Economic Issues Policy - Jacqueline Murray Brux Discrimination Our nation is moving toward two societies, one black, one whiteseparate and unequal

Economic Issues & Policy- Jacqueline Murray Brux

DiscriminationOur 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, 1968

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


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



• 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%)



• 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%)



• 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%)


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


Figure 5-1:Population of Racial Groups as a Share of the Total Population, 2008a

aHispanics 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



• 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”



Table 5-2: Median weekly earnings of full-time workers by, age 16 or over, by race, Hispanic origin, and gender, 2008


• 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



• 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


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



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



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, 2007a

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


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



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


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


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



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).


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



Figure 5-3: Production possibilities curve with discrimination

With discrimination, labor is not utilized as efficiently as possible, and the nation’s outputof 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


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


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


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


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



• 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



• 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



• 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



• 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



• 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



• 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



• 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



• 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



• 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


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”


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


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


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


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Economic Issues Policy - Jacqueline Murray Brux Discrimination Our nation is moving toward two societies, one black, one whiteseparate and unequal