Discrimination Doesn’t Make Dollars, or Sense

Discrimination isn’t just an insult to our most basic notions of fairness. It also costs us money, as some of our best and brightest players are, in essence, sidelined.

  • Share
  • Read Later

Discrimination isn’t just an insult to our most basic notions of fairness. It also costs us money, because those who are discriminated against are unable to make the best use of their talents. This not only hurts them, it hurts us all, as some of our best and brightest players are, in essence, sidelined, unable to make their full contributions to our economy.

Over the past half century, America has made considerable strides in reducing discrimination against women and racial minorities. But recent research suggests that we still have a long way to go. What’s even worse: Progress against discrimination – particularly racial discrimination — seems to have largely stalled out. And there are signs that other forms of discrimination are getting worse.

(MORE: Why Being a Quitter is a Good Sign for the Economy)

Before we get to the recent research, let’s look at the ways discrimination hurts us. Economists see discrimination as a form of economic inefficiency – a massive, systematic misallocation of human resources. Those in the discriminated-against groups can’t bring their full talents to the table, languishing in jobs that are in many ways “beneath them,” while less-talented members of more privileged groups take high-powered, high-paying jobs that are beyond their abilities, dragging down everyone with their relative incompetence.

Economists describe this, drily, in terms of “human capital frictions” that impose “a group-specific tax for each occupation on the inputs into human capital production,” as one recent paper puts it.

But the costs of discrimination are depicted in a much more memorable manner in the show Mad Men, particularly in its earlier seasons. The show, as many of you no doubt are aware, takes place in an ad agency in the 1960s that’s basically one big boys club, in which talented women are relegated to being support staff for ad men who are in some cases little more than amiable drunks. Much of the drama of the first couple of seasons centers around the rise of a new hire named Peggy Olsen, who starts working at the firm as a secretary and whose considerable talents as a writer are only noticed by the men of the firm essentially by accident. And it goes without saying that the boys club is also an all-white club.

Unfortunately, the world depicted in the show really did exist. As University of Chicago economist Chang-Tai Hsieh and three other colleagues at Chicago and Stanford note in a recent paper – this is the one I quoted earlier, and which you can get as a pdf here – when future Supreme Court Justice Sandra Day O’Connor graduated third in her class from Stanford Law School in 1952, “the only private sector job she could get immediately after graduating was as a legal secretary. … Such barriers might explain why white men dominated the legal profession at that time.”

(MORE: The Most Expensive Weapon Ever Built)

Such blatant discrimination is a thing of the past – due in large part to the civil and women’s rights movements and the changes in law (and in consciousness) that they helped to bring about. “[I]n 1960,” the researchers note, “94 percent of doctors and lawyers were white men. By 2008, the fraction was just 62 percent.”

This progress against discrimination – and towards a not only fairer but also more efficient economy — has paid off in a big way. As Hsieh and his colleagues figure it, “[c]hanges in occupational barriers facing blacks and women can explain 15 to 20 percent of aggregate wage growth between 1960 and 2008.” Most of this change, they say, has been “driven by the movement of women into high-skilled occupations.”

That’s the good news. The not-so good news is that this progress seems to have halted – and that another form of discrimination – based on class — seems to be getting worse. Research by sociologists Kevin Stainback and Donald Tomaskovic-Devey shows that ending discrimination is far more easily said than done. As economist Nancy Folbre summarized their findings recently in the New York Times:

From 1960 to 1972, many African-Americans, particularly men, moved out of segregated jobs. From 1972 to 1980, white women also began to gain access to new opportunities.

After Ronald Reagan was elected in 1980, however, the federal government backed off from activist equal-opportunity enforcement, and racial desegregation stalled. White women continued to make inroads based on increased access to professional and managerial occupations, including human resource departments of major corporations, where they became an internal force for change.

But women still earn less than men for the same work – and while the gap isn’t quite as large as advertised, it’s still very much real.

Continued discrimination, as Hsieh et al make clear, is a continued drag on the economy. Adding to the trouble? With economic inequality on the rise in the U.S., the four researchers note,

We suspect that barriers facing children from less affluent families and regions have worsened in the last few decades. If so, this could explain both the adverse trends in aggregate productivity and the fortunes of less-skilled Americans over the last decades.

If this is true, and it seems likely that it is, it could turn out to be an even more intractable problem than more obvious forms of discrimination.

6 comments
selnari
selnari

Thanks for a very interesting blog. What else may I get that kind of info written in such a perfect approach? I’ve a undertaking that I am simply now operating on, and I have been at the look out for such info.

Regards,

http://kiosprodukkecantikan.com

jeangarrod30
jeangarrod30

Great article. Discrimination also harms the non-hirers, since they choose the poorer candidate.

Affirmative action isn't the same as positive discrimination. Affirmative action encourages minorities to apply and may help them to present well. It doesn't mean candidates will get a job just because they're from a minority.

DennisAOK
DennisAOK

Rather than making assertions, please identify qualified applicants for jobs who were denied those postions because of their ethnicity. Today widespread legal discrimination does exist - in the form of affirmative action programs.

idknonsense
idknonsense

@DennisAOK Empirically tested data are not assertions, and neither is anecdotal evidence (although I am sure that there are plenty exemplifying discrimination and reverse).  Just because you do not want to accept a truth does not mean that it is not reality.

A study conducted by NBER fellows Bertrand and Mullainathan (2002) showed that job applicants with white-sounding names, such as Greg and Emily, are 50% more likely to receive callbacks for interviews than job applicants with black-sounding names, such as Lakisha and Jamal, although the competing white and black applicants had equal credentials on their CVs.

crotek
crotek

@idknonsense @DennisAOKYou know it just depend on the corporation on the callbacks, and it’s easier to identify the staff with their educational level of their parents that named them.