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Labor Market Discrimination

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Title: Labor Market Discrimination


1
Labor Market Discrimination
  • Discrimination
  • By Employer, Customer, and Employee

2
Labor Market Discrimination
  • The definition of Labor Market Discrimination is
  • It exists when 2 equally qualified individuals
    are treated differently solely on the basis of
    their gender, race, ethnicity, disability, etc.

3
Feed Back
  • If such behavior is encountered it is only
    logical that those being affected by this labor
    market discrimination view the returns on human
    capital investment to be lower
  • Consequently they will have less incentive to
    invest in human capital

4
Feed Back
  • Furthermore, if this feed-back is widely spread
    such as to be known by younger individuals it
    could even lead to many dropping out of school or
    not pursuing higher education or advanced degrees

5
Subtle and Not so Subtle Barriers
  • In 1991 a jury found in favor of a woman
    executive at Texaco who was not promoted because
    of concerns that the promotion would have
    required her to travel to Latin America and South
    Africa where she might be raped or murdered.

6
Subtle and Not so Subtle Barriers
  • Woman working for GTE (now Verizon) California
    was promoted between 1977 and 1982 but was then
    told by her boss that no further promotions would
    be possible since "women were not suited for
    managerial positions as they lacked military
    training".

7
Glass Ceiling
  • In 1991 as part of the Civil Rights Act of 1991
    21 member committee was formed and chaired by the
    Labor secretary to determine if there was a
    glass ceiling in the upper management of
    American firms

8
Glass Ceiling
  • In terms of the findings of the commission
  • There is a glass ceiling and the derives from
    three sources
  • Societal/Non-Market
  • Business
  • Government

9
Glass Ceiling
  • In terms of those reasons under the control of
    business are
  • Outreach and recruitment practices that do not
    seek out or reach or recruit minorities and women
  • Corporate climates that alienate and isolate
    minorities and women
  • Pipeline Barriers that directly affect
    opportunity for advancement
  • Initial placement and clustering in staff jobs or
    in highly technical and professional jobs that
    are not on the career track to the top

10
Glass Ceiling
  • In terms of those reasons under the control of
    business are (continuation)
  • Lack of mentoring
  • Lack of management training
  • Lack of opportunities for career development,
    tailored training, and rotational job assignments
    that are on the revenue-producing side of the
    business

11
Glass Ceiling
  • In terms of those reasons under the control of
    business are (continuation)
  • Little or no access to critical develop mental
    assignments such as memberships on highly visible
    task forces and committees
  • Special or different standards for performance
    evaluation

12
Glass Ceiling
  • In terms of those reasons under the control of
    business are (continuation)
  • Biased rating and testing systems
  • Little or no access to informal net-works of
    communication
  • Counterproductive behavior and harassment by
    colleagues

13
Glass Ceiling
  • In terms of those reasons under the control of
    government are
  • Lack of vigorous, consistent monitoring and law
    enforcement
  • Weaknesses in the formulation and collection of
    employment-related data which makes it difficult
    to ascertain the status of groups at the
    managerial level and to disaggregate the data
  • Inadequate reporting and dissemination of
    information relevant to glass ceiling issues

14
Measuring Discrimination
  • However, measuring discrimination is not that
    simple
  • For instance,
  • Looking at only wages does not represent the true
    level of discrimination since it is likely that
    personal characteristics may account for some of
    that disparity

15
Measuring DiscriminationGender Wage Ratio
16
The Overcrowding Model
  • The labor market exhibits SEGREGATION
  • Consequently
  • Some jobs are male jobs other are female jobs
  • Some jobs are white jobs other are minority jobs

17
The Overcrowding Model
  • Assume that workers F and M (female and male) are
    perfect substitute for each other (i.e. they are
    homogenous)
  • Let the labor market be divided into two type of
    jobs. Job type F accounts for a quarter of the
    jobs available and job type M accounts for three
    quarters of the jobs available.

18
The Overcrowding Model
  • At first assume that both jobs on average pay the
    same wage.
  • Under this circumstances then we would have the
    following graph

19
The Overcrowding Model
S
S


w
D
D
L
L
F type Jobs
M type Jobs
20
The Overcrowding Model
  • Now assume that at least one of the following is
    possible
  • M workers can move easily between job types, yet
    F workers can not.
  • F workers can find F type jobs but can enter into
    M type jobs.
  • F workers prefer to work only F type jobs
  • Employers of M type jobs will not hire F workers
  • Some other reason that will concentrate F workers
    only to F type jobs

21
The Overcrowding Model
  • Based on the previous scenarios
  • Workers will begin to concentrate in F type jobs
  • There will be less available workers for M type
    jobs
  • In a sense, F type jobs become less important
    than M type jobs or
  • F type jobs become subservient to M type jobs

22
The Overcrowding Model
S
S


wM
w
wF
D
D
L
LF
LM
L
F type Jobs
M type Jobs
23
The Overcrowding Model
  • After the overcrowding in the F type jobs the
    result is that
  • The wages in the F type jobs are lower than the
    wages in the M type jobs (i.e. wMgtwF)
  • This time, F type jobs account now for more than
    a quarter of the jobs available (LF) and M type
    jobs accounts for less than three quarters of the
    jobs available (LM) .

24
Models of Labor Market Discrimination
  • Tastes for Discrimination
  • Gary Becker conceptualized discrimination as a
    personal prejudice
  • UU(?,W,B)
  • Where U is the utility of the employer
  • ? are the profits
  • W is the number of White workers
  • And B is the number of Black workers

25
Gary Becker
  • He then assumed that
  • ?U/?? gt 0
  • ?U/?W gt 0
  • ?U/?B lt 0
  • Assuming that both White and Black workers are
    homogenous

26
Gary Becker
  • The normal assumption that workers will be paid
  • MPL w
  • Will then become
  • MPL wW
  • MPL wB(1 d)
  • Where dgt0

27
Gary Becker
  • Hence, wW wB(1 d)
  • or wm wf(1 d)
  • Where dgt0
  • or
  • wf / wm 1/(1 d)

28
EMPLOYEE DISCRIMINATION COEFFICIENTS AND
WILLINGNESS TO HIRE
EMPLOYER d NET WAGE w X (1 dj), IF wf 10.00 MAXIMUM WAGE WILLING TO PAY WOMEN, IF wm 10.00
A 0 10.00 10.00
B 0.25 12.50 8.00
C 1 20.00 5.00
D 3 40.00 2.50
E 9 100.00 1.00
29
THE DEMAND FOR WOMEN WORKERS, EMPLOYERS A TO E
30
WOMENS WAGES WHEN EMPLOYERS DISCRIMINATION
COEFFICIENTS DIFFER
31
MARKET EQUILIBRIUM BEFORE AND AFTER ENTRY
1
32
Gary Becker
  • If the market was purely competitive the Becker
    discrimination model would not persist
  • However, it can persist if
  • If the firm has monopsony power
  • If supervisors are discriminating
  • If the employees are discriminating
  • If the costumers are discriminating

33
Statistical Discrimination
  • Similar in Context to Racial Profiling
  • Statistical Discrimination against the individual
  • If the preconceptions is based on accurate
    average observations
  • Then there are feed-back effects that increase
    the level of discrimination

34
Customer Discrimination
  • If Customers do not care who the employees are
    then the price will be the same whether the
    employee is male or female (white or black asian
    or hispanic)
  • thus
  • pf pm

35
Customer Discrimination
  • If on the other hand the customer prefers male
    employees than
  • pf(1 d) pm
  • If the customer prefers females than
  • pm(1 d) pf
  • The one characteristic of this model is that
    there is market reason for the discrimination to
    be eradicated.

36
Employee Discrimination
  • If m type worker does not like working alongside
    with f type worker than
  • wm wm(1 - d)
  • Thus, the gross wage of the m type worker would
    be lowered
  • If there are two types of jobs (1 and 2) and
    workers in 1 are only m type and workers in 2 are
    both m and f, then

37
Employee Discrimination
  • If there are two types of jobs (1 and 2) and
    workers of both type (m and f) in each job type
    but only m type workers in job type 2 do not care
    to work with f type workers,then
  • w1m w2m(1 - d)
  • such that
  • w1m lt w2m

38
Statistical Models
  • Statistical Discrimination
  • The employer may use generalized information
    about the employee and may due to that
    discriminate even based on what may be actual
    or perceived information such that wages differ

39
STATISTICAL DISCRIMINATION BASED ON DIFFERENT
DISTRIBUTIONS OF LABOR FORCE ATTACHMENT FOR MEN
AND WOMEN
40
STATISTICAL DISCRIMINATION WHEN THE DISTRIBUTION
BY GENDER ARE VERY SIMILAR
41
Human Capital Theory
  • Solomon Polachek discussed the idea of jobs that
    provide a smaller or larger penalty of leaving
    the workforce for some amount of time
  • If both jobs have the same level skill but one
    gives a larger penalty for exiting the job for a
    given period of time (occupation k)

42
THE HUMAN CAPITAL EXPLANATION OF OCCUPATIONAL
SEGREGATION BY GENDER-THE ROLE OF WAGE PENALTIES
TO PERIODS OF NONWORK
43
Institutional Models
  • These models assume that the discrimination
    occurs as part of the organizations internal
    structure.
  • It is based on the notion that firms management
    structure is build upon internal institutional
    arrangements that have either deliberate or
    unintentional discrimination repercussions

44
Institutional Models
  • There are primarily there Institutional models
    (which can work separately or in conjunction)
  • The internal Labor Market
  • Primary and Secondary Jobs
  • Feedback Effects

45
Internal Labor Market
  • The assumption is that certain firms will
    generally only promote from within.
  • If for whatever reason, entry level jobs
    attracted a certain type of worker
  • or if only certain type of worker will be
    retained
  • or if only certain type of worker will stay in
    that job
  • Then upper management will be composed of that
    type of worker that remains in that entry level
    position

46
Internal Labor Market
Wages ()
Firm-Specific Training
Job Ladder
47
Primary and Secondary Jobs
  • The assumption is that certain firms will
    generally only promote from a certain type of
    entry jobs.
  • In other words, some entry jobs will only allow
    the workers to reach certain heights within the
    organization

48
Internal Labor Market
Wages ()
Primary
Secondary
Job Ladder
49
Feedback Effects
  • Some times employees and employers may
    discriminate by bringing into the work place the
    behavior exhibited in the household
  • So gender roles played in the household labor
  • are parallel in the work labor

50
Feedback Effects
Gender Division of Labor in the family
Gender Differences in Labor Market outcomes
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