Question

We are all aware of the theoretical expected benefits of diversity. However, decisions are made by both expected marginal benefit of an actions compared to the expected marginal COSTS of actions, right?

What are the economic costs of diversity in the labor market?

Assume that you only speak Spanish and you are working with Bob, an English only speaking coworker, can you see any potential issues?

Comment!

Answer 1

Companies with a workplace inclusive of race, gender, and sexual orientation, to name a few, have a more solid footing in the marketplace than others. A diverse workforce can capture a greater share of the consumer market by effectively marketing to more consumers. Economic theory suggests that consumers will simply not spend money if they fundamentally disagree with the values of a company, making slow-to-change organizations nonexistent.

The same can be true for companies with employees who struggle to balance the costs of working for their organization against their personal lives. A diverse and inclusive workforce helps businesses avoid employee turnover. Hostile, non-inclusive work environments often force employees to leave, and the failure to retain qualified human capital results in avoidable turnover costs at the company's expense. Having a discrimination-free work environment helps businesses avoid these costs. Gains in employee engagement and retention alone make for a compelling case for diversity.

Hiring the best often means recruiting from a diverse pool of candidates. Investing in job candidates is similar to investing in the stock market—diversification is essential. When companies recruit from a diverse set of potential employees, they are more likely to hire the most talented and capable people in the labor market. In an increasingly competitive economy where talent is crucial to improving the bottom line, pre-employment screening cannot afford to be limiting in any way. Pooling from the largest and most diverse set of candidates is increasingly necessary for any organization's hiring system