Question

Jane earns more money than Janet, despite the fact that they have the exact same level of human capital and are very similar workers, and work at the exact same job. In fact, the only noticeable difference between them is that Jane grew up in Gardinia and Janet grew up in Trackton.

You speak to their employer, who says "Most of my customers are from Gardinia, and there's an intense sports rivalry there, so a lot of them don't want to be helped by someone from Trackton. So I offered Janet a lower wage than Jane."

This is an example of wage differentials on the basis of...

Select one:

a. human capital

b. signaling

c. taste-based discrimination

d. statistical discrimination

e. unions

f. compensating differentials

Answer 1

Jane earns more money than Janet, despite the fact that they have the exact same level of human capital and are very similar workers, and work at the exact same job. In fact, the only noticeable difference between them is that Jane grew up in Gardinia and Janet grew up in Trackton. The only reason why Janet is offered a lower wage than Jane is that customers are unwilling to take service from Janet only because of her place of birth. So the employer offered her less wage.

This is an example of wage differentials on the basis of taste-based discrimination, because here the only cause of the wage differentials is the taste or preference of the customers which lead to the change in taste and preference of the employer and hence leads to wage differential.

Taste-based discrimination is an economic model of labor market discrimination which argues that employers' prejudice or dislikes in an organisational culture rooted in prohibited grounds can have negative results in hiring minority workers, meaning that they can be said to have a taste for discriminations.