Definition
In neoclassical economics theory, labor market discrimination is defined as the different treatment of two equally qualified individuals on account of their gender, race, age and disability etc. Discrimination is harmful since it affects the economic outcomes of equally productive workers directly and indirectly through feedback effects. Darity and Mason summarize that the standard approach used in identifying employment discrimination is to isolate group productivity differences (education, work experience). Differences in outcomes (such as earnings, job placement) that cannot be attributed to worker qualifications is attributed to discriminatory treatment.
In the non-neoclassical view, discrimination is the main source of inequality in the labor market and it is seen in the persistent gender and racial earnings disparity in the U.S. Non-neoclassical economists define discrimination more broadly than neoclassical economists. For example, the feminist economist Deborah Figart defines labor market discrimination as “a multi-dimensional interaction of economic, social, political, and cultural forces in both the workplace and the family, resulting in different outcomes involving pay, employment, and status” pp. 237]. That is, discrimination is not only about measurable outcomes but also about unquantifiable consequences. It is important to note that the process is as important as the outcomes. Furthermore, gender norms are embedded in labor markets and shape employer preferences as well worker preferences; therefore, it is not easy to separate discrimination from productivity-related inequality.
Although labor market inequalities have declined after the U.S. Civil Rights Act of 1964, the movement towards equality has slowed down after mid-1970s, especially more in gender terms than racial terms. The key issue in the debate on employment discrimination is the persistence of discrimination, namely, why discrimination persists in a capitalist economy.
Read more about this topic: Employment Discrimination
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