28 - EMPLOYMENT DISCRIMINATION AND THE EARNINGS OF BLACKS AND WOMEN

Abstract

This chapter discusses employment discrimination, which exists when a group is either paid less than other groups of similar productivity or is excluded from jobs available to other groups of similar productivity. Employment discrimination may stem from the views of employers, consumers, and/or fellow employees. Employment discrimination reduces the earnings of a group of people if they are paid less than members of the majority group for similar work. Exclusion of a group of people from some employment opportunities would reduce their earnings because they would be crowded into a smaller set of occupations. This crowding would reduce wage rates in these occupations. Economic theory suggests that in the absence of consumer or fellow employee discrimination, it is costly for an employer to discriminate. The employer could reduce his costs by substituting equally productive blacks for high-wage whites. Although employment discrimination may be a factor contributing to the earnings differential between women and men, the family specialization hypothesis suggests that women make a trade-off between earnings and working conditions complementary with their household responsibilities.