Does the Race Affect Allocation and Distribution of Resources - Essay Example

Consumers purchase fewer or less specific products or items, so the grocer must increase the prices to recover the profits.   Often there are specific products that are unavailable in minority neighborhood stores.     

One basic premise of The Efficiency Wage model is that the “law of one price is repealed. Wages and Workers' productivity may differ between and across industries” (Romaguera 13). Even in the same chain stores, prices are often lower in those located near prime real estate, where affluent citizens live, particularly where pricing is left for individual store owners and managers to decide.  First, we must assume that many minorities live in less affluent neighborhoods.  Next, we must assume they purchase fewer products and have less income to spend on products.  This is particularly true of higher priced items, such as produce in grocery stores or hardwood lumber from the local Home Depot.  These are not illogical assumptions. There is less demand and there is less income available for resources. Consider the local BP stations in two very different neighborhoods.  Those living in the less affluent neighborhood are more likely to have jobs closer to home, thus consuming less fuel than those in the more affluent neighborhood.  Therefore, to make the same profit as the station in the more affluent neighborhood, the station in the less affluent neighborhood must increase the price of fuel.  In turn, the higher cost of fuel may cause those living nearby to become more conscious of fuel consumption or use alternative methods of transportation.

Given that another premise of the Efficiency Wage Model “Net productivity of workers is a function of the wage they receive” (Romaguera 14) is true, wages in minority may be lower because they do not need to be higher.  If one worker is not productive and is fired, many others are waiting to take his or her place and will work for the same wage. Again, the ability to purchase resources is reduced, due to lower income.  The same concept can be applied to housing and rent, only reversed. “In 2000, the proportion of African American households that had obtained home ownership was 65% lower than the proportion of white households that had obtained homeownership” (Ohio State University 3).  Therefore, the rental owner will seek to charge as much as demand will allow, regardless of race.  This means that those living in less affluent neighborhoods may ultimately get less for their money, in terms of rental unit quality, amenities, and space.

            Social segmentation also affects the distribution of resources.  It may not always do so directly, but by altering marketing efforts, based on clustering or categorization of specific geographic locations or types of customers, allocation is indirectly affected.   In Asian Social Science December 2008, Yingchun Guo ( 3-4) explains how clustering works for electric power consumers.  The types of customers are divided into four categories.  The highest ranking is those that consume more power and have good credit, while the lowest-ranking group has less than ideal credit and consumes less power.  Marketing strategies are likely to focus more heavily on the highest-ranking users, where the company stands to make the most profit.  Those in the highest ranking group may be offered special rate packages and pricing that is lower per unit than those in the lowest ranking group.  Therefore, those in the lowest-ranking group will continue to use less power and are likely to focus more on measures that conserve power, such as unplugging appliances and turning off more lights.  They also own fewer major appliances and they may be smaller in size.  Fewer electronics such as stereos, TVs, computers, and others.  Because they consume less power and have poorer credit, they will be less likely to move up in the rankings and even less likely to be offered the benefits that preferred customers are offered, such as special rates.