The Theory and Empirical Evidence on Racial Discrimination in the Labour Market - Coursework Example

Critically Discuss the Theory and Empirical Evidence on Racial Discrimination in the Labour Market Table of Contents Table of Contents 2 Introduction3 Overview of Facts about Race and Gender in Labour Market 3 Theories of Racial Discrimination in Labour Market 5 Evidences 8 Conclusion 9 References 11 Introduction The paper elaborates about racial discrimination in the labour markets. Discrimination in the labour market can be based on employment level and wages provided to different individuals of various class and creed. Different social practices and beliefs in the workplace results in ranking the individuals as superior and inferior not only based on their competencies and qualities possessed but also on the basis of colour. The Gary Becker model of taste discrimination has been used in the paper to indicate the type of discrimination faced in the workplace by people. It is elaborated that due to racial discrimination the productivity of an organization is reduced to a considerable extent. The baker model states that the firms discriminating on the basis of race are likely to affect the recruitment process and thus the productivity of the overall profit margin of the organization falls (Lang and Jee-Yeon, 2010). Overview of Facts about Race and Gender in Labour Market The failure in the labour market depends on various factors such as unequal income distribution, differences in employment opportunities, which results into discrimination among the individuals. People belong to different backgrounds and belief that results into discrimination between the employers and workers. The outcome of the labour market is related with various facts about race, gender and Hispanic differences (Lang et al., n.d.). Some evidences related to the fact that wages and employment influences the treatment given to the individuals in labour market are evident (Cornileus, 2010). The unemployment rate reflects the fact that racial discrimination affects the outcome of labour force considerably. The unemployment rate on the basis of race is shown in figure-1 below. Figure-1 Source: (Ramakrishnan and Ahmad, 2014) It can be identified from the above graph that that the unemployment rate among Asian countries is lowest since 2010. As indicated in the figure unemployment rate was between 6% to 10% until January 2012 but declines to 5% in April 2012. By 2013, the rate declined to 4%. Comparing the unemployment rate between black, Hispanic, white and Asian, it is evident that African Americans faced more problems due to race discrimination at the workplace. The Asian Americans have the lowest unemployment rate as compared to black American, Hispanic and White. Long-term unemployment among the people of Hispanic and Asian affects the total outcome of the nation. It is evident that discrimination affects the life of individual. People not only face discrimination in the workplace but also in school and colleges based on their colour and origin. Figure-2 Source: (Ramakrishnan and Ahmad, 2014) Apart from low unemployment rate, the duration of unemployment is also highest in people of other origin than white. This is indicated in the figure above that in year 2010 the period of unemployment if compared between white, black, Hispanic and Asia, then the duration for Asian American is highest with 50.1%. On the other hand, the duration is reduces to 41.9% by the end of year 2011(Bureau of Labor Statistics. 2015). Theories of Racial Discrimination in Labour Market Racial and gender discrimination in the labour market implies that the male earns more than the females and the income of white is more than the non-white. The “taste discrimination model” of Gary Becker states that the discrimination in labour market arises because employers and the personnel’s have differences in taste as people belongs to different ethnic groups with different beliefs. Apart from this, customers in some cases dislike purchasing goods from people belonging from different races. People may prefer to buy from the member belonging to their own ethnic group; this shows the discriminating nature of people. As stated above, the model translates the term racial discrimination into economic terms. The model considers two groups of workers black workers earning hourly wage denoted by (WB) and another group called white workers earning (WW) hourly wage. It is assumed that the employers are unfair against the black workers and so the discrimination affects the utility function. The cost involved to hire a black labour for an hour is WB, but the employer assumes WB (1+D) as the cost because of the unfair treatment towards black people. Here ‘D’ is positive and is known as “discrimination coefficient”. Racial difference that influences an employer to assume the cost of hiring the black people will be more than the actual cost involved i.e 1+D. The model explains another form of discrimination that is known as “reverse discrimination” or “nepotism”. It refers to favouritism towards the black employees (Cahuc and Zylberberg, 2014). The employer may prefer to hire back employees in such case wherein WB (1-N) is the cost of hiring and ‘N’ is nepotism coefficient and is positive. Assuming that both the black and white workers are substitute so are equally productive and say q= f (EW+EB), where EW and EB denotes employment of black and white people. In case if the employer does not discriminate then will hire the cheaper worker. For example, if WW is more than WB, then the employer will prefer black workers. According to the Becker model, if blacks are perfect substitutes of white and vice versa and a difference in wage exist then the employer will have separate work forces. The employment decision of a firm is depicted in the figure-3 below that does not discriminate on the basis of race (Cohn, 2009). The graph indicates two variables that is employment of black and the market wage rate. Suppose that the market wage for black is low as compared to white then employers will hire black people till it reaches the equilibrium point where the marginal product of labour is equal to WB (Cahuc and Zylberberg, 2014). Figure-3 Source: (Cahuc and Zylberberg, 2014) On the other hand, the employment decision in case of racial discrimination is shown in figure-4 (a) and (b) below. Figure-4 (a) white firm and (b) black firm Source: (Cahuc and Zylberberg, 2014) The employer hires up to the point where the marginal product is equal to the wages paid to them. A firm that discriminates is likely to recruit fewer workers as compared to firm that does not discriminate. According to the Becker model, discrimination at work place also reduces the overall profit of the company because the employer pays above the competitive wage and hires fewer workers. The model indicates some of the symptoms of discrimination but does not explain from where discrimination arises. From the above analysis, it is shown that the discrimination faced by the black and white is on the basis of their wages along with employment level. It is seen that black people are offered jobs in lower level as compared to the people of the white origin (Nunley et al., 2014). Evidences The difference in wages is an evidence of discrimination at the work place. On the other hand, the discrimination between males and females or blacks and whites also indicates the presence of inequality. According to the data of “Bureau of Labor Statistics”, the employment population ratio in year January 2014 was highest in Asia 60.7 but is lowest among black African. The lowest employment ratio suggests that the black Americans are not getting equal job opportunities as compared to other countries (Bureau of Labor Statistics, 2015). It is very difficult to determine the nature of discrimination because according to the Gary Becker’s model of discrimination it depends on the employer whether the discrimination is on the basis of race or the prevailing market wage rate. Discrimination on the basis of gender is also evident from the data. In case black or African, they face discrimination due to colour differences, but apart from this, the discrimination between male and female is also affecting the productivity of the firm. The men employment ratio of black African was 57.6 and female was 55 in the year 2014, this indicates that the females are not getting equal opportunity to contribute to the total productivity of country (1Bureau of Labor Statistics, 2015). The laws against discrimination at workplace is implemented in various countries but still African Americans encounters issues related to organizational practices (Chima and Wharton, n.d.). Individual discrimination is one of the problems faced by the African American. For example, the African American is hired for low-level jobs and their pay is less compared to the workers of different ethnic group. The employer ignores the personal qualification or experience possessed by them. The employed individuals also face discrimination due to the policies and practices prevalent in an organization. They do not get equal opportunities for promotion to a higher level as compared to other individuals (Arrow, 1998). Conclusion Racial discrimination is one of the issues that are faced globally. From the above analysis, it is observed that people face discrimination on the basis of their race, ethnicity as well as gender in the labor market. It is evident from the fact that people were discriminated. The unemployment rate is more in case of black Africans as compared to White and Asian. The model of taste discrimination implies that the firms discriminate by linking racial differences and economic cost that is people are recruited on the basis of the cost involved. The model also focuses on the concept of reverse discrimination that is favouring a particular group of people. In such a case, it is found that the employer continues employing a particular group of people until it reaches equilibrium point where the marginal productivity is equal to the prevailing market wage rate. According to various data of Bureau of Labor Statistics, the participation of the female labour is less as compared to the male. This suggests that apart from racial discrimination, gender discrimination also exists in the labor market. References Arrow, Kenneth J.1998. “What Has Economics to Say About Racial Discrimination?”. Some Empirical Constraints on Theory. February 18. http://www.csus.edu/indiv/c/chalmersk/ECON251FA12/WhatDoesEconSayAboutDiscrimination.pdf Bureau of Labor Statistics. 2015. “Employment status of the civilian population by race, sex, and age”. U.S. Bureau of Labor Statistics. http://www.bls.gov/news.release/empsit.t02.htm (accessed February 18, 2015). 1Bureau of Labor Statistics. 2015. “Employment status of the Hispanic or Latino population by sex and age”. http://www.bls.gov/news.release/empsit.t03.htm (accessed February 18, 2015). Cornileus, Tonya Harris. 2010. “A Critical Examination Of The Impact Of Racism On The Career Development Of African American Professional Men In Corporate America”. Abstract, February 18. https://getd.libs.uga.edu/pdfs/cornileus_tonya_h_201008_phd.pdf Chima, Felix O., and William D. Wharton. n.d. “African Americans and the Workplace: Overview of Persistent Discrimination”. Workplace Discrimination And African Americans, February 18. http://www.wininsights.com/wp-content/uploads/2012/02/AfricAN-AMERICAN.pdf Cahuc, Pierre Stéphane Carcillo, André Zylberberg.2014. Labor Economics. Cambridge:MIT Press. Cohn, Samuel. 2009. Race and Gender Discrimination at Work. US:Westview Press. Lang, Kevin., and Jee-Yeon K. Lehmann. 2011. “Racial Discrimination in the Labor Market: Theory and Empirics”. Journal of Economic Literature. February 18. http://www.uh.edu/~jlehman2/papers/Lang_Lehmann_JEL.pdf Lang, Kevin., Michael Manove and William T. Dickens . n.d. “Racial Discrimination in Labor Markets with Posted Wage Offers”. The Wage-Posting Model in a Nondiscriminatory Regime. February 18. http://www.bu.edu/econ/files/2012/11/dp145-Lang-Manove.pdf Nunley, John M., Adam Pugh., Nicholas Romero., and Richard Alan Seals. 2014. “An Examination of Racial Discrimination in the Labor Market for Recent College Graduates: Estimates from the Field”. Abstract. February 18. http://cla.auburn.edu/econwp/Archives/2014/2014-06.pdf Ramakrishnan, Karthick., and Farah Z. Ahmad. 2014. “Labor-Market Outcomes Part of the “State of Asian Americans and Pacific Islanders” Series”. Asian Americans are the most rapidly growing segment of the U.S. labor force. February 18. https://cdn.americanprogress.org/wp-content/uploads/2014/04/AAPI-LaborMkt.pdf Read More