Harrison Hensley, Maria Isidoro-Chino, and Yudis Subedi
Harrison Hensley, Maria Isidoro-Chino, and Yudis Subedi
Introduction
Income inequality is one of many major issues that has been known to contribute to economic discrimination. Economic discrimination can be defined in one of two ways. Societal economic discrimination is the “long-lasting inequality in economic well-being among individuals based on their color, gender, or ethnic ties” (Cain 2). Market labor discrimination is defined as the “differences in pay or wage rates for equally productive groups” (Cain 2). In either case, economic discrimination is a concept that takes into account several economic factors that, in essence, contributes to the inequality seen across the United States and around the world. It is still a growing issue among many developed countries and among developing nations.
Gary Becker’s book The Economics of Discrimination (1957) has been a pivotal influence on this topic. He raises awareness to this growing issue by particularly focusing in on wage rate and how it arises as a result of productivity differences and pay differences among two group (African Americans and whites) when considering both discriminatory and non-discriminatory factors separately (Blau and Ferber 316). He also focuses on the effect of wage rate in terms of racial preference among customers, co-workers, and employees. Within a competitive model, Becker analyzes the relationship between “racial prejudice among whites and discrimination against minorities” (Charles and Guryan 1).
The current chapter discusses several implications of economic discrimination such as racial discrimination and the wage gap across several groups in the efforts to see how such factors contribute to the growing trend of income inequality. An overview and analysis of Becker’s (1957) work will also be introduced and discussed . We will also be discussing trends across the United States, regionally and across different cities, as well as the legal system and its contributions to economic discrimination, and the concept of intergenerational income mobility and its impact on income inequality.
The Economics of Discrimination: An Overview
As stated before, Becker (1957) focused on racial wage gaps and prejudice faced in the labor market. The model assumes a perfectly competitive economy with constant returns to scale, where whites and African Americans are seen as perfect substitutes for production (Charles and Guryan 4). Within the model, prejudice was measured as an aversion for contact amongst the two races and utility was dependent on employer profits and the employment of black individuals, where for each black individual brought into the labor market, there was disutility that came with these individuals (Charles and Guryan 4). The conditions for the model state that labor would be hired up to the point where marginal product is equal to marginal costs for every one-unit of production increase. In essence, the wage of a black individuals also takes into account the prejudi