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Markets for the Factors of Production


Differences in Wages:Discrimination

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racial discrimination and gender discrimination have been pervasive throughout history. Let's see the role they play in economics and how they can lead to differences in wages. So we're gonna talk about economic discrimination, and this is the fact that you're gonna pay someone a lower wage or simply not hire someone based on an irrelevant characteristic. Okay, So this might be, oh, I only hire blondes. I don't hire redheads or brunettes, right? It's something irrelevant to the job, but it's playing a role into the hiring process. Now. Generally we don't discriminate on hair color. What the most common forms that we see are gonna be racial discrimination based on race and gender discrimination based on gender, Right? And now, what we're going to see is that white males make considerably considerably more money than any other demographic group, right? And I'm sure you've all heard some studies and seen differences in wages. And and have seen studies where white males are making more money, right? But it doesn't all come down to discrimination that's currently occurring. It's not like all employers are just saying, hey, he's a white male. I'm gonna hire him and I'm gonna pay him more money. It doesn't really work like that in in theory, what we're gonna see is that there's gonna be some other factors going into play rather than just current discrimination. Remember discrimination happens throughout history, and it takes time for changes in our society to fall into place. So let's see some of these current problems that we see first, a reason why white males might be making more money is differences in levels of education here. Okay, so, throughout history, what we've seen is that there's been more opportunities, there's more opportunities for white males to receive a higher education to go to college. Obviously, this trend is changing. We're seeing that there's more women in college, more minorities going to college. But remember that that's gonna take time to to take effect. Right? So, right now, what we're seeing is that there's generally more educated in the white male category, and that leads them to have more human capital. Remember that this education in this training, it leads to higher human capital, which leads to higher wages. Okay, And I'm not saying that this is the only reasons why white males are paid more, but this does explain some of the differences. The next one is difference in experience. And we're gonna see that men generally have less job interruptions than women. Okay, so things like pregnancy come into play when we think of a job interruption, and that time where the woman's pregnant and can't go to work, or after she's pregnant and taking care of the child, she loses that experience. She would learn on the job. And remember that experience also increases your human capital, and when you have higher human capital, you make more money. So this is another reason these job interruptions are breaking up the experience that women are getting last one here. That explains some of the wage difference is the difference in job preferences. So we're gonna see that women represent approximately 90% of people employed in some some of the low paying jobs. Okay, So this includes preschool teachers, dental assistance, childcare. We're going to see that these jobs are mostly filled by women And they're mostly low paying jobs where men fill approximately 90% of some high paying jobs. Right? So we see pilots, electricians, engineering managers, things like that. We're gonna see that these rules are generally filled by men. Of course, this is going to change over time as differences in education start happening uh, than they have in the past, right? But these do explain some of the current differences in wages. Okay. But this obviously doesn't explain everything. There is still discrimination, but one of the main things that happens with discrimination is that it's it can be institutionalized. So it becomes part of the culture part of the culture. Okay. And when it's part of the culture, it makes it much more difficult to get rid of, right? So, we have still, to this day, we have the lingering effects of slavery and segregation that's affecting african americans in the United States. Okay, so what we see is a lot, oftentimes in urban neighborhoods, or neighborhoods where a lot of black families live, there's info interior schools and these inferior schools, they're getting a worse education when they go to these schools and that ends up with having lower human capital, right? And this isn't their choice. It's not like they chose to go to this poor school. They went to the school because it's the one in their neighborhood and it just doesn't have the funding to provide a quality education. So they have lower human capital. And then there's still discrimination where people just don't want to hire african americans. There's actually a study done where they sent resumes in with white sounding names and black sounding names and the white sounding names got more callbacks than the black sound names, right? So there's still this discrimination definitely. It's still happening. And since they can't get the jobs, it ends up like they have lower work experience. They can't get the job. They don't get the experience and they don't get the human capital that allows them to get higher wages, Right? But let's you know, this has been quite a heavy topic, right? Discrimination is a heavy topic. Let's think of the other side, let's see a benefit of what could be happening here. However, on the bright side, Well, this discrimination, it's gonna cost money to people who want to discriminate. Okay, so let's look at this example, we've got peace and Love Patrick and we've got discriminating Dave over here, right? So peace and Love Patrick. He loves everybody and he'll hire any any qualified candidate for his job. We're discriminating Dave is only gonna hire white males, right? So what you can imagine is that peace and love Patrick can pay a lower wage, right? He's gonna have more people he can choose from. And in the sense, if you have to pay a white male more, well, he's gonna have to pay more uh to hire people discriminating day, right? So, we might see that Peace and Love Patrick might be able to hire Someone for $10 an hour. Where discriminating Dave would have to pay 12 an hour. Right? And now that discriminating Dave has this higher wage. He has to pay. Well, you can imagine his costs are gonna be higher. So eventually peace and Love Patrick can run him out of business, right? Because he can keep lower costs. He can provide more efficiently to his customers, right? He reaches the more of a minimum in his average total cost. And he will be able to eventually not discriminating Dave out of business. Right? So that is the bright side is that discrimination is gonna cost money and eventually they shouldn't be able to make money in these situations. All right, So, this is a pretty heavy topic. But this is how it relates to economics here.