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Labor Market Discrimination . Discrimination By Employer, Customer, and Employee. Labor Market Discrimination. The definition of Labor Market Discrimination is:

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labor market discrimination

Labor Market Discrimination

Discrimination

By Employer, Customer, and Employee

labor market discrimination1
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.
feed back
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
feed back1
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
subtle and not so subtle barriers
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.”
subtle and not so subtle barriers1
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".
glass ceiling
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
glass ceiling1
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
glass ceiling2
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
glass ceiling3
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
glass ceiling4
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
glass ceiling5
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
glass ceiling6
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
measuring discrimination
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
the overcrowding model
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
the overcrowding model1
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.
the overcrowding model2
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
the overcrowding model3
The Overcrowding Model

S

S

$

$

w

D

D

L

L

F type Jobs

M type Jobs

the overcrowding model4
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
the overcrowding model5
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
the overcrowding model6
The Overcrowding Model

S

S

$

$

wM

w

wF

D

D

LF

L

LM

L

F type Jobs

M type Jobs

the overcrowding model7
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) .
models of labor market discrimination
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
gary becker
Gary Becker
  • He then assumed that
  • U/ > 0
  • U/W > 0
  • U/B < 0
  • Assuming that both White and Black workers are homogenous
gary becker1
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
gary becker2
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)
the demand for women workers employers a to e

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
women s wages when employers discrimination coefficients differ

Wf/Wm

SUPPLY

1/(1+d*)

DEMAND

NUMBER OF WOMEN

WOMEN’S WAGES WHEN EMPLOYERS’ DISCRIMINATION COEFFICIENTS DIFFER
market equilibrium before and after entry

Wf/Wm

SUPPLY

DEMAND AFTER ENTRY

1/(1+d*)

DEMAND BEFORE ENTRY

NUMBER OF WOMEN

MARKET EQUILIBRIUM BEFORE AND AFTER ENTRY

1

gary becker3
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
statistical discrimination
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
customer discrimination
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*
customer discrimination1
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.
employee discrimination
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
employee discrimination1
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
statistical models
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
slide39

PERCENT

WOMEN

MEN

ATTACHMENT TO LABOR FORCE

W

M

STATISTICAL DISCRIMINATION BASED ON DIFFERENT DISTRIBUTIONS OF LABOR FORCE ATTACHMENT FOR MEN AND WOMEN
statistical discrimination when the distribution by gender are very similar

PERCENT

MEN

WOMEN

ATTACHMENT TO LABOR FORCE

W

M

STATISTICAL DISCRIMINATION WHEN THE DISTRIBUTION BY GENDER ARE VERY SIMILAR
human capital theory
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)
slide42

(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
institutional models
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
institutional models1
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
internal labor market
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
internal labor market1
Internal Labor Market

Wages ($)

Firm-Specific Training

Job Ladder

primary and secondary jobs
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
internal labor market2
Internal Labor Market

Wages ($)

Primary

Secondary

Job Ladder

feedback effects
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
feedback effects1
Feedback Effects

Gender Division of Labor in the family

Gender Differences in Labor Market outcomes