Transcript Contemporary Labor Economics

Chapter 14
Labor Market Discrimination
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
1. Gender and Racial
Differences
14-2
Table 12.1 Shares of the Civilian
Labor Force for Major Demographic
Groups: 1988, 1998, 2008, 2018
14-3
Figure 12.1 Mean Earnings as a Percentage of
White Male Earnings, Various Demographic
Groups, Full-Time Workers over 24 Years Old,
2008
14-4
Table 12.2 Female Earnings as a Percentage of
Male Earnings, by Age and Education, Full-Time
Workers, 2008
14-5
Table 12.3 Female/Male Earnings Ratios and Percentages of Female
Jobholders, Full-Time Wage and Salary Workers, by Selected High- and Low-
Paying Occupations, 2009
14-6
Table 12.4 Employment Ratios, Labor-Force Participation Rates, and
Unemployment Rates, by Race and Gender,a 1970–2009
14-7
Table 12.5 Male Earnings
Differences, by Ancestry, 1990
14-8
Ratio of Female to Male
• The ratio of female
Hourly Earnings
to male hourly
earnings rose
substantially from the
late 1970s to the early
1990s and has leveled
off since then.
• The wage gap has
decreased because
the skills of women
have risen, the
industrial and
occupational
distributions have
shifted in favor of
women, the decline in
unionism has
decreased male
wages more than
female wages, and
discrimination has
declined.
14-9
Ratio of African-American to
White Weekly Earnings
• The ratio of
AfricanAmerican to
white hourly
earnings has
not changed
much over the
past 3 decades.
14-10
The Trend in the Earnings Ratio of
Hispanics and Asians to Whites
1.2
Asian women
Earnings ratio
1.1
1
Asian men
0.9
Hispanic women
0.8
0.7
Hispanic men
0.6
1970
1975
1980
1985
1990
1995
2000
2005
2010
Year
14-11
Unemployment Rate
• The
unemployment
rate difference
between white
female and white
males has
narrowed over
time.
• AfricanAmericans have
an
unemployment
rate that is
consistently
twice as great of
those of whites.
14-12
Occupational Distribution by
Gender, 2008
• Women are 47
percent of the
employed labor
force.
• Women are
over-represented
in lower paying
occupations such
secretaries and
elementary
school teachers.
• Women have
made significant
gains in recent
decades into
higher paying
occupations.
14-13
Occupational Distribution by
Race, 2008
• African
Americans are 11
percent of the
employed labor
force.
• African
Americans are
over-represented
in lower paying
occupations such
janitors, cleaners,
nursing aides,
and orderlies.
14-14
Educational Attainment,
2007
• White males are
more likely to have
a college education
than females and
African-Americans
among persons 25
and older.
• The quality of
education received
by AfricanAmericans has
generally been
inferior to that
acquired by whites.
14-15
Earnings by Education, Race,
and Sex, 2007
• Full-time women
and black workers
earn less than
white males at
each educational
level.
• Black males tend
to earn more than
black and white
females.
14-16
Non-Discrimination Factors
o Raw racial and gender differentials on
earnings, occupational distribution, and
unemployment data must be interpreted
with caution.
• Factors other than discrimination such as
individual choice may play a role.
14-17
2. Discrimination and
Its Dimensions
14-18
Discrimination
o Discrimination exists when female or
minority workers—who have the same
abilities, education, training, and
experience as white male workers—are
accorded inferior treatment with respect
to hiring, occupational access, promotion,
wage rate, or working conditions.
14-19
Types of Discrimination
o Wage discrimination
• Female or black workers are paid less than
male (white) workers for doing the same
work.
o Employment discrimination
• Blacks and women bear a disproportionate
share of unemployment.
o Occupational job discrimination
• Blacks and women are arbitrarily restricted
from entering some occupations, even
though they are as capable as male (white)
workers.
14-20
Types of Discrimination
o Human capital discrimination
• Blacks and women have less access to productivityincreasing opportunities such as formal schooling or onthe-job training.
o Post-market discrimination
• Occurs after a person has entered the labor market
∞ Wage discrimination
∞ Employment discrimination
∞ Occupational job discrimination
o Pre-market discrimination
• Occurs before a person has entered the labor market
∞ Human capital discrimination
14-21
3. Taste for
Discrimination Model
14-22
Taste for Discrimination
o Becker’s taste for discrimination assumes
that discrimination is a “taste” for which a
discriminator is willing to pay.
• Society’s taste for discrimination implies that it
is willing to forego output and profits as the
price of discrimination.
o Tastes for discrimination arise from
sources:
• Employers
• Consumers
• Employees
14-23
Statistical Discrimination
o Statistical discrimination exists when
employers base decisions upon the
average characteristics of the group to
which they belong.
• Ex: Young males pay higher insurance rates
since they have more accidents on average.
o Employers base hiring decisions on
imperfect predictors of productivity.
• Age, education, and experience provide some
information about productivity.
14-24
Statistical Discrimination
• Employers may use race and gender as well
since they also provide information.
∞Gender may provide information on job
commitment since women on average have
higher turnover rates.
∞Race may provide some information about
schooling quality since blacks on average go to
inferior schools than whites.
14-25
Implications
o Employers are not harmed when they
practice statistical discrimination.
• They gain since they minimize hiring costs.
o Employers are not being malicious in
practicing this type of discrimination.
• The problem is that workers who have
characteristics different from the average are
harmed.
o Statistical discrimination will diminish if the
average characteristics of the groups
converge over time.
• Male-female turnover rates are converging.
14-26
Question for Thought
1. Explain the following statement: “In the tastefor-discrimination model, discrimination is
practiced even though it is costly to do so. But
in the statistical discrimination model, it is clear
that discrimination pays.”
14-27
5. The Crowding
Model:
Occupational
Segregation
14-28
Occupation Crowding
Wage rate
• Employers may practice
job segregation if male
(white) workers don’t like to
work with female (black)
workers.
Wage rate
• By crowding women into
a narrow set of “female”
occupations, men will
receive high wage rates of
Wm in male occupations,
while women will receive
low wage rates of Wf in
female occupations.
Wm
We
We
Wf
Dm
Q2 Q1Quantity of
Male Occs Labor
Df
Q1 Q2
Female Occs
Quantity
of Labor
14-29
Ending Discrimination
o Ending occupational crowding would
enable females to enter male
occupations.
• Raise the wage rates of women and lower
the wage rates of men
• There would be a net gain to society as
domestic output and efficiency would
increase.
14-30
Index of Occupational
Segregation by Gender
• The index of
segregation shows
the percentage of
women (men) who
would have to
change occupations
for women to be
distributed among
occupations in the
same proportions as
men.
• The index of
segregation by gender
has fallen moderately
over time.
14-31
Index of Occupational
Segregation by Race
• The index of
segregation by
race has fallen
moderately over
time.
14-32
6. Cause and Effect:
Nondiscriminatory
Factors
14-33
Rational Choice
o Some economists argue that part of the
gender wage gap is the result of rational
choices made by women.
o Women tend to have interrupted work
careers due to childbearing.
• Due to their shorter work careers, it is rational for women to
invest less in education and training.
• Their stock of human capital will deteriorate while they are out
of the labor force.
• Occupational segregation may be due to women choosing
occupations, such as nursing and teaching, with skills that are
useful in home production.
14-34
Rational Choice
o The wage gap may be the result of
compensating wage differentials.
• Women may prefer safer jobs, less effortintensive jobs, and shorter commute times.
o Women work fewer hours than men.
• More likely work part-time
• Full-time women work fewer hours than fulltime men.
14-35
Discrimination as a Cause
o Some argue that women invest less in
human capital because of discrimination.
• Women stay out of the labor force because
of the low pay in the labor market.
• If discrimination declined, then more women
may decide to remain single or childless.
o Sexual harassment may cause women to
drop out of the labor force.
14-36
Evidence
o Male-female pay gap
• Researchers decompose the pay gap into
the portion explained by differences in
productivity characteristics and the portion
unexplained (discrimination).
• Blau-Kahn find that two-thirds of the pay gap
can be explained by differences in
experience, industry, occupation, etc.
• Pay gap has been falling equally due to a
rise in relative productivity characteristics of
women and a decline in the unexplained
gap.
14-37
Evidence
o Black-white pay gap
• Blau-Kahn find that 89 percent of the pay
gap can be explained by differences in
productivity characteristics.
• The pay gap has not changed much over
time.
∞The black-white difference in education has
diminished and thus shrunk the gap.
∞The payoff to education has risen which has
expanded the gap.
14-38
Controversy
o Economists differ on whether the
unexplained portion over or understates
the amount of discrimination.
• Economists differ on whether unobserved
productivity characteristics favor men or
women.
• Do the observed productivity characteristics
(such as occupation) reflect discrimination?
14-39
Question for Thought
1. “Wage differences between men and women do
not reflect discrimination but rather differences
in job continuity and rational decisions with
respect to education and on-the-job training.”
Explain why you agree or disagree.
14-40
7. Antidiscrimination
Policies and Issues
14-41
Equal Pay Act of 1963
o The Equal Pay Act of 1963 requires that
men and women doing the same job be
paid the same.
• Firms could avoid the law’s requirements by
conducting employment discrimination (e.g.,
not hiring females for jobs held by males) .
14-42
Civil Rights Act of 1964
o The Civil Rights Act of 1964 outlaws
both wage discrimination and
employment discrimination.
• Applies to race, gender, color, religion, and
national origin
• Applies to private employers, labor unions,
and governments
14-43
Executive Orders
o Executive orders in 1965 and 1968
attempted to eliminate discrimination by
businesses holding government contracts.
o Firms with more than $50,000 of
government contracts must develop
affirmative-action programs.
• Firms must a develop plan to hire more
women and minorities if the firm has a
smaller of proportion of women and
minorities than in the available labor force.
• These programs have been under legal and
political attack.
14-44
Controversy
o Interventionist view
• The market has failed to eliminate
discrimination.
• Minorities and women have been
discriminated against in the acquisition of
human capital.
• Current legislation against discrimination
does not correct for the effects of past
discrimination.
∞More than equal opportunity must be given to
close the current gap.
14-45
Have Anti-Discrimination
Policies Worked?
o The empirical evidence on whether
government policies have narrowed the
gender and racial pay gaps is mixed.
• It is difficult to separate the effects of the laws
from other factors that are changing.
o The affirmative-action laws did appear to
have improved the employment
opportunities for women and minorities in
the 1970s but this progress ended in the
1980s.
14-46
Extra Slides
14-47
Discrimination Coefficient
o If black and white workers are equally
productive, a non-discriminatory employer
will randomly hire black and white
workers if the wages are the same.
o The strength of a employer’s prejudice
against black workers is measured by the
discrimination coefficient--d.
• For prejudiced employers, the cost of hiring a
black worker is the worker’s wage (Wb) plus
the psychic cost of hiring a black worker (d).
14-48
Discrimination Coefficient
• Prejudiced employers will be indifferent
between white and black workers when:
Ww = Wb + d
• A given employer will hire black workers, if the
market white-black wage gap is greater than d.
14-49
Wage Discrimination in the
Labor
Market
• The demand for black
workers is formed by arraying
employers from lowest for
highest discrimination
coefficients.
• The horizontal portion of the
demand curve is composed of
non-discriminating employers.
• The downward sloping
portion consists of
discriminating employers.
W b/ W w
Sb
1.00
0.8
Db
• The quantity supply of black
workers supplied rises as the
black-white wage ratio rises.
• The intersection of the supply
and demand for black workers
determines the black-white
ratio and the number of black
workers employed.
Q
Quantity of
Black Workers
14-50
Generalizations
o A change in the shape or location of the demand
curve will alter the black-white wage ratio.
• A decrease in discrimination will lengthen the
horizontal portion of the demand curve and reduce
the slope of the downward sloping portion.
∞This will raise the black-white wage ratio.
o The size of the black-wage gap varies directly with
the supply of black labor.
• If the supply of black labor is small that it intersected
the horizontal portion on the demand curve, then no
wage gap would exist.
14-51
Generalizations
o The size of the black-wage gap varies directly
with the supply of black labor.
• If the supply of black labor is small that it
intersected the horizontal portion on the
demand curve, then no wage gap would
exist.
14-52
Winners and Losers
o White workers gain since they are protected
from competition from black workers.
o Black workers lose since they receive lower
wages.
o Employers that discriminate lose since they
incur higher wage costs than if they did not
discriminate.
• Competition will decrease discrimination as
lower cost non-discriminating firms will drive
discriminating firms out of business.
14-53