Economic discrimination
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 charge different buyers different prices based on their willingness to pay.
History
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, 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.
Causes
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". There are three main causes that most economic theorists agree are likely root causes.Animosity
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. 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.
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.
Cost and revenue
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.
Efficiency
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.
The relations between economic theory, efficiency and discrimination, or "discriminatory tastes" are much more problematic. Some critics of the concept of a "taste-based" view of discrimination have cited many reasons. One claim against this view is that viewing discrimination as a consumer preference outside of the scope of regulation could make economists indifferent towards its negative effects. Other reasons use the fact that discrimination often exists as a system which feeds on itself as evidence that it can't be viewed in the same way that people could prefer McDonalds over Burger King.
History and tradition
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. 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.
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. 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. 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.
Forms
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.Against workers
Most forms of discrimination against minorities involve lower wages and unequal hiring practices.Wage discrimination
Several studies 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. 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. 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.
A recent study 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 show similar patterns for Hispanics. Studies involving women found similar or even worse rates.
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.
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.
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.