6.7

• Wage discrimination definition

  Paying different workers different wage rates for doing the same job
• what is labour market discrimination?

  occurs when workers with the same productivity are treated differently due to irrelevant characteristics such as gender, race, age, disability or religion
• what are the main types of labour market discrimination?

  1. wage discrimination - paid less for the same job
  2. hiring discrimination - less likely to be recruited
  3. promotion discrimination - limited progression opportunities
  4. occupational segregation - confined to certain jobs
• what is taste-based discrimination?

  employers, employees, or customers have a preference against working with or buying from certain groups, even if it’s irrational
• what is statistical discrimination?

  when employers use group averages (e.g age, gender) as a basis for hiring decisions, instead of assessing individuals fairly
• what is occupational segregation?

  when certain jobs are dominated by one gender or group, not due to ability but stereotypes or past discrimination
• what is the impact of discrimination on the individual?

  • lower wages
  • fewer job opportunity
  • limited promotion and skill development
  • lower morale and productivity
  • reduced lifetime earnings
• what is the impact of discrimination on the economy ?

  • misallocation of labour
  • loss of talent and productivity
  • lower overall output
  • increased inequality
  • higher welfare costs
• what does the gender pay gap measure?

  the difference in average earning between men and women across the labour market, often expressed as a percentage
• what are the causes of the gender pay gap?

  • part time worker prevalence
  • career breaks (e.g maternity leave)
  • occupational segregation
  • discrimination and unconscious bias
  • glass ceiling effects
• what is the glass ceiling?

  an invisible barrier that prevents certain groups (usually women or minorities) from reaching top jobs despite having the ability
• how can government policy reduce discrimination in the labour market ?

  • Equal Pay Act and Equality Act 2010
  • gender pay gap reporting
  • anti-discrimination laws in hiring/promotion
  • subsidising training for underrepresented groups
• how can firms help reduce discrimination?

  • blind recruitment processes
  • diversity and inclusion training
  • clear promotion criteria
  • equal pay audits
  • flexible working arrangements
• what is positive discrimination (affirmative action)?

  when policies actively favour underrepresented groups to redress past inequalities (e.g quotas, targeted recruitment)
• What are the arguments for intervention to reduce discrimination?

  • promotes fairness and equality
  • improves economic efficiency by using all talent
  • reduces poverty and inequality
  • Encourages diversity of thought and innovation
• what are the arguments against intervention in terms of discrimination (e.g affirmative action)?

  • could lead to resentment or tokenism
  • may favour less qualified individuals
  • difficult to implement fairly
  • can be seen as reverse discrimination
• how much discrimination affect labour supply?

  can reduce labour supply from certain groups, lowering participation rates and potential GDP
• how might discrimination affect wage elasticity of supply?

  if certain groups face barriers to entry (e.g bias, cost, lack of networks), the labour supply becomes more inelastic, meaning it’s harder to respond to wage changes
• what are the long-run consequence of persistent discrimination?

  • entrenched poverty and inequality
  • lower economic growth
  • skills shortages
  • decline in social mobility
  • greater public spending on support services
• in monopsony, a trade union may be able to increase both the wage rate and the level of employment towards the perfectly competitive levels. a national minimum wage can have the same effect
• from 2016 onwards, for most adults the national living wage (NLW) replaced the national minimum wage (NMW)
• when does perfect wage discrimination occur?

  when workers are paid the minimum wage rates they are prepared to accept
• Gender discrimination means that women often earn less than men