Discrimination

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Discrimination

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Discrimination

• Making a distinction in favor or against a person
  based on the group, class, or category that
  person belongs to rather than individual merit
• Based on non-productive characteristics
• When equals are treated unequally
• Based on group rather than individual attributes

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Discrimination sometimes confused with Prejudice
and Segregation

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Prejudice

• Attitude
• When a person dislikes those in another group
• I dont like Hispanics
• Only leads to discrimination if you ACT on the
  prejudice

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Discrimination

• Verbal or nonverbal acts that bring about
  negative consequences for the minority group
• Aimed at denying equal access to societal rewards

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Segregation

• Physical separation due to negative feeling
• Complete elimination of the minority group or
  thing
• Easier to measure than discrimination because it
  can be quantified
• Can result from prejudice, discrimination, or
  voluntary choice

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Discrimination vs. Social Injustice

• When equals are treated unequally
• When an individual is treated unjustly

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Why does discrimination exist?

• In 1946, Jackie Robinson was the first
  African-American player since the 1880s to play
  professional baseball
• Baseball had much discrimination of blacks in its
  past
• Any other examples in sports??
• Two theories

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Neoclassical Theory of Discrimination

• Gary Becker in 1957
• People are rational and seek to maximize utility
• What is rationality?
• What is socially viewed as normal
• What is utility?
• Satisfaction or well-being
• People who discriminate experience disutility
  from associating with members of certain groups

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• Disutility leads to
• Firms willing to accept lower profits
• Consumers willing to pay higher prices
• Employees willing to accept lower wages
• All to avoid associating with members of that
  group

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Monopoly Power

• Firms discriminate because it leads to higher
  profits
• Use race and gender to divide labor into
  non-competing groups
• Three models
• Dual labor market model
• Crowding/occupational segregation model
• Political economy model

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Dual Labor Market Model

• Market is segmented into a primary and secondary
  sector
• No mobility between sectors
• Primary Sector
• Job security, increasing wages, good benefits,
  upward mobility, on the job training
• Major League
• Secondary Sector
• High turnover rates, low wages, no benefits, no
  on the job training
• Minor League

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• Based on internal labor market
• Wage determination and job assignments are based
  on administrative procedures
• Productivity doesnt determine wages
• Initial job does
• Employers put the people who they dont like in
  the secondary sector
• Hire themdoesnt look like firm discriminates
• Workers quit

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Crowding/Occupational Segregation Model

• Women and minorities are crowded into certain
  occupations
• Lower wage occupations
• With no discrimination what do we know about
  mobility of labor and wages?
• Mobility of labor exists and wages are equal
• With discrimination what do we know about
  mobility of labor and wages?
• Mobility of labor doesnt exist and wages are
  unequal
• Graphical (with and without discrimination)

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Ls
Wage
Wage
Ls
Ls
Ls
W2
W1
W2
Ld
Ld
workers
workers
2
1
2
1
Firm does not Discriminate
Firm Discriminates
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Why does this occur?

• Some employers want certain types of employees
• Some employees want to work with certain types of
  workers
• Some customers want to deal with certain types of
  people
• Segregation can increase productivity and
  therefore profits

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Political Economy Model

• Discrimination benefits employers while ALL
  employees lose
• Play one race (gender) against the other
• Segregation of workers is done to minimized
  probability of unionization
• Firms are happy because unions tend to increase
  wages

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Support

• African Americans have typically been used as
  strikebreakers
• Puts in workers minds that this group is
  willing to take your job
• Areas of the country that boast less
  discrimination have more unionized jobs

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Types of discrimination

• Wage
• Women earn on average 72 of a mans salary
• African American men earn 80 of a white mans
  salary
• How are wages determined?
• Based on productivity
• How measure productivity?
• Only accurate measure is piece rates
• 50 of wage difference has been linked to
  productivity differences
• Rest (residual) can be linked to discrimination

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Employment Discrimination

• Not hired due to non-economic factors
• Age, race, gender
• Back to Neoclassical Theory
• People will pay to get rid of disutility gained
  from working with certain types of people

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How can we measure this disutility?

• Discrimination coefficient
• D
• More intense prejudice means D is greater

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Example

• French speaking hockey players and English
  speaking hockey players are equally productive
• MPL are equal
• With no discrimination workers will be
  substitutes
• How will their wages compare??
• Wages will be equal
• If team discriminates against French speaking
  players
• How will wages compare??
• French speaking wage (salary) will be lower

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Why will French speaking hock wages be lower?

• Psychic Cost
• Disutility associated with hiring this group
• Monetary Cost Psychic Cost
• What is the monetary cost of an employee?
• wage
• How do we measure this psychic cost?
• D (discrimination coefficient)

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How are wages determined?

• Wage set by workers productivity
• With no discrimination
• WageFS WageES MPL
• Because players are equally productive
• With discrimination French Speaking players are
  more costly
• WES MPL
• WFS D MPL

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• But MPL are equal so
• WES WFS D
• WES D WFS
• French speaking wage is less than the English
  speaking wage
• How much less?
• By the psychic cost (D)

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Occupational Discrimination

• Male jobs vs. Female jobs
• People not hired due to societys view of
  appropriate gender for the job
• Male or Female Job?
• Secretary
• Plumber
• Male carrier
• Flight attendant

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Statistical Discrimination

• Employers project onto individuals certain
  perceived characteristics about the group they
  belong to
• Why do firms do this??
• Imperfect information
• Use available information that they feel is
  correlated with productivity
• What information is this?
• Education, experience, test scores, age

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• Subjective information
• Information about the PERCEIVED average
  characteristic of the group rather than
  individual characteristic
• Hire workers who are statistically safer
• Examples
• Women tend to leave their job after three years
• Hispanics tend not to speak English well
• White men tend to be arrogant

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Why use this information?

• Cheep source of information
• Seems to be efficient
• Non-discriminatory employers use also

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Employee Discrimination

• Taste for discrimination against co-workers
• Regard their wage as lower because they have to
  work with these types of people
• How much lower?
• w(1-D)
• Want higher wages to continue working in those
  conditions

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Customer Discrimination

• People who prefer not to purchase goods or
  services from certain types of people
• Do customers get wages???
• Nothey pay prices
• View prices they pay as higher
• P(1D)
• Hard to isolate due to quality issues

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Customer Discrimination in Sports

• Fans have preferences for observing players of a
  particular race, age, gender, or other
  non-productive characteristic
• Doesnt mean fans hate the other players
• Fans may pay a premium to see preferred players
• Implies
• MRP for players of the preferred group is greater
  than for other groups
• What is MRP?
• MR MPL

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Evidence

• Major League Baseball trading cards
• Baseball cards of Latin and Black players are
  generally worth less than cards of equally
  productive white players
• NBA racial composition
• Teams racial composition has been found to be
  highly correlated with the racial composition of
  the city

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Is all discrimination bad??

• Should we try to eliminate all forms of
  discrimination??

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Costs and Benefits of Discrimination

• Costs
• Social lower standard of living, less
  opportunities, paid lower wages, pay higher
  prices
• Economic Less efficient (under PPF)
• Benefits
• Employers get more productive workers than they
  pay for
• Wage paid is less than MPL

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Should we??

• Those who receive benefits from discrimination
  would argue NOthose who receive no benefits
  would argue YES