Discrimination • Becker: Economics of Discrimination • 3 potential sources: • 1) employers: most important source of discrimination • 2) employees: who willing to work alongside? • 3) customers: who willing to buy from or sit next to?
Employer Discrimination • Set up discussion: – Males are majority group (M); – Females are minority group (F). – M employers discriminate against F employees. • Discrimination coefficient = d = monetary equivalent of the prejudice. If actual hourly wage = w, then this discriminating employer views the wage “he” must pay as w + d. – Example: w = $5; d = $1, so employer views wage as $6, which includes monetary component plus a disutility component.
Employer Discrimination (cont. ) • Further details when d 0 and same for all firms: – Market will favor male employees. – F only get job if their wage (Wf+d) Wm; otherwise only men hired. • But what if different employers have different d? – Employer with no prejudice has d = 0; d for more discriminatory firms. – Then some employers will hire women. – These less discriminating employers have competitive advantage. – See Table 5.
Results of Discrimination • Result of discrimination: – In equilibrium, women earn less than they would earn in absence of discrimination. • LR: competition should d to 0. – Firms hiring women have lower labor costs then firms hiring just men, so firms with women have higher profits. – Discrimination is inconsistent with profit-maximization. • So why doesn’t discrimination disappear? D to 0 requires: – Enough potential firms with zero d. – Freedom of firm entry.
Professional Baseball as Example • Until 1947, every player in Major League Baseball was white: – All owners had such high d’s that zero African Americans were hired. – Also had discrimination on part of “customers” so more complicated. • Why persisted? – Industry lacked freedom of entry. • Negro Baseball League created. • In 1947, Major League Baseball race “color line” was broken: – Brooklyn Dodgers signed Jackie Robinson (BD exploited their low d). – Within 10 years—all teams integrated.
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