Slide 1Chapter OutlineYou Are HereSlide 4Economic Differences between Men and WomenRatio of Women’s Income to Men’sDifference in Earnings by OccupationSocial and Economic Conditions for African-AmericansMedian Family Income by RaceSlide 10What is DiscriminationMeasuring and Detecting DiscriminationLabor Market Discrimination in the PastModeling Labor Market DiscriminationWhy Competition Would Eliminate Discriminatory PayWhy Competition Would Not Necessarily Eliminate DiscriminationWhy Women Make Less than MenWhy Women Make Less than Men (continued)Slide 19Sociology vs. EconomicsSociology vs. Economics (continued)Consumption Market DiscriminationAffirmative ActionHistory of Affirmative ActionMore HistoryThe Civil Rights Act of 1964 vs. the California Civil Rights InitiativeGradations of Affirmative ActionThe University of Michigan CaseMyths of Affirmative Action Roland Fryer and Glenn LouryChapter 27The Economics of Race and Sex DiscriminationCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin27-2Chapter Outline•The Economic Status of Women and Minorities•Why Women Earn Less than Men •What Is Discrimination?•Modeling Discrimination•Affirmative Action27-3You Are Here27-4Economic Status of Women•Labor-force participation rate –Labor force participation rate: the percentage of people in a particular category who are over 16 and working –After adjusting the labor-force participation rate to reflect the fact that as the U.S. population has been ageing the real impact is •Men –have 61% more income than women, –make 25% more in wages for full-time employment, –are 11% (5 percentage points) more likely to be covered by pensions, –are less likely to be in poverty.•Bankruptcies of single women are increasing substantially.27-5Economic Differences between Men and WomenMen WomenIncome from all sources $32,265 $20,014Average weekly wages for full-time employment$798 $635Mean net worth (singles) $120,718 $102,718Covered by a pension 51% 46%Poverty rate 11.0% 13.6%Percentage of single-filing bankruptcies46% 54%27-6Ratio of Women’s Income to Men’s27-7Difference in Earnings by OccupationOccupation Women’s Earning’s as a Percent of Men’sPhysicians 86%Lawyers 80%Managers/Executives 71%Teachers (elementary) 88%27-8Social and Economic Conditions for African-Americans•African-American family income is rising.•The relative position of African-American family income to white family income has risen slowly.•Rates of poverty and unemployment are much higher for African-Americans than whites.•More African-American men are in prison than in college.27-9Median Family Income by Race27-10Black/White Median Family Income27-11What is Discrimination•Disparate Treatment Discrimination treating two otherwise equal people differently on the basis of race•Adverse Impact Discriminationdoing something that is not necessarily discriminatory on its face but that impacts some groups more negatively than others•Rational or Statistical Discriminationdiscrimination that is based on sound statistical evidence and is consistent with profit maximization27-12Measuring and Detecting Discrimination•Regression techniques–Statistical methods which seek to determine if the differences in treatment for whites and blacks could have happened by random chance.•Auditing techniques–Sending paid actors into a situation to determine if people with identical economic characteristics are treated differently based on race.27-13Labor Market Discrimination in the PastChicago Tribune 1/3/1960DOORMAN-WHITE age 30 to 45married...Neat in appearance and at least5'11" or taller in heightNew York Times 1/3/1960COOK, housekeeper, Negro preferred,experience essential, prominent family,permanent position, high salary27-14Modeling Labor Market DiscriminationLabor market for jobsonly whites are allowed do.WageSNDDwNDLabor market for jobs that blacks who work must do.WageSNDDSDSDwwhitewblack27-15Why Competition Would Eliminate Discriminatory Pay•Businesses that hired only whites at the higher wage would have higher costs than businesses that did not discriminate.•Businesses that did not discriminate could lower their prices and take the market share of those firms that did discriminate.•As this happened firms would see that discrimination was not consistent with maximizing profits and would stop discriminating.27-16Why Competition Would Not Necessarily Eliminate Discrimination•In industries where there is economic profit, firm owners may continue to discriminate and consider it a price they are willing to pay so as to not employ blacks.•In industries in which the customer chooses which business to patronize based on race, firms may be willing to discriminate because their profit maximizing interest and discrimination are consistent.27-17Why Women Make Less than Men•Pregnancy–Loss of time in the field and intermittent absence can put women at a economic disadvantage. (Many times this difference in treatment is against the law.)•Stay-at-home Moms–98% of stay-at-home parents are women leaving them out of the job market for extended periods of time.27-18Why Women Make Less than Men (continued)•Different Professions–Teachers (81%)–Nurses (90%)–Social Workers (68%)–Day Care workers (94%)–Secretaries (97%)27-19•Flexible Employment–Women, more than men, tend to choose jobs that allow them to deal with her children’s activities and illnesses.Why Women Make Less than Men (continued)27-20Sociology vs. Economics•Economic Explanation for pay differences–People make choices and one of the consequences of those choices is their earning capacity. –If women choose •professions that do not pay well, •to have and stay home with children •jobs that allow them to deal with their children –they will make less money.27-21Sociology vs. Economics(continued)•Sociological Explanation for pay differences–Women are socialized •to pick certain professions•into being the parent to stay home•into being the parent that sacrifices career for family–which causes them to be paid less.27-22Consumption Market Discrimination•Blacks pay more for cars.•Blacks are shown fewer homes and those homes are in already integrated neighborhoods.•Blacks are more likely to be turned down for a mortgage loan.27-23Affirmative Action•Affirmative Action : any policy that is taken to speed up the process of achieving equality27-24History of