- Labour market discrimination
- Labour market discrimination arises when workers with the same education, experience and expertise receive different pay or job opportunities because of their race or gender.
- Marginal revenue product
- Marginal revenue product is the marginal product of labour times marginal revenue: the value to the firm of what one more worker produces.
Who pays for discrimination
Can you name the three groups that bear the cost of discrimination?
Discrimination has a cost, and three groups share it.
They are paid less than the value of what they produce, and fewer of them are hired, so the group's total earnings fall.
Can you think of an example?
An engineering firm that undervalues women engineers offers them less than men with the same degree and experience, and takes on fewer of them.
It turns away productive workers and pays more to hire others in their place, so its costs rise and its profit falls.
Can you think of an example?
A firm that hires only men for its sales team pays above the going rate to fill the posts, while a rival hires the equally able women it rejected.
Output is lost when able people are kept out of the jobs they would do best, and the group has less reason to invest in education.
Can you think of an example?
If one group's degrees rarely lead to well-paid jobs, fewer of its young people study for them, and the economy loses the skills they would have built.