1 LIR 809 DISCRIMINATION IN THE LABOR MARKET LIR 809 DEFINITION OF LABOR MARKET DISCRIMINATION The valuation of personal characteristics of workers that are unrelated to productivity 3 Types Pure discrimination Occupational Segregation Statistical Discrimination LIR 809 2003 Median Weekly Wages for Full-Time Workers 2003 Median Weekly Earnings White Males White Females Black Males Black Females Hispanic Males Hispanic Females Asian Males Asian Females $715 (100%) $567 (79.3%) $555 (77.6%) $491 (68.7%) $464 (64.9%) $410 (57.3%) $772 (107.9%) $598 (83.6%) BLS: ftp://ftp.bls.gov/pub/special.requests/lf/aat37.txt
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LIR 809
DISCRIMINATION IN THE LABOR MARKET
LIR 809
DEFINITION OF LABOR MARKET DISCRIMINATION
The valuation of personal characteristics of workers that are unrelated to productivity3 Types
Pure discriminationOccupational SegregationStatistical Discrimination
Quality of educationOcc. segregationCWD to avoid OT for family needsQuality of exp.AbilityLanguage
LIR 809
THEORY 1: TASTE FOR DISCRIMINATION (Pure Discrimination)
Basis for discrimination: Personal PrejudiceDiscrimination coefficient: Measure of willingness to pay (a discrimination premium)
Assume MPf= MPM = MPDiscriminating employer sees female productivity as lower and pays less:
Wm = MP = Wf
but discriminating employer believes Wf = MP - dSo Wf = Wm - d
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LIR 809
PUZZLE: WHY DOESN’T THE MKT. DRIVE DISCRIMINATORY PRODUCERS
OUT OF BUSINESS?
Discriminating ER hires Ed EEs at Wf while profit-max ER hires EfEEs at Wf. Since ER revenues= area under curve, see discriminating ER is giving up profits to discriminate.
Wf
Wf + d
EdEf
MPL
d
fg
0
P
LIR 809
CUSTOMER DISCRIMINATION
Customers/clients may not want to be served by W&M
W&M therefore lower value to firm if affect customer preference
Empirical expectation: Lower wages for W&M in jobs that are more visible
Some support for females, but almost no support for minority males.
LIR 809
CO-WORKER DISCRIMINATION
Co-worker may need to be paid premium to work with/for W&MEqually productive WM thus paid differentially due to work with W&MBasis for Occupational segregation (next theory):
Rather than pay premium, crowd W&M into different occupation
PUZZLE: Since all WMs do not discriminate, why does occ. seg. continue?
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Theory 2: Occupational Segregation
Definition:Different distributions of men and women or different racial or ethnic groups across occupation, jobs, and places of work (Padavic and Reskin, 2002).
LIR 809
Job/Establishment LevelConcentration by gender, race of ethnicity at establishment level or narrow job type
Somewhat difficult to measureExample of job-level: Female investment bankers assigned to non-profit sector & Male to M&AExample of establishment: Male vs. female wait staff
LIR 809
3 Models of Occupational Segregation
1) Crowding Model2) Queuing Theory3) Ideology of Separate
Spheres/Pollution Theory
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LIR 809
Crowding Model: Increases Male Wage
PlumbersSecretaries
DLDL
Pre-Segregation
W - No segregation
Wages - Plumbers
Wages -Secretaries
LIR 809
Queuing Theory
Dual Queues: LaborJob queues
Match: Employers hire from top of labor queue;Workers choose from top of job queueBest jobs to preferred workers
income, social standing, autonomy, job security, working conditions, interesting work, advancement.
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LIR 809
Structural Properties of Queues
1) Ordering of their elements (how jobs, groups of workers)
2) Shape (relative sizes of various elements)
Number of prospective workers in each subgroup sets shape of the labor queue.
3) Intensity of rankers' preferencesCan see differing preference intensities
leading to unexpected location of high/low queue workers in low/high jobs, e.g., practicing medicine in rural areas.
LIR 809
Any of these can change:
How workers or employers rank jobs/employees
New information about true worker productivityJob content may change
Intensity of preferencesEEO; Change in Male Aversion; Cohort
Composition of queuesDiffering labor supply, Different jobs in economy
LIR 809
Ideology of Separate Spheres/Pollution
Ideology of Separate SpheresSeparated men’s work from women’s workDistinction resting eventually on paid versus non-paidReinforced by Images about responsibility to support family vs. responsibility to raise family
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LIR 809
Ideology of Separate Spheres/Pollution (2)
PollutionPrestige of occupation is polluted if individuals who belong to a group with lower average productivity enters the occupation. Even if the new entrant is qualified, she may be seen as qualified outside of the occupation and thus lower its prestige, i.e., polluting it
LIR 809
Changes in Job Characteristics affecting Occupational Prestige
Decreases in share of full-time, year round jobs.De-skillingSome subjected to new regulations that eroded earningsSome changes with rise of ownership patterns
LIR 809
Mechanisms for sorting
Social expectations: vicious circleEmployer decisions
StereotypingHR practices
Self-sortingSocializationHuman capital investment decisions
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Trends:Index of Segregation
Tells us what percent of women or men would have to change occupations for distribution to be equal.= (.5)*Σ|mit – fit|0 = complete integration; 100 = complete segregationIndex2000 = 52.9 Index1980 = 59.2Index1970 = 67.9
LIR 809
Patterns in decline of Index
Women moving into Male-dominated Occupations
Potential for re-segregationMales moving into Female-dominated
Little of this sort of movementChange in job structure
Fewer male-dominated or female dominated jobs in economy
LIR 809
WHY EARNINGS CHANGED
Some deskillingChanges in Fair Labor StandardsChange in ownership patternsChange in job security, occupational prestige, & mobility opportunities
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WHERE ARE WE NOW?3 Possible forms of occupational desegregation
Genuine IntegrationGhettoizationResegregation
Difficult to know – see wage gap increasing with age, but can not yet separate cohort effect from discrimination
LIR 809
THEORY 3: STATISTICAL DISCRIMINATION
Discrimination as solving an information problem
ERs not risk seekersERs have to guess re: potential productivity of job applicantsERs hire using information thought to be correlated with productivity
LIR 809
STATISTICAL DISCRIMINATION, CONT.Conditions when stat. disc. arises:
If group data has relationship to productive capacity, on averageNo differences on average in compensation between groups who are on average equally productive
Problems with statistical disc.Tests don’t equally predict all groupsOn average correlations ne individual
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LIR 809
Income Distribution
LIR 809
INCOME DISTRIBUTION SINCE 1970
$253,23921.4%
$147,07849.8%
$43,58814.8%
$99963.4%2003
$269,60922.1%
$151,96949.8%
$45,11314.9%
$10,8503.6%2000
$226,34021%
$131,14648.7%
$40,88115.2%
$10,0093.7%1995
$189,37618.6%
$118,92046.6%
$40,64415.9%
$98193.9%1990
$161,33717%
$10735745.3%
$3870116.3%
$94524%1985
$14085815.8%
$9737643.7%
$3765216.9%
$94794.3%1980
$132,41315.9$
$8982943.9%
$3552017.1%
$91434.4%1975
$136,94716.6%
$88,96143.3%
$35,64317.4%
$83244.1%1970
TOP 5%HIGHEST 20%MIDDLE 20%LOWEST 20%YEAR
Top number: Mean Household Income (in 2003 dollars); Bottom number: total share of national income
OURCE: USNITED STATES CENSUS BUREAU: http://www.census.gov/hhes/income/histinc/f02.html, http://www.census.gov/hhes/income/histinc/f03.html
LIR 809
Components of Income Differences
EarningsLabor force participationUnemployment historyEarnings rate
Transfer paymentsNon-cash programs (insurances)Unearned incomeOther assets
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LIR 809
Household net worth by race, 1995
LIR 809
Common measures of Income/Earnings DistributionDispersion of Earnings
VarianceCoefficient of Variation (less
sensitive to change in unit size)Comparison of top and bottom percentiles: Ratio of incomes (best used to compare over time)Lorenz CurveGini Coefficient
LIR 809
Dispersion as Measure of Income Distribution
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LIR 809
Lorenz Curve & Gini Coefficient
Lorenz curve:Plots percentage of population against percentage of income heldIf income distribution perfectly equal,
Lorenz curve would be diagonal line bisecting two axes
Gini coefficient: Area between Lorenz curve and diagonal line
If income distribution perfectly equal, Gini coefficient = 0
LIR 809
Changes in income distribution Income distribution becoming less equal
Recent historyFairly stable income distribution in
1970s, but rapid increase in income inequality during 1980s and 1990s.Smaller share to both the bottom and middle of income distribution
LIR 809
1313
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Figure 3: The top percentile income share in the United States,1913-2000
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
S o u rc e : Au t h o rs ' c o m p u t a t i o n s b a s e d o n i n c o m e t a x re t u r n s , t a b l e A 1, c o l . P 9 9 - 10 0 )
Shar
e (in
%),
excl
udin
g ca
pita
l gai
ns
LIR 809
Contact the Housing and Household Economic Statistics Division at 301-763-3242or mail to [email protected] for further information.
Go to Income InequalityGo to Income Statistics Created: August 3, 2000Last Revised: August 22, 2002
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LIR 809
Figure 21: The Top 0.1% Income Share in France, the United States and the United Kingdom
0%1%2%3%4%5%6%7%8%9%
10%11%12%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
S o u rc e : A u t h o rs ' c o m p u t a t i o n s b a s e d o n i n c o m e t a x re t u r n s ( Fra n c e : s e e P i k e t t y ( 2 0 0 1b , t a b l e A 1, c o l . P 9 9 - 10 0 ) ; U . S . : s e e t h i s p a p e r , t a b l e A 1, c o l . P 9 9 - 10 0 ) ; U . K. S e e A t k i n s o n ( 2 0 0 1) .
Changing returns to human capitalIncreasing returns to higher ed.Increasing difference in returns to
experience between workers with college degree vs. high school graduates
LIR 809
Reasons for Inequality, cont.No evidence for a labor supply explanation (I.e., lots of low earning new entrants to workforce)No strong evidence for either a union or minimum wage explanation (?)Possible demand explanation
Changes in industry mix: decline in high pay/semi-skilled jobsLarge increase in managerial & professional
