Question

What is labor market discrimination? What evidence do we have that it exists? What models describe the existence (or lack of existence) of labor market discrimination? What policies are available to combat this discrimination? Are these policies effective?

Answer 1

Labor market discrimination is a situation where workers are treated differently in terms of recruitment, salary and benefits from other workers because of their religion,race,gender and age.

There are several types of labor market discrimination, for example, take the case of sex differences in pay, employers may discriminate against women on the grounds of recruitment and promotion, they give preference to hire men for higher positions. This may be due to the fact that women will be more likely to leave work than men, once they got married and have children.
Another form of labor discrimination is found on the grounds paying wages, in some countries women are paid less than the male workers for identical jobs. This is known as wage discrimination and is the most prevalent one.

Models based on tastes describes the existence of labor market discrimination. In this model, discrimination will arise due to wage differences between men and women. Employers having discriminating nature, will hire women at a higher wage discount that compensates them for the dis-utility of employing them. There are some discriminatory male employees who demand a higher wage to work with women, thereby increasing men's relative wages. Also, in certain cases, there are discriminatory customers who hesitate to buy goods or services produced by women will bring women to a less productive state in terms of revenue collected, and in turn lowering women's relative wages.

The policies available to combat such discrimination are: Equal Pay Act(1970), Sex Discrimination Act (1975) and Employment Protection Act (1975).

The effectiveness of such policies is subject to much debate. It varies from country to country, one employer's mentality to another's and so on. There is discrimination based on the kind of jobs that the disadvantaged group have access to, the discriminated group are provided with repetitive and servant level jobs. The disadvantaged group does not have access to better paying jobs, in spite of their higher qualification. There is also customer discrimination, customers may choose to transact with only a particular kind or class of people. In spite of various anti-discrimination policies there are employers who are engaged locally with various discriminating practices in order to increase revenue and decrease costs.