Chapter 9. DiscriminationChapter 9. DiscriminationChapter 9. DiscriminationChapter 9. Discrimination

• Definition

• Types of Evidence

• Theories

• Combating

• Definition

• Types of Evidence

• Theories

• Combating

An economist’s definitionAn economist’s definitionAn economist’s definitionAn economist’s definition

• two people with same• productivity• preferences• but different group (race, sex, age)

• receive different outcomes in labor market • wages, hiring, promotion

• 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• prejudice is a cause of

discrimination• but discrimination can happen

without it

• NOT the same as prejudice• prejudice is a cause of

discrimination• but discrimination can happen

without it

• sex vs. race discrimination• w/ race there is segregation & a

total unwillingness to associate with that group• but men and women share

households

• sex vs. race discrimination• w/ race there is segregation & a

total unwillingness to associate with that group• but men and women share

households

Types of EvidenceTypes of EvidenceTypes of EvidenceTypes 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

• 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

• 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

• 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

• Statistical evidence• wage regressions• control for worker differences

(education, experience, etc.)• estimate unexplained wage

differences by sex for firm, industry

• Statistical evidence• wage regressions• control for worker differences

(education, experience, etc.)• estimate unexplained wage

differences by sex for firm, industry

• large sample shows pattern• but

measurement problems, and

sample selection bias

(does not include women not hired)

• large sample shows pattern• but

measurement problems, and

sample selection bias

(does not include women not hired)

Theories of DiscriminationTheories of DiscriminationTheories of DiscriminationTheories of Discrimination

• With competitive, free markets with rational firms, consumers• no discrimination should exist

• With competitive, free markets with rational firms, consumers• no discrimination should exist

• 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

• 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

• So, if discrimination exists then• firms, consumers, employees have

a preference for it• markets are not competitive• imperfect information about

prospective workers

• So, if discrimination exists then• firms, consumers, employees have

a preference for it• markets are not competitive• imperfect information about

prospective workers

• Any theory of discrimination should explain• lower wages for women• occupational segregation• long run persistence

• Any theory of discrimination should explain• lower wages for women• occupational segregation• long run persistence

A Preference for DiscriminationA Preference for DiscriminationA Preference for DiscriminationA Preference for Discrimination

• Gary Becker, PhD dissertation• Nobel Prize winner (1992)

• Discrimination can occur due to preferences of• employer• employees• customers

• Gary Becker, PhD dissertation• Nobel Prize winner (1992)

• Discrimination can occur due to preferences of• employer• employees• customers

Employer DiscriminationEmployer DiscriminationEmployer DiscriminationEmployer Discrimination

• employer wants to• maximize profits AND• engage in discrimination due to

his/her prejudice• willing to accept lower profits in

order to discriminate

• employer wants to• maximize profits AND• engage in discrimination due to

his/her prejudice• willing to accept lower profits in

order to discriminate

• 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

• 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

• long run?• non discriminating employers have

lower costs, drive discriminating employers out of business• UNLESS there is not a lot of

competition

• long run?• non discriminating employers have

lower costs, drive discriminating employers out of business• UNLESS there is not a lot of

competition

Employee DiscriminationEmployee DiscriminationEmployee DiscriminationEmployee 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

• 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

• Note: employers responding to employee prejudice, not their own• trying to avoid paying higher

wages• wanting to maximize productivity

• Note: employers responding to employee prejudice, not their own• trying to avoid paying higher

wages• wanting to maximize productivity

• employee discrimination would cause segregation

• lower wages for women?• if they appear to be less productive• (but really the prejudiced workers

are less productive)

• employee discrimination would cause segregation

• lower wages for women?• if they appear to be less productive• (but really the prejudiced workers

are less productive)

• long run?• this would persist as employee

attitudes change slowly over time• and if attitudes are widespread

• long run?• this would persist as employee

attitudes change slowly over time• and if attitudes are widespread

Customer DiscriminationCustomer DiscriminationCustomer DiscriminationCustomer Discrimination

• 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

• 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

• segregation• 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)

• segregation• 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)

• long run?• yes, since attitudes change slowly

• long run?• yes, since attitudes change slowly

Models w/out prejudiceModels w/out prejudiceModels w/out prejudiceModels w/out prejudice

• monopsony

• rent-seeking

• imperfect information

• monopsony

• rent-seeking

• imperfect information

Monopsony ModelMonopsony ModelMonopsony ModelMonopsony Model• = 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

• = 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

problemsproblemsproblemsproblems• 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

• 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

Rent-seeking modelsRent-seeking modelsRent-seeking modelsRent-seeking models

• 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

• 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

• more likely a model for racial discrimination• because men and women share

households,• but races are more segregated in

all areas

• more likely a model for racial discrimination• because men and women share

households,• but races are more segregated in

all areas

Imperfect Information ModelImperfect Information ModelImperfect Information ModelImperfect Information Model

• a.k.a. statistical discrimination

• employers have imperfect information on potential hires• do not know for certain their

individual productivity

• a.k.a. statistical discrimination

• employers have imperfect information on potential hires• do not know for certain their

individual productivity

• so increase their odds of a “good” hire by• taking average characteristics of

group (sex, race, etc.)• applying it to individual

• so increase their odds of a “good” hire by• taking average characteristics of

group (sex, race, etc.)• applying it to individual

exampleexampleexampleexample

• 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

• 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

• who is hurt?• women who are highly attached to

the labor force

• who benefits?• men who are not

• who is hurt?• women who are highly attached to

the labor force

• who benefits?• men who are not

Differences in average Differences in average characteristicscharacteristicsDifferences in average Differences in average characteristicscharacteristics

• may be perceived or actual

• some actual differences• women have more absences

(especially married women)• men more likely to have substance

abuse problem

• may be perceived or actual

• some actual differences• women have more absences

(especially married women)• men more likely to have substance

abuse problem

why isn’t this prejudice?why isn’t this prejudice?why isn’t this prejudice?why isn’t this prejudice?

• 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

• 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

the lawthe lawthe lawthe law

• 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.

• 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.

Indirect vs. direct discriminationIndirect vs. direct discriminationIndirect vs. direct discriminationIndirect vs. direct discrimination

• direct• discriminating among individuals

with same skills, preferences

• indirect• certain groups have fewer skills

because of discrimination

• direct• discriminating among individuals

with same skills, preferences

• indirect• certain groups have fewer skills

because of discrimination

Combating DiscriminationCombating DiscriminationCombating DiscriminationCombating Discrimination

• Government regulation

• Private sector alternatives• Government regulation

• Private sector alternatives

Government RegulationGovernment RegulationGovernment RegulationGovernment Regulation

• laws against discrimination

• pros:• improve efficiency, productivty• improve equity• works more quickly than changing

societal attitudes

• laws against discrimination

• pros:• improve efficiency, productivty• improve equity• works more quickly than changing

societal attitudes

• cons:• compliance costs• costs of litigation

• cons:• compliance costs• costs of litigation

Federal LawsFederal LawsFederal LawsFederal Laws

• Equal Pay Act of 1963

• The Civil Rights Act of 1964

• The ERA (not passed)

• Equal Pay Act of 1963

• The Civil Rights Act of 1964

• The ERA (not passed)

The Equal Pay Act of 1963The Equal Pay Act of 1963The Equal Pay Act of 1963The Equal Pay Act of 1963

• prohibits wage discrimination for women and men performing work for same employer of similar• skill• effort• responsibility• working conditions

• prohibits wage discrimination for women and men performing work for same employer of similar• skill• effort• responsibility• working conditions

• restrictive• how to define “similar”?

• covers almost all employers

• restrictive• how to define “similar”?

• covers almost all employers

• exceptions if wages differ by sex due to• seniority system• merit pay system• any factor other than sex

• exceptions if wages differ by sex due to• seniority system• merit pay system• any factor other than sex

The Civil Rights Act of 1964The Civil Rights Act of 1964The Civil Rights Act of 1964The Civil Rights Act of 1964

• created EEOC to enforce the law

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

• Title VII – employment

• Title IX -- education

• created EEOC to enforce the law

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

• Title VII – employment

• Title IX -- education

Title VIITitle VIITitle VIITitle VII

• hiring/firing/layoff

• compensation/benefits

• job title/promotions/tranfers

• ads/recruitment

• training/facilities

• disability leave

• all employers with > 15 workers

• hiring/firing/layoff

• compensation/benefits

• job title/promotions/tranfers

• ads/recruitment

• training/facilities

• disability leave

• all employers with > 15 workers

• exceptions• if sex, religion is legitimate job

requirement• “BFOQ” • race is not considered a BFOQ• EEOC vs. Hooters (1995)

• exceptions• if sex, religion is legitimate job

requirement• “BFOQ” • race is not considered a BFOQ• EEOC vs. Hooters (1995)

sexual harassmentsexual harassmentsexual harassmentsexual harassment

• illegal under title VII

• “quid pro quo”• sex-for-job, raise, promotion

• hostile work environment• behavior of coworkers make

interferes with job

• illegal under title VII

• “quid pro quo”• sex-for-job, raise, promotion

• hostile work environment• behavior of coworkers make

interferes with job

back to interview questionsback to interview questionsback to interview questionsback to interview questions

• questions about marital, family status• may violate title VII if used against

women and not against men

• questions about marital, family status• may violate title VII if used against

women and not against men

pregnancy based discriminationpregnancy based discriminationpregnancy based discriminationpregnancy based discrimination

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

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

Title IXTitle IXTitle IXTitle IX

• education programs receiving federal aid

• implications for sports programs

• education programs receiving federal aid

• implications for sports programs

Title IX & sportsTitle IX & sportsTitle IX & sportsTitle IX & sports

• 1972• < 30,000 female NCAA athletes

• 2000• > 150,000 NCAA female athletes

• 1972• < 30,000 female NCAA athletes

• 2000• > 150,000 NCAA female athletes

college sports programscollege sports programscollege sports programscollege sports programs

• schools comply by• % female athletes proportional to

enrollment• history of expanding sports

opportunities for females

• schools comply by• % female athletes proportional to

enrollment• history of expanding sports

opportunities for females

controversycontroversycontroversycontroversy

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

like men’s basketball & football

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

like men’s basketball & football

notenotenotenote

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

for noncompliance with Title IX

Civil Rights ActCivil Rights ActCivil Rights ActCivil Rights Act

• does not prohibit discrimination based on• sexual orientation• marital status• family status

• but many states and municipalities do

• does not prohibit discrimination based on• sexual orientation• marital status• family status

• but many states and municipalities do

The Equal Rights AmendmentThe Equal Rights AmendmentThe Equal Rights AmendmentThe Equal Rights Amendment

• 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.

• 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.

ERAERAERAERA

• 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)

• 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)

why is it necessary?why is it necessary?why is it necessary?why is it necessary?

• Civil Rights Act, Equal Pay Act• they are laws by congress• could easily be changed

• Civil Rights Act, Equal Pay Act• they are laws by congress• could easily be changed

• 14th 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

• 14th 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

Why do people oppose it?Why do people oppose it?Why do people oppose it?Why do people oppose it?

• would it lead to taxpayer-funded abortion?

• unisex bathrooms?

• female draft?

• homosexual marriage?

• alimony & child support?

• would it lead to taxpayer-funded abortion?

• unisex bathrooms?

• female draft?

• homosexual marriage?

• alimony & child support?

• 18 states have ERA as part of their state Constitution• 18 states have ERA as part of their

state Constitution

new life for the ERA?new life for the ERA?new life for the ERA?new life for the ERA?

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

• All 35 previous ratifications would hold• need 3 more states

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

• All 35 previous ratifications would hold• need 3 more states

Private MethodsPrivate MethodsPrivate MethodsPrivate Methods

• Unions

• Networking

• Arbitration

• Unions

• Networking

• Arbitration

UnionsUnionsUnionsUnions

• can help eliminate inequities with• job classifications• performance standards• pay scales• grievance procedures

• can help eliminate inequities with• job classifications• performance standards• pay scales• grievance procedures

• employee-to-employee harassment?• tougher for a union to handle• whose side to take?

• employee-to-employee harassment?• tougher for a union to handle• whose side to take?

EEOC v. Mitsubishi Motors, 1996EEOC v. Mitsubishi Motors, 1996EEOC v. Mitsubishi Motors, 1996EEOC v. Mitsubishi Motors, 1996

• 29 women (later 300), UAW members

• charged sexual harassment on the assembly line

• multi-million dollar settlement

• 29 women (later 300), UAW members

• charged sexual harassment on the assembly line

• multi-million dollar settlement

NetworkingNetworkingNetworkingNetworking

• women’s groups designed to promote women in business

• promoting mentors for women

• equivalent of rent-seeking behavior for women?

• women’s groups designed to promote women in business

• promoting mentors for women

• equivalent of rent-seeking behavior for women?

ArbitrationArbitrationArbitrationArbitration

• 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

• 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

1996 Smith Barney1996 Smith Barney1996 Smith Barney1996 Smith Barney

• class action lawsuit to get around arbitration requirement

• alleged hostile work environment• “Boom-boom room”

• grew to over 2000 women in brokerage industry

• class action lawsuit to get around arbitration requirement

• alleged hostile work environment• “Boom-boom room”

• grew to over 2000 women in brokerage industry

Chapters 6-9, revisitedChapters 6-9, revisitedChapters 6-9, revisitedChapters 6-9, revisited

• what does the gender earnings gap mean?

• explain up to 60% controlling for• occupation• human capital• job characteristics

• what does the gender earnings gap mean?

• explain up to 60% controlling for• occupation• human capital• job characteristics

• the remainder?• measurement error• direct discrimination

• the remainder?• measurement error• direct discrimination

The policy issueThe policy issueThe policy issueThe policy issue

• is the gap about discrimination?• both indirect and direct

• or is it about women making different choices?• different values/preferences?• different constraints?

• is the gap about discrimination?• both indirect and direct

• or is it about women making different choices?• different values/preferences?• different constraints?

Vicky LovellVicky LovellInstitute for Women’s Policy ResearchInstitute for Women’s Policy ResearchVicky LovellVicky LovellInstitute for Women’s Policy ResearchInstitute 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?....

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

“… 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…”

“… 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…”

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

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

SocietySocietySocietySociety

• 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

• 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