Labor Market DiscriminationLabor market discriminationFeedback effects of labor market discriminationPowerPoint PresentationSimilarities & Differences in Characteristics of Male & Female Full-Time WorkersThe Gender Wage GapFemale-Male Wage RatioSlide 8Slide 9Some Experimental StudiesSlide 11Other FindingsDiscrimination Models: How does discrimination operate?Becker’s Model of Taste DiscriminationEmployer Taste DiscriminationSlide 16Slide 17Slide 18Slide 19Slide 20Slide 21Slide 22Slide 23Slide 24Slide 25Employee Taste DiscriminationSlide 27Slide 28Slide 29Slide 30Slide 31Customer Taste DiscriminationSlide 33Statistical DiscriminationSlide 35Slide 36Slide 37Slide 38Feedback Effects of Statistical DiscriminationSlide 40OvercrowdingSlide 42Slide 43Slide 44Effect of Overcrowding on ProductivityInstitutional ModelsSlide 47Slide 48Government Policy & Labor Market DiscriminationEquityEfficiencyThe Equal Pay Act of 1963Civil Rights Act of 1964, Title VIIBona Fide Occupational Qualification (BFOQ)Disparate Treatment vs. Disparate ImpactExecutive Order 11246Eight Factors to be Considered by Federal Contractors in an Affirmative Action PlanSlide 58Comparable WorthJob EvaluationSlide 61Multiple Regression ApproachRegression – Simple Case: Y = a + b X Determine the values of a & b (the Y-intercept & the slope), so the line best fits the data.Slide 64Regression ApproachJob Evaluation – ProblemsWhat happens when women’s wages increase?Slide 68Labor Market DiscriminationLabor market discriminationtreating two individuals with equal qualifications differently for reasons unrelated to their productivityFeedback effects of labor market discriminationFaced with labor market discrimination that lowers the returns to human capital investments, women have less incentive to undertake them.Women’s economic outcomes are therefore adversely affected both directly and indirectly by labor market discrimination.Feedback EffectsGender Division of Labor in the FamilyGender Differences in Labor Market OutcomesSimilarities & Differences in Characteristics of Male & Female Full-Time WorkersMen and women have similar amounts of education.Men have more full-time experience and women have more part-time experience.Men are more likely to be in blue-collar jobs and to work in mining, construction, or durable manufacturing. Women are more likely to be in clerical or professional jobs and to work in the service industry.The Gender Wage GapThe percentage of the gender wage gap that is attributable to discrimination is usually measured as a residual after productivity factors are taken into consideration.About 30.8% of the gender gap in wages can be explained by differences in labor market experience.Differences in educational attainment only explain about 0.3% of the gender wage gap.About 1.8% of the gender wage gap is explained by differences in the racial composition of the male and female full-time labor force. (Part of the effect of race is due to poorer quality education and part is due to racial discrimination.)Even when differences in occupations and industries and differences in union/non-union status are taken into consideration, 38% of the gender wage gap remains unexplained. (Given some forms of gender discrimination, taking these factors into consideration is questionable.)Female-Male Wage RatioWomen earn on average 72% what men earn.If women had the same education, experience, and race as men, their wages would be 81% of men’s wages.Even if women had the same industrial and occupational distribution, and the same union coverage, their wages would still only be 88% of men’s wages.Measuring discrimination accurately is problematic, partly because it is not possible to take into consideration all the variables than can affect potential productivity. If, for example, men are more motivated, then discrimination will be overestimated due to omitted factors. If women have greater interpersonal skills, then discrimination would be underestimated.Another problem with measuring discrimination occurs when studies control for variables that themselves reflect the direct effects of discrimination. Then, the impact of discrimination on the gender wage gap is underestimated. For example, women may be excluded from some jobs due to discrimination in hiring or promotion. Therefore, controlling for occupation and industry will lead to underestimating discrimination.Some Experimental StudiesMale & female pseudo-job seekers were given similar resumes and sent to apply for jobs waiting on tables at the same set of high-priced Philadelphia restaurants.A female applicant’s probability of getting an interview was 40 percentage points lower than a male applicant’s, and her probability of getting an offer was 50 percentage points lower.The switch to blind auditions was found to explain one quarter of the increase in the percentage female in the top five symphony orchestras in the United States, from less than 5% of all musicians in 1970 to 25% in 2000.When a screen was used to conceal the identity of candidates at auditions for musicians for symphony orchestras, the probability that a woman would advance out of the preliminary rounds and be the winner in the final round increased substantially.Other Findings1. In a study of small firms, male employers paid higher wages and employed fewer women.2. Women’s chances of being hired and promoted were greater when there was a higher proportion of women at the level of the job being filled.Discrimination Models: How does discrimination operate?Becker’s Modelof Taste DiscriminationTastes for discrimination may exist on the part of1. Employers2. Employees3. CustomersEmployer Taste DiscriminationFirst, consider an employer with no taste for discrimination.The employer hires workers up to the point where the amount that the worker contributes to revenues is equal to the amount the worker adds to costs.That is where marginal revenue product (MRP) equals marginal resource cost (MRC).Marginal Resource Cost MRC = TC/L. Marginal Revenue ProductMRP = TR/LMarginal Revenue ProductMRP = TR/L = (TR/L)(Q/Q) = (TR/Q)(Q/L) = (MR)(MPP),where MR is the marginal revenue and MPP is the marginal physical product. For firms in perfectly competitive product markets, MR equals the product price P. So MRP would be (P)(MPP) which is the value of the marginal product VMP.For nondiscriminatory firms in perfectly competitive labor