CHAPTER 3 LABOR FORCE PARTICIPATION

1
C H A P T E R
9
Discrimination in the Labor Market
2
OVERVIEW OF CHAPTER

• The pattern of earnings differentials by race and
  gender
• Theories of market discrimination
• Discrimination and life cycle earnings
• The measurement of discrimination
• The economic progress of backs and women
• Government programs to combat discrimination

3
THE PATTERN OF EARNINGS DIFFERENTIALS BY RACE AND
GENDER

• 1939 black males earned 45 as much as white
  males black women earned 38 as much as white
  females
• Earnings have converged by race since WWII men
  now 78 and women 90
• Lack of improvement since 1975
• Gender gap more narrow for blacks

4
Median Earnings Ratios for Year-Round
Full-TimeWorkers by Race and Gender, 19402000
SOURCE U.S. Bureau of the Census, Money Income
of Households, Families, and Persons, P60, nos.
69, 80, 105, 132, 156, 174, 193, 197, and 200.
And, beginning in 2000, PINC-05
lthttp//ferret.bls.census.gov/macro/032001/perinc/
new05_032.htmgt 1940 data actually corresponds to
1939.
Figure 9.1
5
THEORIES OF MARKET DISCRIMINATION

• Discrimination people who hold an inferior
  status and are denied an equal opportunity to
  develop their potential capability, to use that
  capability in its most advantageous employment,
  and to earn a wage that is equal to what others
  of the same capability are paid
• Pre-market discrimination denies an equal
  opportunity to develop their natural abilities
  and talents during their formative,
  pre-employment years.
• Market discrimination takes place in the labor
  market
• Economics focuses more on market discrimination

6
THEORIES OF MARKET DISCRIMINATION

• Personal prejudice
• Prejudice connotes a subjective feeling of
  dislike for a person or group
• Prejudice creates either a desire for physical
  distance or social distance
• Gary Becker wrote of prejudice

7
THEORIES OF MARKET DISCRIMINATION

• Prejudice by employers
• Taste for discrimination
• Wage differential will depend upon
• Size of the minority group (blacks in Colorado)
• Extent of prejudice among employers
• According to Beckers model, discrimination
  should be eliminated through competition. Why
  doesnt it?
• Less than perfect competition
• Pre-market discrimination eliminates qualified
  minorities
• Less than full employment

8
Wage Differentials Caused by Employer Prejudice
Figure 9.2
9
THEORIES OF MARKET DISCRIMINATION

• Options to eliminate employer discrimination
• Adopt policies that reduce the prejudicial
  attitudes of employers.
• Impose financial penalties on firms to raise the
  cost of discrimination.
• Increase the competitiveness of the economy.
• Prejudice by workers
• Prejudice by consumers

10
MARKET POWER

• Monopsonistic discrimination
• Model developed by Joan Robinson
• Discrimination by unions
• Imperfect information
• Statistical discrimination due to the process
  of unequal information.
• The use of group characteristics in screening
  gives rise to statistical discrimination
• Unequal productivity
• Equal productivity
• In the news The Young and the Beautiful

11
Wage Discrimination by a Monopsonist
Figure 9.3
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Hypothetical Frequency Distribution of Worker
Productivity among Blacks and Whites
Figure 9.4
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DISCRIMINATION AND LIFE CYCLE EARNINGS

• Discrimination in training
• Discrimination in promotion
• Women and minorities in dead-end jobs
• So close, and yet so far away the glass ceiling
  effect
• Discrimination and labor market choices

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Amounts of On-the-Job Training Received by Race
and Gender
SOURCE Based on information contained in
Jonathan R. Veum, Training among Young Adults
Who, What Kind, and For How Long? Monthly Labor
Review (August 1993) 2732.
Table 9.1
15
Distribution of Race/Gender Groups across
Occupations with Varying Promotion
Opportunities, 2001
SOURCE Occupation classification is made by
Waddoups and Assane, Mobility and Gender in a
Segmented Labor Market A Closer Look, appendix
distribution of workers across occupations from
Bureau of Labor Statistics, Employment and
Earnings (January 2002), Table 11.
Table 9.2
16
Percentage of Executives, Managers, and
Administrators Represented by Race and Gender
Groups, by Industry, 2001
SOURCE Cross-tabulations from the March 2001
Current Population Survey obtained through Ferret
extraction tools from the U.S. Census Bureau,
lthttp//ferret.census.govgt.
Table 9.3
17
THE MEASUREMENT OF DISCRIMINATION

• The residual method
• Estimates of discrimination
• Sources of bias

18
Mean Values of Worker Characteristics and
Percentage of Wage Gap Explained
SOURCE Based on Garey Durden and Patricia
Gaynor, More on The Cost of Being Other Than
White and Male Measurement of Race, Ethnic, and
Gender Effects on Yearly Earnings, American
Journal of Economics and Sociology 57 (January
1998), Table 1 and unpublished tables.
Table 9.4
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The Residual Approach to Measuring Wage
Discrimination
Figure 9.5
20
THE ECONOMIC PROGRESS OF BLACKS AND WOMEN

• Blacks
• Employment to population ratio
• Women
• In the news the mommy track fair or unfair
  to women?

21
Dimensions of Black Economic Progress, 19602000
SOURCES Earnings Bureau of the Census, Money
Income of Households, Families and Persons in the
United States, P-60 series, lthttp//
ferret.bls.census.gov/macro/032001/perinc/new05_03
2.htmgt. Education National Center for
Educational Statistics, U.S. Department of
Education, Office of Educational Research and
Improvement, Digest of Educational Statistics
education statistics calculated from the 2001
March Supplement of the Current Population
Survey. Occupational representation Bureau of
the Census, Statistical Abstract of the United
States, various issues. Employment/Population
ratios E. Jacobs, ed., Handbook of Labor
Statistics (Lanham, Md. Bernan Press, 1998) and
Ferret extraction tool from lthttp//ferret.bls.cens
us.govgt. Householder information lthttp//www.cens
us.gov/population/www/socdemo/hh-fam.htmlgt.
Family income statistics http//www.census.gov/hh
es/income/histinc/f05.html. Poverty Bureau of
the Census, Poverty in the U.S. 2000 Current
Population Reports Consumer Income Series, P-60,
no. 214.
Table 9.5
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GOVERNMENT PROGRAMS TO COMBAT DISCRIMINATION

• Federal legislation
• Civil Rights Act of 1964
• EEOC
• Civil Rights Act of 1991
• Executive Order 11246
• Affirmative action program
• Equal pay act of 1963
• ADEA
• ADA
• Effectiveness of antidiscrimination programs

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DISCRIMINATION IN FULL-TIME COMPENSATION

• What is a full-time wage premium?
• Table 9.6 - of hours required to receive
  full-time wage premium by race and gender groups
• How many hours is full-time?

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Relationship Between Monthly Salary and Job Worth
Points for Men and Women, Washington State, 1974
SOURCE Donald J. Treiman and Heidi I. Hartmann,
eds., Women, Work, and Wages (Washington, D.C.
National Academy Press, 1981) 61. Used with
permission.
Figure 9.6
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Number of Hours Required to Receive Full-Time
Wage Premium by Race and Gender Groups
SOURCE Based on information contained in Susan
L. Averett and Julie L. Hotchkiss,
Discrimination in the Payment of Full-Time Wage
Premiums, Industrial and Labor Relations Review
49 (January 1996) 287301, Tables 3a3d.
Table 9.6
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