  • exceptions own

    • if sex, religion is legitimate job requirement

    • “BFOQ”

    • race is not considered a BFOQ

    • EEOC vs. Hooters (1995)


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sexual harassment own

  • illegal under title VII

  • “quid pro quo”

    • sex-for-job, raise, promotion

  • hostile work environment

    • behavior of coworkers make interferes with job


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back to interview questions own

  • questions about marital, family status

    • may violate title VII if used against women and not against men


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pregnancy based discrimination own

  • pregnancy, childbirth and related disabilities must be treated same as other disabilities/illnesses in employer policy


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Title IX own

  • education programs receiving federal aid

  • implications for sports programs


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Title IX & sports own

  • 1972

    • < 30,000 female NCAA athletes

  • 2000

    • > 150,000 NCAA female athletes


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college sports programs own

  • schools comply by

    • % female athletes proportional to enrollment

    • history of expanding sports opportunities for females


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controversy own

  • are low-profile men’s sports cut to comply with Title IX?

    • due to large spending on sports like men’s basketball & football


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note own

  • no school has ever lost federal aid for noncompliance with Title IX


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Civil Rights Act own

  • does not prohibit discrimination based on

    • sexual orientation

    • marital status

    • family status

  • but many states and municipalities do


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The Equal Rights Amendment own

  • Section 1. Equality of rights under the law shall not be denied or abridged by the United States or by any state on account of sex.

  • Section 2. The Congress shall have the power to enforce, by appropriate legislation, the provisions of this article.

  • Section 3. This amendment shall take effect two years after the date of ratification.


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ERA own

  • proposed as 28th Amendment to the U.S. Constitution

    • passed in 1972 by Congress

    • must be ratified by 38 states (3/4)

    • only ratified by 35 states by 1982 deadline

    • (later 5 states rescinded)


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why is it necessary? own

  • Civil Rights Act, Equal Pay Act

    • they are laws by congress

    • could easily be changed


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  • 14 ownth Amendment (1868)

    • originally did not apply to sex, only to race (“male citizens”)

    • courts have not consistently applied law to guarantee equal protection under law to women

    • 1873 Court upheld ban on women lawyers

    • 1981 Court upheld law allowing only men to be charged with statutory rape


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Why do people oppose it? own

  • would it lead to taxpayer-funded abortion?

  • unisex bathrooms?

  • female draft?

  • homosexual marriage?

  • alimony & child support?



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new life for the ERA? own

  • Supreme Court rulings suggest that Congress may extend deadline for state ratification

  • All 35 previous ratifications would hold

    • need 3 more states


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Private Methods own

  • Unions

  • Networking

  • Arbitration


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Unions own

  • can help eliminate inequities with

    • job classifications

    • performance standards

    • pay scales

    • grievance procedures


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EEOC v. Mitsubishi Motors, 1996 own

  • 29 women (later 300), UAW members

  • charged sexual harassment on the assembly line

  • multi-million dollar settlement


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Networking own

  • women’s groups designed to promote women in business

  • promoting mentors for women

  • equivalent of rent-seeking behavior for women?


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Arbitration own

  • settling disputes with a third party

    • out of court

  • cheaper than litigation

    • but may favor employers

  • employer may require this as a condition of employment

    • Wall Street


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1996 Smith Barney own

  • class action lawsuit to get around arbitration requirement

  • alleged hostile work environment

    • “Boom-boom room”

  • grew to over 2000 women in brokerage industry


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Chapters 6-9, revisited own

  • what does the gender earnings gap mean?

  • explain up to 60% controlling for

    • occupation

    • human capital

    • job characteristics


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The policy issue own

  • is the gap about discrimination?

    • both indirect and direct

  • or is it about women making different choices?

    • different values/preferences?

    • different constraints?


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Vicky Lovell ownInstitute for Women’s Policy Research

“The question is how do we interpret the fact that women don’t have as much occupational choice as men do?....


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“… Men choose to have children and choose to be admitted to the work force because they’ve already established that women will be doing the caring work, relieving them of the work-family conflict…”


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“…Society has narrowed women’s choices in a way that it hasn’t narrowed men’s choices.”


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Society it hasn’t narrowed men’s choices.”

  • earnings gap is NOT about “men bad, women good”

  • sometimes women are their own worst enemies:

    • Phyllis Schaefly led ERA opposition

    • SAHM vs. WOHM debate