Isues in economics today 6th by guell chapter29

Chapter 29
The
Economics of
Race and Sex
Discrimination

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Chapter Outline
• The Economic Status of
Women and Minorities
• Definitions and Detection of
Discrimination
• Discrimination in Labor,
Consumption, and Lending
• Affirmative Action

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Economic Status of
Women
• Labor-force participation rate

– Labor force participation rate: the
percentage of people in a particular category
who are over 16 and working
– After adjusting the labor-force participation rate
to reflect the fact that as the U.S. population has
been ageing the real impact is
• Men
– have 58% more income than women,
– make 22% more in wages for full-time
employment,
– are 11% (5 percentage points) more likely to be
covered by pensions,
– are less likely to be in poverty.
• Bankruptcies of single women are increasing
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Economic Differences between Men
and Women
Men

Income from all sources
Average weekly wages
for full-time
employment

Mean net worth (singles)
Covered by a pension
Poverty rate
Percentage of singlefiling bankruptcies

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Women

$31,184

$20,957

$824

$669

$163,489

$136,351

75%

63%

11.4%

13.6%

46%

54%

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Ratio of Women’s Income to Men’s

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Difference in Earnings
by Occupation
Occupation

Women’s Earning’s as
a Percent of Men’s

Physicians

71%

Lawyers

77%

Managers/Executives

72%

Teachers (elementary)

91%

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Social and Economic Conditions for
African-Americans
• African-American family income is rising.
• The relative position of African-American
family income to white family income has
risen slowly.
• Rates of poverty and unemployment are
much higher for African-Americans than
whites.
• More African-American men are in prison

than in college.

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Median Family Income by
Race

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Black/White Median Family
Income

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What is Discrimination
• Disparate Treatment Discrimination
treating two otherwise equal people
differently on the basis of race
• Adverse Impact Discrimination
doing something that is not necessarily
discriminatory on its face but that impacts
some groups more negatively than others
• Rational or Statistical Discrimination
discrimination that is based on sound
statistical evidence and is consistent with
profit maximization

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Measuring and Detecting Discrimination
• Regression techniques
• Statistical methods which seek to determine
if the differences in treatment for whites
and blacks could have happened by random
chance.

• Auditing techniques
• Sending paid actors into a situation to
determine if people with identical economic
characteristics are treated differently based
on race.

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Labor Market Discrimination in
the Past
Chicago Tribune 1/3/1960
DOORMAN-WHITE age 30 to 45
married...Neat in appearance and at least
5'11" or taller in height

New York Times 1/3/1960
COOK, housekeeper, Negro preferred,
experience essential, prominent family,
permanent position, high salary

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Modeling Labor Market
Discrimination
Wage

SD

SND Wage

SND

SD

wwhite
wND
wblack
D

Labor market for jobs
only whites are allowed
do.
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D

Labor market for jobs that
blacks who work must do.

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Why Competition Would Eliminate
Discriminatory Pay
• Businesses that hired only whites at the
higher wage would have higher costs than
businesses that did not discriminate.
• Businesses that did not discriminate could
lower their prices and take the market
share of those firms that did discriminate.
• As this happened firms would see that
discrimination was not consistent with
maximizing profits and would stop
discriminating.

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Why Competition Would Not Necessarily
Eliminate Discrimination

• In industries where there is economic profit,
firm owners may continue to discriminate
and consider it a price they are willing to
pay so as to not employ blacks.
• In industries in which the customer chooses
which business to patronize based on race,
firms may be willing to discriminate because
their profit maximizing interest and
discrimination are consistent.

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Why Women Make Less than Men
• Pregnancy
• Loss of time in the field and intermittent
absence can put women at a economic
disadvantage. (Many times this difference in
treatment is against the law.)

• Stay-at-home Moms
• 98% of stay-at-home parents are women
leaving them out of the job market for
extended periods of time.

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Why Women Make Less than Men
(continued)
• Different Professions
• Teachers (82%)
• Nurses (92%)
• Social Workers (81%)
• Day Care workers (95%)
• Secretaries (97%)

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Why Women Make Less than Men
(continued)
• Flexible Employment
• Women, more than men, tend to choose
jobs that allow them to deal with her

children’s activities and illnesses.

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Sociology vs. Economics
• Economic Explanation for pay
differences
• People make choices and one of the
consequences of those choices is their
earning capacity.
• If women choose
• professions that do not pay well,
• to have and stay home with children
• jobs that allow them to deal with their children

• they will make less money.

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Sociology vs. Economics
(continued)

• Sociological Explanation for
pay differences
• Women are socialized

• to pick certain professions
• into being the parent to stay home
• into being the parent that
sacrifices career for family
• which causes them to be paid less.

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Consumption Market Discrimination
• Blacks pay more for cars.
• Blacks are shown fewer homes
and those homes are in already
integrated neighborhoods.
• Blacks are more likely to be
turned down for a mortgage
loan.

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Affirmative Action
• Affirmative Action : any
policy that is taken to speed
up the process of achieving
equality

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History of Affirmative Action
But freedom is not enough. You do not wipe
away the scars of centuries by saying: Now you
are free to go where you want, do as you desire,
and choose the leaders you please.You do not
take a person who, for years, has been hobbled
by chains and liberate him, bring him up to the
starting line of a race and then say, “You are free

to compete with all the others,” and still justly
believe that you have been completely fair.Thus
it is not enough to just open the gates of
opportunity. All our citizens must have the ability
to walk through those gates.
Lyndon Johnson, 1965 at Howard University

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More History
• Nixon’s Executive order 11246
mandated affirmative action in
contracts with the federal government.
• Set-asides were created so that 10% of
all federal highway contracts were “set
aside” for minority owned contractors.
• Various Supreme Court rulings have
limited the scope with which affirmative
action can be employed. It must now
meet a high standard of “strict scrutiny.”

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The Civil Rights Act of 1964 vs. the
California Civil Rights Initiative
• Civil Rights Act 1964
• The state shall not discriminate against any
individual or group on the basis of race, sex,
color, ethnicity, or national origin in the
operation of public employment, public
education, or public contracting.

• California Civil Rights Initiative
• The state shall not discriminate against, or
grant preferential treatment to, any
individual or group on the basis of race, sex,
color, ethnicity, or national origin in the
operation of public employment, public
education, or public contracting.

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