A previous post answered a question that I am often asked when I tell people about my research, namely: how can one be an economist without focusing specifically on money? In that post I also mentioned that my research is based on discrimination, and that people always wonder what that has to do with economics. Discrimination is an emotive subject, one that inspires strong personal feelings for most people (hopefully against it). Such passionate issues surely have no place in the cold, stoic field of economics. Fortunately, economists have worked out ways to remove all of this passion and emotion from the subject and analyse it as an issue like any other. First of all, discrimination is not sexism, nor racism. It is not a woman getting sexually harassed in the office. It is not Roma being repatriated to Romania from France. Discrimination in the sense used in economics, is simply treating one group differently from another. This word ‘treating’ is ambiguous, since it is difficult to quantify. Therefore a place of interaction is needed , in order to provide information about how one group is treated differently from another. The best place to do this is a place where people are traded for different prices, according to their specific characteristics. In the absence of an actual slave market, researchers in economics settle for the labour market, where employers buy and sell employees on an unimaginable scale all over the world. There are two main theories in economics about why employers discriminate against one group of employees in favour of another, ‘Taste for Discrimination’ and ‘Statistical Discrimination’. My research centres on gender discrimination, so I will focus on this.
The theory of ‘taste for discrimination’ is fundamentally an argument based on the flawed nature of humanity. Some people just don’t like certain people, for no apparent reason. One could also argue from an evolutionary perspective that we are conditioned to be wary of those who are different from us. This argument would be more relevant to discussions about racial discrimination, but it is still applicable to gender discrimination. As many men and women will know, a substantial percentage of each gender mistrusts the other, for various reasons. Unfortunately for women (although this is definitely changing), employers are mostly men. For whatever ill-conceived reason, an employer may be a gender-discriminating employer. Therefore when considering equally qualified male and female candidates for a job opening, the employer will always choose the male candidate. The reason for this is that because of the employers ‘taste’ for discrimination, hiring the woman would ‘cost’ more to him (assuming the employer is male) than hiring the man, if there is equal pay across genders. If he hired the woman, he would have to endure the hardship of her presence alongside paying her a monthly wage. Therefore, the only way the woman is hired for the job is if the employer pays her less than he would have paid the man. So much less so that it compensates for the burden of her daily presence. Yes, this is a real, respected academic theory that attempts to explain why women are paid less than men.
Statistical discrimination is much easier to understand, as while the previous theory was grounded in base humanity, this one is based on the dark side of another inescapable fact of modern life: capitalism. Capitalism favours profit above all else, and therefore from an employer’s perspective the best workforce is the workforce that generates the most profit. It is difficult to quantify the contribution of most employees to the profit of an enterprise, and therefore certain substitute statistics must be used instead. As with the ‘taste’ exposition, we have to imagine a decision from an employer about hiring a similarly qualified man or woman for a job. Each looks like a worthy employee, however a tiebreaker is needed. It is proven statistically that women take more sick days than men over the course of a year (really). Mostly this has been attributed to menstruation (seriously, there are studies done on this), however it still affects productivity, and therefore profits for the employer. Similarly and more obviously, the woman will more than likely take a career break, with pay, during her time employed in the available position, as a result of maternity leave and its associated regulation. A profit maximising employer, in the absence of regulation, will always hire the male candidate in this case. Unless of course he can hire the female candidate for a lower wage that would mitigate his risk of hiring a potentially profit-sapping employee.
While theories are interesting to formulate, what economists are really interested in is how to empirically measure an issue under analysis. Both of the discussions on theories above ended with an explanation for why women are paid less than men. This is because from the beginning, researchers are set with the task of explaining why and ultimately quantifying how much women are paid less than men, the highly publicised Gender Wage Gap. The gender wage gap quantifies the difference between what a man is paid and what a similarly qualified women is paid, in a similar occupation. This research has informed governments all over the world, and led to numerous policies being enacted in order to rectify these labour market malfunctions. Equal opportunity laws, gender quotas, affirmative action have all been justified in debates due to the work of labour economists working in the area of discrimination. Economists, while seen as cold and stoic, can also add much-needed weight to the argument of emotive subjects. This does however lead to those economists stripping the subject down to its bones, and of everything that made it so emotive in the first place. The justification for this is simple, as economics aims to describe the world as it actually is, as opposed to as it should be. In this sense everything I have written in this post is Positive, as opposed to Normative. In economics therefore, positive research is undertaken in order to inform policy advice for those normative few who wish to change the world into the way it should be.