- Discrimination results in an inefficient allocation of resources and inequitable wage differentials
- The group that’s discriminated against are likely to be paid less for doing the same job, and are likely to find it harder to gain employment.
- They may be overlooked for promotion, have to do less demanding jobs, may not go on selected training courses, etc.
- The producers who discriminate will have a smaller pool of labour to select from, and may not make the best use of black workers they do employ
- As a result, their costs of production will increase which will make them less competitive
- Consumers will experience higher prices if producers discriminate (if the producers pass their costs onto the consumer (elasticity?))
- If consumers themselves discriminate, they will find themselves with less choice to buy from, and so higher prices.
- The government may have to pay out more money to groups that are discriminated against in terms of welfare, and they may have to spend money on anti-discrimination legislation.
- Overall, the economy will lose out as a result of the misallocation of resources
- Output will be below the potential output that could be achieved if the groups were not discriminated against in terms of employment, pay, promotion and training.
Theories of Discrimination
- Becker’s theory states that some people may be prepare to experience higher costs rather than to come into contact with members from a particular group
- For example, a firm may have lower profits due to not employing women workers, and higher costs due to not buying from firms employing women workers.
- Statistical discrimination states that firms make generalisations about specific groups
- g. a firm may not employ over 50s, as it believes that they’re less productive that younger workers. The same may apply when over 50s lose out on promotions, or get made redundant over younger workers.