Economic Issues & Policy - Jacqueline Murray Brux Discrimination Our nation is moving toward two societies, one black, one white—separate and unequal. —Report of the President’s National Advisory Commission on civil disorders (The Kerner Commission), March 1, © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. PowerPoint slides prepared by: Andreea Chiritescu Eastern Illinois University

Discrimintion Dr. Martin Luther King, Jr. “I Have a Dream” speech August 1963 March on Washington for Civil Rights President Lyndon Johnson’ Kerner Commission Shocking 1968 report Blaming racism and discrimination, poverty, and unemployment for the riots that had besieged the nation’s central cities during the 1960s © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 2

3 Table 5-1: Resident population, percent of total population, by race and Hispanic origin, July 2000 & July 2008

The Diversity of the U.S. Population Hispanics Nearly tie with African-Americans as the largest minority group 2008, 15.4% of population (47 million): 62% of Mexican origin; 9% Puerto Rican; 3% Cuban; Central and South America High concentrations of Hispanic people: Texas, California, New Mexico, Arizona, New York, Florida © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 4

The Diversity of the U.S. Population African-Americans Largest racial minority 13% of population, 39 million High concentrations of African-Americans: District of Columbia (57%) Mississippi (37%), Louisiana (33%) Georgia (29%), Maryland (29%) South Carolina (29%) © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 5

The Diversity of the U.S. Population Asian-Americans 4.6% of population; 14 million Chinese (23%), Asian-Indian (19% of all Asians), Filipino (Philippines, 18%), Vietnamese (11%) Korean (10%), Japanese (7%) High concentrations of Asian-Americans Hawaii (42%), California (12%) New Jersey (7%), New York (7%) Washington (7%), Nevada (6%) © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 6

The Diversity of the U.S. Population Native Americans 1% of population; 3 million Tribal groupings The Cherokees (13% of Native Americans), The Navajos (12%), The Chippewas (5%) The Sioux (5%) Hi concentrations of Native Americans Alaska (14%), New Mexico (10%) South Dakota (8%), Oklahoma (7%) Montana (6%), North Dakota (5%), Arizona (5%) © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 7

What Is a Minority? Minority Group with less access to positions of power, prestige, and status in society Prejudice Prejudgment on the basis of stereotypes and hearsay, plus the refusal to consider evidence that conflicts with the prejudgment Discrimination Action that treats individuals differently on the basis of some arbitrary characteristic © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 8

9 Figure 5-1:Population of Racial Groups as a Share of the Total Population, 2008 a a Hispanics are not a racial group

Earnings Differentials and Discrimination Earnings Money received from labor market activities Income Money received from all sources Earnings differentials Full-time working women Earn less than full-time working men © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 10

Earnings Differentials and Discrimination Earnings differentials Fulltime working African-Americans and Hispanics Earn less than full-time working white Caucasians Labor market discrimination When like workers are treated unequally Based on some arbitrary characteristic Like means “equally productive” © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 11

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 12 Table 5-2: Median weekly earnings of full-time workers by, age 16 or over, by race, Hispanic origin, and gender, 2008

Earnings Differentials and Discrimination Wage discrimination Paying equally productive workers different wages on the basis of some arbitrary characteristic Employment discrimination Not hiring certain workers on the basis of some arbitrary characteristic © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 13

Earnings Differentials and Discrimination Occupational discrimination Not hiring some groups of workers for particular jobs, resulting, for example, in men’s jobs and women’s jobs or minority jobs and white jobs Human capital discrimination Anything that prevents certain groups from acquiring the level or quality of education or training to which other groups have access © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 14

Earnings and Education Women with a bachelor’s degree Earn on average only 74% of what men with a bachelor’s degree Women with a master’s degree Earn only 73% of the earnings of men with a master’s degree Women’s earnings From 70% to 75% of men’s earnings © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 16 Table 5-3: Median annual earnings by highest educational attainment of full-time, year-round workers, age 25 and over, by gender, 2007

Earnings and Education African-Americans, Asian-Americans, and Hispanics Earn a smaller share than white Caucasians Asian-Americans with an advanced degree Earn 107% of the earnings of whites © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 17

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 18 Table 5-4: Median annual earnings of full-time workers, age 25 and over for racial and ethnic minorities as a share of white Caucasians, by highest educational attainment, 2007 a

Earnings and Unemployment Lower earnings Frequent periods of involuntary unemployment Unemployed Actively looking for work Unemployment rate Number of unemployed people as a percentage of the number of people who are either working or actively seeking employment © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 19

Earnings and Unemployment Unemployment rates for men Higher than for women Asian-Americans Lowest unemployment rates among all races Hispanics Higher rates of unemployment African-Americans Higher rates of unemployment than do whites © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 20

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 21 Table 5-5: Unemployment rates by gender, race, and Hispanic origin, 2008

Earnings and Experience Earnings of Full-time year-round working women and men With identical levels of education Likely that women will on average have less experience in the labor market Take time off from work to care for infants and young children May receive lower earnings than men © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 22

Some Explanations of Discrimination Statistical discrimination Judging an individual on the average characteristics of his or her group Employment discrimination Belief: women are more likely To stay home with sick children To quit their jobs because their spouses are being transferred © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 23

Some Explanations of Discrimination Occupational crowding Crowding some groups of workers into a limited number of jobs Some occupations Dominated by men – more highly paid Dominated by women © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 24

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 25 Figure 5-2: Labor markets with and without occupational crowding If the 12 million female workers are crowded into Occupation 3, while the 12 million male workers share Occupations 1 and 2, women will earn lower wages ($7) than men ($10).

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 26 Figure 5-2: Labor markets with and without occupational crowding If occupational segregation is eliminated, the 24 million workers will be randomly distributed among the three occupations and they will earn the same wage ($9).

Effects of Labor Market Discrimination Effects on the Economy National output will be reduced by discrimination Because we are not using our labor force in the most efficient way possible © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 27

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 28 Figure 5-3: Production possibilities curve with discrimination With discrimination, labor is not utilized as efficiently as possible, and the nation’s output of bread and roses is at point X, below the production possibilities curve

Effects of Labor Market Discrimination Effects on Individuals Inferior position with respect to other aspects of their lives Higher poverty rates Restricted home ownership housing Segregation Less access to adequate health care Fewer opportunities for quality education © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 29

Problems in Measuring Labor Market Discrimination Rational Individual Choice Women choosing to work fewer hours than men Primary caregivers of children Chief housekeepers Women choose the so-called women’s occupations Complementary to their primary roles as mothers and wives © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 30

Problems in Measuring Labor Market Discrimination Rational Individual Choice Women may choose to take the “mommy track” Avoiding the high level promotions that take too much time away from family Decision not to finish high school Low-wage, dead-end jobs Unfortunate past choices © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 31

Policies to Eliminate Labor Market Discrimination The Equal Pay Act of 1963 Illegal for an employer to pay men and women different wage rates for doing the same job The Civil Rights Act of 1964 Discriminatory compensation – illegal Forbids discrimination Hiring, promoting, and firing Race, gender, color, religion, national origin Equal Employment Opportunity Commission © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 32

Affirmative Action in Employment Affirmative action Efforts to provide equal opportunities in terms of employment and education to underrepresented groups of people Quotas Rigid numerical requirements in hiring Tokenism Hiring minorities to comply with law, not for their abilities © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 33

Affirmative Action in Employment Reverse discrimination Discrimination against white males Some economists argue: Discriminating employers Competitive disadvantage compared with other employers Have higher costs than non-discriminators Driven from the market © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 34

Affirmative Action in Employment Some economists argue: Direct intervention in labor markets: Unnecessary In favor of disadvantaged groups actually hurts these groups Native Americans have the longest relationship (as a ward of the state) with the federal government Consistently at the very bottom of our economic ladder © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 35

Affirmative Action in Employment Some economists argue: Minorities such as Japanese- Americans Not favored by the government Succeeded far better than the recipients of the government’s largesse Other economists argue: Labor markets Have not solved the problem of discrimination © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 36

Affirmative Action in Employment Other economists argue: Do not believe that discriminators are at a cost disadvantage Statistical discrimination probably results in short-run cost savings We need programs such as affirmative action Programs directed at the supply side of labor market © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 37

Policies to Eliminate Labor Market Discrimination Indirect Labor Market Policies Improving educational opportunities for racial and ethnic minorities and women Subsidized day care programs for low-income workers with families Improve mass transit (public transportation) Maintain a healthy economy Appropriate fiscal and monetary policies Welfare reform © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 38

Policies to Eliminate Labor Market Discrimination Other Forms of Discrimination Residential and educational segregation Low-income residential areas Poorer-quality schools Racially segregated central-city neighborhoods Lead to Lower-wage-paying jobs Higher unemployment rates Unequal opportunities for minorities © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 39

Policies to Eliminate Labor Market Discrimination Residential segregation Institutionalizes discrimination Nonminority populations - fled to the suburbs Minority residents - often remain trapped in central cities Metropolitan-wide desegregation plans Much higher levels of integration Blocked desegregation Prevented effective desegregation © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 40

Policies to Eliminate Labor Market Discrimination Educational Segregation Large-scale school desegregation Improve objective measures of achievement such as test scores Increase the probability of college attendance Positively affects type of college, college major, and types of employment as an adult Extremely strong pattern of continued educational segregation for African-Americans © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 41

Policies to Eliminate Labor Market Discrimination Educational Segregation Increasing segregation for Hispanics Minority high schools - large numbers of low- income students Strong positive correlations between: Predominantly minority schools High proportions of poor children Low educational achievement © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 42

Affirmative Action in Education President George W. Bush University of Michigan gives unconstitutional preferences to African-American, Hispanic, and Native American applicants “At the core, the Michigan policies amount to a quota system that unfairly rewards or penalizes prospective students based solely on their race” © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 43

Affirmative Action in Education 2003, U.S. Supreme Court University of Michigan cases Graduate admissions (the law school) Race can be used as a factor in university admission decisions, and that indeed “a diverse student body has its own benefits” Undergraduate admissions A more rigid system relying on specific points given to students based on their race and ethnicity is not constitutional © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 44

Conservative versus Liberal Liberal economists Government programs Have done some good Have not completely solved the problem of discrimination Continue affirmative action programs Great value in diversity of the workplace and educational institutions Conservative economists Disparities between the earnings of minorities and whites and between those of women and men are the result of rational choice, not discrimination Gaps - have narrowed somewhat since the 1960s. Oppose government intervention in markets © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 45

Conservative versus Liberal Liberal economists Committed to overcoming the results of decades of unequal treatment of minorities Propose alternatives to property tax financing of public education Conservative economists Affirmative action- misguided and a source of great inefficiency Changing social values and the passage of antidiscrimination laws have alleviated the problem of discrimination and that affirmative action is no longer needed © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 46