4.7 Discrimination in the labour market

Question 1

What is wage discrimination?

Answer 1

Paying workers different wage rates for doing the same job

Question 2

Why does wage discrimination occur?

Answer 2

Employers undervaluing or overvaluing workers MRPL based on characteristics such as ethnicity, gender or age.

Question 3

What is negative discrimination?

Answer 3

Employers undervaluing MRP

Question 4

What is positive discrimination?

Answer 4

Employers overvaluing MRP

Question 5

What are the conditions for wage discrimination?

Answer 5

• Firms must have some wage-setting ability, therefore the labour market must be imperfect
• Distinct/separate labour markets, i.e. workers unable to successfully offer their labour in different markets for a higher wage
• Lack of legal protection or imperfect information about the discrimination on the part of the government

Question 6

How are workers already discriminated against in a monopsony labour market?

Answer 6

Workers are already paid at a lower wage rate than MRP

This is due to imperfect information in the market

Question 7

How does a gender discrimination diagram work?

Answer 7

• Less female workers are demanded - demand decreases
• This leads to an increase in supply in other markets - due to females moving industry
• In this new market more females are then demanded - however due to the shift in supply this is at a lower wage rate

Question 8

What are possible advantages of wage discrimination?

Answer 8

• Firms can reduce their wage bills and therefore be more competitive
• May be beneficial to some firms if their consumers are racially prejudiced
• Can be difficult to successfully prove discrimination
• Positive discrimination (affirmative action) can boost cultural diversity and social justice

Question 9

What are possible disadvantages of wage discrimination?

Answer 9

-May lead to some groups being underpaid and underemployed worsening relative poverty
-Increased government spending on welfare benefits
-Waste of scarce, valuable resources
-May lead to increased litigation as workers attempt to take legal action against employers
-Lack of cultural diversity in the workplace
May create social tensions