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Economic discrimination is discrimination based on economic factors. These factors can include job availability, wages, the prices and/or availability of goods and services, and the amount of capital investment funding available to minorities for business. This can include discrimination against workers, consumers, and minority-owned businesses.
It is not the same as price discrimination, the practice by which monopolists (and to a lesser extent oligopolists and monopolistic competitors) charge different buyers different prices based on their willingness to pay.
A recognition of economic discrimination began in the British Railways Clauses Consolidation Act 1845, which prohibited a common carrier from charging one person more for carrying freight than was charged to another customer for the same service. In nineteenth-century English and American common law, discrimination was characterized as improper distinctions in economic transactions; in addition to the above issue in the Railways Clauses Consolidation Act 1845, a hotelier capriciously refusing to give rooms to a particular patron would constitute economic discrimination. These early laws were designed to protect against discrimination from Protestants who might discriminate against Catholics, or Christians who might discriminate against Jews.
By the early twentieth century, economic discrimination was broadened to include biased or unequal terms against other companies or competing companies. In the United States the Robinson-Patman Act (1936), which prevents sellers of commodities in interstate commerce from discriminating in price between purchasers of goods of like grade and quality, was designed to prevent vertically integrated trusts from driving smaller competitors out of the market through economies of scale.
It was not until 1941, when U.S. President Franklin D. Roosevelt issued an executive order forbidding discrimination in employment by a company working under a government defense contract, that economic discrimination took on the overtones it has today, which is discrimination against minorities. By 1960, anti-trust laws and interstate commerce laws had effectively regulated inter-corporate discrimination so problematic in the late nineteenth and early twentieth centuries, but the problem of discrimination on an economic basis against minorities had become widespread.
There is a wide range of theory concerned with the root causes of economic discrimination. Economic discrimination is unique from most other kinds of discrimination because only a small portion of it is due to racism, but rather is due to what has been called a "cynical realization that minorities are not always your best customers". [1] There are three main causes that most economic theorists agree are likely root causes.
Racism, sexism, ageism, and dislike for another's religion, ethnicity or nationality have always been components of economic discrimination, much like all other forms of discrimination.
Most discrimination in the US and Europe is claimed to be in terms of racial and ethnic discrimination—mostly blacks and Hispanics in the US, Muslims in Europe. In most parts of the world, women are held to lower positions, lower pay, and restricted opportunities of land ownership or economic incentive to enter businesses or start them. [2] This case remains the same for racial minorities in certain countries. For example, a study conducted by Nuffield College in the UK found that using identical CVs and cover letters, BAME job applicants had to apply for 60% more jobs to receive the same number of callbacks as white applicants. [3]
This form of economic discrimination is usually performed by whatever groups are held to be "in power" at the time. For example, in America, discrimination is often considered to be the province of Caucasians, while in Saudi Arabia, it's men who are considered discriminatory. One study suggests that the increase in equal opportunity lawsuits has reduced this kind of discrimination in America by a large amount. [4]
There is a certain opportunity cost in dealing with some minorities, particularly in highly divided nations or nations where discrimination is tolerated.
A second common reason for this kind of discrimination is when the worker or consumer is not cost-efficient. For example, some stores in the US Northwest do not stock ethnic foods, despite requests for such, since they feel the cost is too high for too low a return.
Additionally, the illegal immigration debate in the US has resulted in some businesses refusing to hire such workers based on the likelihood that they would be fined and litigated against.
In some cases, minorities are discriminated against simply because it is inefficient to make a concerted effort at a fair allocation. For example, in countries where minorities make up a very small part of the population, or are on average less educated than the population average, there is rarely an attempt to focus on employment of minorities.
The Equal Opportunity Employment Act in the US has almost reduced this sort of rationale for discrimination to nothing, according to recent studies. [5]
The relations between economic theory, efficiency and discrimination, or "discriminatory tastes" [6] are much more problematic. [7]
The foundations and roots of economic discrimination lie in history. Discrimination of minorities is a cycle the continues to repeat itself around the world due to historic views and the remnants of generations passed.
Slavery is often referred to as America's 'original sin' as the root of all contemporary racial problems stem from the era. [8] It is racially prejudiced events like this that cause issues like racial residential segregation which persists to cause huge economic problems for African Americans in contemporary US society. In 2020, the funding of schools in white areas was $23 billion higher than the funding of schools in traditionally African American areas. [9]
Wage gaps for minorities are also founded in history. Prejudice against women in high-paid jobs has been carried through generations with women frequently given the domestic worker role that history and tradition have given them. In 2011, a study was conducted by the CMI that predicts that the gender pay gap will not be closed until 2109. [10] Furthermore, the racial pay gap in the US was caused by the prejudice of traditional racist views, in 2020, black families had a median household income of just over $41,000, however, white families have a median household income of more than $70,000. [11] Throughout history the groups that are "in power" have remained the same and it is this power dynamic that continues to cause economic discrimination for minorities.
There are several forms of economic discrimination. The most common form of discrimination is wage inequality, followed by unequal hiring practices. But there is also discrimination against minority consumers and minority businesses in a number of areas, and religious or ethnic discrimination in countries outside the United States. [12]
Most forms of discrimination against minorities involve lower wages and unequal hiring practices.
Several studies [13] have shown that, in the United States, several minority groups, including black men and women, Hispanic men and women, white women, gay men of any race and trans people of any race suffer from decreased wage earning for the same job with the same performance levels and responsibilities as heterosexual white and Asian males. [14] Numbers vary from study to study, but most indicate a gap from 5 to 15% lower earnings on average, between an affected minority and other groups.
Studies by experts from Harvard University and the University of Chicago have shown that, at least for some career paths like those of MBA graduates, the pay gap for women is largely due to time taken off to care for children. Their work has shown that the earnings of male and female MBA graduates from top US business schools are nearly identical at the outset of their careers. However, a decade after completing their degree, male graduates begin to earn more than female graduates. Researchers found that three factors account for the gap in earnings: differences in training prior to MBA graduation, differences in career interruptions, and differences in weekly hours. Female graduates had less training outside of their formal MBA, were more likely to take time off to provide full time childcare, and worked fewer hours per week on average. [15] However, these findings appear to be changing as more men are seeking out careers that allow for flexibility in child care and some female dominant fields, like obstetrics, are developing new ways to increase work-life balance. [16]
A recent study [2] indicated that black wages in the US have fluctuated between 70% and 80% of white wages for the entire period from 1954 to 1999, and that wage increases for that period of time for blacks and white women increased at half the rate of that of white males. Other studies [4] show similar patterns for Hispanics. Studies involving women found similar or even worse rates. [17]
Another study indicated that Muslims earned almost 25% less on average than whites in France, Germany, and England, while in South America, mixed-race blacks earned half of what Hispanics did in Brazil. [18]
Most wage discrimination is masked by the fact that it tends to occur in lower-paying positions and involves minorities who may not feel empowered to file a discrimination lawsuit or complain.[ citation needed ]
UK – On 10 October 2018 the Prime Minister, Theresa May, launched a three-month consultation with businesses on how large businesses would have to report the pay gap between staff of different ethnicities. [19]
Hiring discrimination is similar to wage discrimination in its pattern. It typically consists of employers choosing to hire a certain race candidate over a minority candidate, or a male candidate over a female candidate, to fill a position. A study of employment patterns in the US indicated [5] that the number of hiring discrimination cases has increased fivefold in the past 20 years. However, their percentage as a whole fraction of the workforce hirings has decreased almost as drastically. With the stiff laws against discrimination in hiring, companies are very careful in who they hire and do not hire.
Even so, studies [5] have shown that it is easier for a white male to get a job than it is for an equally qualified man of color or woman of any race. Many positions are cycled, where a company fills a position with a worker and then lays them off and hires a new person, repeating until they find someone they feel is "suitable"—which is often not a minority. [17]
While hiring discrimination is the most highly visible aspect of economic discrimination, it is often the most uncommon. Increasingly strong measures against discrimination have made hiring discrimination much more difficult for employers to engage in. However this is only the case in formal hiring arrangements, with corporations or others subject to public scrutiny and overview. Private hiring, such as apprenticeships of electricians, plumbers, carpenters, and other trades is almost entirely broken down along racial lines, with almost no women in these fields and most minorities training those of their own race.
Most discrimination against consumers has been decreased due to stiffer laws against such practices, but still continues, both in the US and in Europe. The most common forms of such discrimination are price and service discrimination.
Discrimination based on price is charging different prices for goods and services to different people based on their race, ethnicity, religion, or sex. It should not be confused with the separate economic concept of price discrimination. Discrimination based on price includes, but is not limited to:
Most charges of discrimination based on price are difficult to verify, without significant documentation. Studies indicate that less than 10% of all discrimination based on price is actually reported to any authority or regulatory body, and much of this is through class-action lawsuits. [20] Furthermore, while a number of monitoring services and consumer interest groups take an interest in this form of discrimination, there is very little they can do to change it. Most discrimination based on price occurs in situations without a standardized price list that can be compared against. In the cases of per diem charges, this is easily concealed as few consumers can exchange estimates and work rates, and even if they do the business in question can claim that the services provided had different baseline costs, conditions, etc.
Discrimination based on price in areas where special sales and deals simply are not offered can be justified by limiting them to those with strong credit ratings or those with past business with the company in question.
Although price discrimination mentions services, service discrimination is when certain services are not offered at all to minorities, or are offered only inferior versions. According to at least one study, [21] most consumer discrimination falls into this category, since it is more difficult to verify and prove. Some assertions of discrimination have included:
Minority owned businesses can also experience discrimination, both from suppliers and from banks and other sources of capital financing. In the US, there are tax benefits and even public relations benefits from having minority-owned businesses, so most instances of this occur outside of the United States. [22]
Women of color are starting businesses at rates three to five times faster than all other businesses, according to an article from Babson College on "State of Businesses Owned by Women of Color" (Press release). Newswise. May 9, 2008. Retrieved 2008-05-12. However, once in business, their growth lags behind all other firms, according to the results of a multi-year study conducted by the Center for Women's Business Research in partnership with Babson College exploring the impact of race and gender on the growth of businesses owned by women who are African-American, Asian, Latina and other ethnicities.
This form of discrimination covers suppliers providing substandard goods to a business, or price gouging the business on purchases and resupply orders.
A more significant source of perceived discrimination is in capital investment markets. Banks are often accused of not providing loans and other financial instruments for inner-city minority owned businesses. [22] Most research indicates that the banking industry as a whole is systemic in its abuse of the legal system in avoidance of "high risk" loans to minorities, pointing out that banks cannot provide facts backing up their assertions that they deny such loans to a high failure rate. [1]
On the other hand, most financial institutions and some economists feel that all too often, banks are accused unfairly of discrimination against minority owned businesses when said business is simply not worth such a credit risk, and that no one would find such a decision discriminatory if the business were not minority owned. These charges of reverse racism or prejudicial analysis are a longstanding source of controversy in the study of economic discrimination. [23]
An increasing number of economists and international commerce theorists have suggested that economic discrimination goes far beyond the bounds of individuals or businesses. The largest scale forms of economic discrimination, and the widest ranging, affect entire nations or global regions. Many consider that an open world economic system (globalization), which includes world bodies such as the International Monetary Fund (IMF), World Bank, and International Bank for Reconstruction and Development (IBRD), places countries at risk by practicing explicitly discriminatory techniques such as bilateral and regional bargaining, as well as asymmetrical trade balances and the maintaining of cheap force labor. Trade policies like the North American Free Trade Agreement (NAFTA) and General Agreement on Tariffs and Trade (GATT) are often regarded as financial measures serving to economically oppress Third World nations. [24]
This could include:
Affirmative action refers to a set of policies and practices within a government or organization seeking to benefit marginalized groups. Historically and internationally, support for affirmative action has been justified by the idea that it may help with bridging inequalities in employment and pay, increasing access to education, and promoting diversity, social equity and redressing alleged wrongs, harms, or hindrances, also called substantive equality.
Redlining is a discriminatory practice in which financial services are withheld from neighborhoods that have significant numbers of racial and ethnic minorities. Redlining has been most prominent in the United States, and has mostly been directed against African-Americans. The most common examples involve denial of credit and insurance, denial of healthcare, and the development of food deserts in minority neighborhoods.
Discrimination based on skin tone, also known as colorism or shadeism, is a form of prejudice and discrimination in which people of certain ethnic groups, or people who are perceived as belonging to a darker-skinned race, are treated differently based on their darker skin tone.
The Equal Pay Act of 1963 is a United States labor law amending the Fair Labor Standards Act, aimed at abolishing wage disparity based on sex. It was signed into law on June 10, 1963, by John F. Kennedy as part of his New Frontier Program. In passing the bill, Congress stated that sex discrimination:
Employment discrimination is a form of illegal discrimination in the workplace based on legally protected characteristics. In the U.S., federal anti-discrimination law prohibits discrimination by employers against employees based on age, race, gender, sex, religion, national origin, and physical or mental disability. State and local laws often protect additional characteristics such as marital status, veteran status and caregiver/familial status. Earnings differentials or occupational differentiation—where differences in pay come from differences in qualifications or responsibilities—should not be confused with employment discrimination. Discrimination can be intended and involve disparate treatment of a group or be unintended, yet create disparate impact for a group.
The gender pay gap in the United States is a measure comparing the earnings of men and women in the workforce. The average female annual earnings is around 80% of the average male's. When variables such as hours worked, occupations chosen, and education and job experience are controlled for, the gap diminishes with females earning 95% as much as males. The exact figure varies because different organizations use different methodologies to calculate the gap. The gap varies depending on industry and is influenced by factors such as race and age. The causes of the gender pay gap are debated, but popular explanations include the "motherhood penalty," hours worked, occupation chosen, willingness to negotiate salary, and gender bias.
Mortgage discrimination or mortgage lending discrimination is the practice of banks, governments or other lending institutions denying loans to one or more groups of people primarily on the basis of race, ethnic origin, sex or religion.
In the United States, the minimum wage is set by U.S. labor law and a range of state and local laws. The first federal minimum wage was instituted in the National Industrial Recovery Act of 1933, signed into law by President Franklin D. Roosevelt, but later found to be unconstitutional. In 1938, the Fair Labor Standards Act established it at 25¢ an hour. Its purchasing power peaked in 1968, at $1.60 In 2009, it was increased to $7.25 per hour, and has not been increased since.
Occupational inequality is the unequal treatment of people based on gender, sexuality, age, disability, socioeconomic status, religion, height, weight, accent, or ethnicity in the workplace. When researchers study trends in occupational inequality they usually focus on distribution or allocation pattern of groups across occupations, for example, the distribution of men compared to women in a certain occupation. Secondly, they focus on the link between occupation and income, for example, comparing the income of whites with blacks in the same occupation.
Occupational segregation is the distribution of workers across and within occupations, based upon demographic characteristics, most often gender. Other types of occupational segregation include racial and ethnicity segregation, and sexual orientation segregation. These demographic characteristics often intersect. While a job refers to an actual position in a firm or industry, an occupation represents a group of similar jobs that require similar skill requirements and duties. Many occupations are segregated within themselves because of the differing jobs, but this is difficult to detect in terms of occupational data. Occupational segregation compares different groups and their occupations within the context of the entire labor force. The value or prestige of the jobs are typically not factored into the measurements.
In the United States, housing segregation is the practice of denying African Americans and other minority groups equal access to housing through the process of misinformation, denial of realty and financing services, and racial steering. Housing policy in the United States has influenced housing segregation trends throughout history. Key legislation include the National Housing Act of 1934, the G.I. Bill, and the Fair Housing Act. Factors such as socioeconomic status, spatial assimilation, and immigration contribute to perpetuating housing segregation. The effects of housing segregation include relocation, unequal living standards, and poverty. However, there have been initiatives to combat housing segregation, such as the Section 8 housing program.
Race is one of the correlates of crime receiving attention in academic studies, government surveys, media coverage, and public concern. Research has found that social status, poverty, and childhood exposure to violent behavior are causes of the racial disparities in crime. Research conducted in Europe and the United States on the matter has been widely published, particularly in relation to discrimination by criminal justice systems.
Housing discrimination in the United States refers to the historical and current barriers, policies, and biases that prevent equitable access to housing. Housing discrimination became more pronounced after the abolition of slavery in 1865, typically as part of Jim Crow laws that enforced racial segregation. The federal government didn't begin to take action against these laws until 1917, when the Supreme Court struck down ordinances prohibiting blacks from occupying or owning buildings in majority-white neighborhoods in Buchanan v. Warley. However, the federal government as well as local governments continued to be directly responsible for housing discrimination through redlining and race-restricted covenants until the Civil Rights Act of 1968.
In the United States, despite the efforts of equality proponents, income inequality persists among races and ethnicities. Asian Americans have the highest median income, followed by White Americans, Hispanic Americans, African Americans, and Native Americans. A variety of explanations for these differences have been proposed—such as differing access to education, two parent home family structure, high school dropout rates and experience of discrimination and deep-seated and systemic anti-Black racism—and the topic is highly controversial.
In the United States, racial inequality refers to the social inequality and advantages and disparities that affect different races. These can also be seen as a result of historic oppression, inequality of inheritance, or racism and prejudice, especially against minority groups.
Structural inequality occurs when the fabric of organizations, institutions, governments or social networks contains an embedded cultural, linguistic, economic, religious/belief, physical or identity based bias which provides advantages for some members and marginalizes or produces disadvantages for other members. This can involve, personal agency, freedom of expression, property rights, freedom of association, religious freedom,social status, or unequal access to health care, housing, education, physical, cultural, social, religious or political belief, financial resources or other social opportunities. Structural inequality is believed to be an embedded part of all known cultural groups. The global history of slavery, serfdom, indentured servitude and other forms of coerced cultural or government mandated labour or economic exploitation that marginalizes individuals and the subsequent suppression of human rights are key factors defining structural inequality.
Gender inequality in the United States has been diminishing throughout its history and significant advancements towards equality have been made beginning mostly in the early 1900s. However, despite this progress, gender inequality in the United States continues to persist in many forms, including the disparity in women's political representation and participation, occupational segregation, and the unequal distribution of household labor. The alleviation of gender inequality has been the goal of several major pieces of legislation since 1920 and continues to the present day. As of 2021, the World Economic Forum ranks the United States 30th in terms of gender equality out of 149 countries.
The gender pay gap or gender wage gap is the average difference between the remuneration for men and women who are working. Women are generally found to be paid less than men. There are two distinct numbers regarding the pay gap: non-adjusted versus adjusted pay gap. The latter typically takes into account differences in hours worked, occupations chosen, education and job experience. In other words, the adjusted values represent how much women and men make for the same work, while the non-adjusted values represent how much the average man and woman make in total. In the United States, for example, the non-adjusted average woman's annual salary is 79–83% of the average man's salary, compared to 95–99% for the adjusted average salary.
Gender-based price discrimination is a form of economic discrimination that involves price disparities for identical goods or services based on an individual's gender, and may reinforce negative stereotypes about both women and men in matching markets. Race and class-based price discrimination also exists. Acts of discrimination often have legal ramifications, but whether gendered price disparities prove an intent to discriminate or constitute illegal discrimination can become a legal inquiry. Policies against gender-based price discrimination is not universally approved and enforced in the United States. Gender-based price discrimination is also described as pink tax.
The COVID-19 pandemic has revealed race-based health care disparities in many countries, including the United States, United Kingdom, Norway, Sweden, Canada, and Singapore. These disparities are believed to originate from structural racism in these countries which pre-dates the pandemic; a commentary in The BMJ noted that "ethnoracialised differences in health outcomes have become the new normal across the world" as a result of ethnic and racial disparities in COVID-19 healthcare, determined by social factors. Data from the United States and elsewhere shows that minorities, especially black people, have been infected and killed at a disproportionate rate to white people.