Economics explains discrimination in the labour market
Economics explains discrimination in the labour market

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Economics explains discrimination in the labour market

2 Discrimination in the labour market: introduction

Discrimination can manifest itself in all aspects of life. It may be evident in the type and location of housing available to certain groups, in their access to quality education and health care or how they are treated in the labour market. We will focus on the last of these considerations and, in particular, why the labour market status of some groups of workers is significantly worse than that for the population at large. This does not mean that discrimination in the labour market is a more relevant consideration than other forms of discrimination, nor should it imply that labour market discrimination is independent from other forms of discrimination. Indeed, some economists would argue that a satisfactory explanation of labour market discrimination can only be developed when it is recognised that all forms of discrimination are related.

The fact that some people do better or worse than others in the labour market does not, in itself, signify the presence of discrimination. It would be more surprising if such differences were not observed. What is harder to explain, however, is why particular groups of workers are disadvantaged in the labour market. Why do women and members of minority ethnic groups, for example, face significantly lower wages and poorer employment opportunities as a group? In this course we focus on the general observation that certain characteristics – gender, race, religion, age – actually matter in the labour market when there is no apparent reason why they should.

In the next section we outline the extent to which disadvantage in the labour market varies. There are, of course, many different dimensions to labour market disadvantage. The most obvious is differences in average earnings which may arise either because people from disadvantaged groups are paid less for doing a particular job or because they end up in (or are ‘crowded’ into) low paying jobs. A second dimension of labour market disadvantage is that the level of unemployment is higher for certain groups of workers than for others. Linked to this is the observation that disadvantaged groups are concentrated in jobs with higher turnover rates and greater job insecurity. Finally, some groups may be disadvantaged in terms of the type of work they have access to, with an emphasis on menial and repetitive tasks. Since there are many different ways in which labour market disadvantage can be measured, it is perhaps not surprising that there are also different types of discrimination. The two main types will be considered.

The theories proposed to explain discrimination in the labour market are equally diverse. Differences are reflected not simply in terms of the underlying theoretical framework adopted but also in the particular aspects of labour market behaviour which are focused upon. Explanations which can be grouped under the heading of neoclassical theories focus mainly on the supply side of the labour market, such as the relationship between labour market disadvantage, low productivity and low levels of investment in human capital. Other, non-neoclassical theories, such as segmented labour market theory, concentrate on the limited access certain groups of workers have to ‘good’ jobs (independent of their human capital) and upon why there is segregation in access.


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