Racial Discrimination

The purpose of this paper is to examine the causes, consequences and remedies of racial discrimination in the labor market. Understanding racial discrimination in the labor market is of critical importance because of the sever wage differentials between different races in the market. Most of the economic research on racial discrimination focuses on black and white males. Hence this paper will also be focusing on wage and employment differentials between black and white males. I will start by discussing the research that has been done on the causes of labor discrimination, then, I will explain the consequences and finally the possible remedies.

Causes of Labor Market Discrimination

One of the most widely accepted reasons for racial discrimination in the labor market is Gary Becker’s taste model. Put simply, this is the school of thought that racial prejudice is responsible for discrimination in the labor market; that is, people prefer to work with others of the same race. Becker’s analysis of racial prejudice is divided into 3 categories: employers, employees and consumers. For this paper I will spend more time on the employers analysis

Becker’s model explains that minority workers have to be more productive that white workers at any given wage or be willing to accept a lower wage for the same level of productivity (Becker 1971). In his model, Becker makes the assumption that black and white males are of equal productivity and he assumes operation in a perfectly competitive market. His economic approach diverges from the widely accepted Marxian view that individuals act solely in selfish interest. Becker explains, “behavior is driven by a much richer sense of values and preferences” (Becker 1992).

According to Bec...

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7. Rema Hanna and Leigh Linden,2009 “Measuring Discrimination in Education”

NBER Working Paper No. 15057,      

8.Ross Levine, Alexey Levkov, and Yona Rubinstein “Racial Discrimination and Competition”

NBER Working Paper No. 14273,     

9.Kerwin Kofi Charles and Jonathan Guryan, Prejudice and The Economics of Discrimination

NBER Working Paper No. 13661, ,     

10.Gary Becker,THE ECONOMIC WAY OF LOOKING AT LIFE*Nobel Lecture, December 9, 1992

Department of Economics, University of Chicago, Chicago, IL. 60637, USA

11.Kerwin Kofi Charles and Jonathan Guryan “Prejudice and Wages: An Empirical Assessment

of Becker’s The Economics of Discrimination”.NBER Working Paper, ,     