Discrimination

Concessionaires interested in maximizing their profits will forgo prejudice, hire women, reduce their costs, and increase their profits.Unless government steps in to protect the bigots from competition, market conditions will end up forcing firms to choose between lower profits and hiring women.

An example of the effect of market penalties on prejudicial hiring occurred in South Africa in the early 1900s.In spite of penalties threatened by government and violence threatened by white workers, South African mine owners sought to increase profits by laying off high-priced white workers in order to hire lower-priced black workers. Higher-paying jobs were reserved for whites only after white workers successfully persuaded the government to place extreme restrictions on blacks’ ability to work (see apartheid).

Determined to equalize the representation of various protected groups in all spheres of social activity, they support government-sanctioned discrimination as long as it fosters their version of equality.

In the real world, distinguishing discrimination based on productivity from discrimination based on prejudice can be difficult.

Lacking information about individuals, the concessionaire bases his decision on the average characteristics of the groups with which he has had experience. “statistical discrimination.”

Some myths of income gap:
(1)When education is taken into account, the earnings gap between Asians and whites vanishes, and the black/white wage gap shrinks substantially because whites, on average, have more education than blacks.

(2)Adding geographic location shrinks the black/white wage gap further because a much larger proportion of black men live in the South, and southern wage levels tend to be lower for everyone.

(3)Adding individual achievement test scores, which are a measure of educational quality, erases the black/white wage gap for college graduates.

Conclusion: most of the disparity in earnings between blacks and whites in the labor market of the 1990s is due to differences in the skills they bring to the market, not to discrimination in the market.

The gap between male and female wages narrowed from about 40 percent in 1970 to about 24 percent in 2003. Claims that the 24 percent difference results from bigotry typically ignore the fact that as a group women are more likely to work part time, choose careers in lower-paying fields, work for government or a nonprofit, and have fewer years of labor market experience than men of the same age. These differences could all create a wage gap and may reflect choices made to accommodate family responsibilities.

Along with real or implied hiring quotas, the restrictions created under affirmative action blunt the market mechanisms that make discrimination expensive.