Ch. 11: Employment and Earnings Policy

• Topics already covered: – 1) verified existence of sex

differences; – 2) presented HK explanations; – 3) discrimination.

•  This chapter: – 1) Describe government policies

designed to combat labor market discrimination.

– 2) Discuss evidence as to effectiveness of such policies.

Origins of Discrimination Laws

• Early discriminatory laws:– Designed to protect women from

too much exertion, bad language; or provide protection for fetus.

•  Marriage or pregnancy “bars”: – Explicit limits based on either;

such as rules against hiring married women or pregnant women.

– In US: overt “bars” gone by 1950s.

Anti-Discrimination Laws

• First laws originated under President Kennedy.

• Equal Pay Act of 1963: – First federal anti-discrimination

law – Mandates equal pay for equal

work.

• Key is to define equal work: – Work that requires equal skill,

effort, responsibility, and performed under similar working conditions.

Most Important Anti-Discrimination Policy

• Title VII of Civil Rights Act of 1964:– Cornerstone of US anti-discrimination

policy; – Much broader than 1963 Act;– Amended several times.

•  EEOC enforces Title VII:– Equal Employment Opportunity

Commission; – Independent 5 member commission;– How active depends on which political

party in power • Power exerted via $$ given to EEOC and

who appointed head of Commission.

• EEOC enforces following laws:– ADEA of 1967 (Age

Discrimination in Employment Act);

– Equal Pay Act of 1963: (EPA)– Titles I and V of the Americans

with Disabilities Act of 1990– Sections 501 and 505 of the

Rehabilitation Act of 1973– Civil Rights Act of 1991

Affirmative Action

• History: – Established by Executive Order 11246,

signed in 1965 by President Johnson;– Not applicable to women and enforced for

them until 1972.

•  Law requires any company doing business with fed govt (with contracts of $50,000 or more) to agree to not discriminate in any aspect of employment. – Usually affects large firms: universities,

defense industry.– Many large firms not required to follow

details of law do so anyway (to avoid discrimination suits arising from other legislation).

Details of Affirmative Action

• To determine which firms need an AA plan: – Firm documents employment by

sex/race; – If proportions differ from

proportions “in available labor force” then firm must file AA plan.

– Plan includes goals and timetables and methods for implementation.

• Difficult to figure out and implement.

Criticisms of Affirmative Action

• Some critics of AA accuse it of:– establishing quotas (quotas actually

forbidden by the Exec. .Order)

– imposing reverse discrimination (although forbidden by the E.O.);

• Reverse discrimination: when less qualified female or minority hired in place of more qualified white male.

• Some critics say it:– stigmatizes minorities.

– simply shifts minority workers from covered firms to uncovered firms.

Supporters of Affirmative Action

• Because forces diversity in hiring, will remove employment barriers.

• Even if some reverse discrimination, can be justified as remedy for past discrimination.

• Once diverse workforce created, benefits will be seen. – Helps in selling to diverse public;

– Helps ensure firms’ future survival in face of changing workforce (white male no longer majority of workers).

Effectiveness of Anti-discrimination Programs

• Yes many employment outcomes have changed over time.– How much due to laws? – Hard to say.

• To analyze, need lots of data from lots of firms.– Then compare firms covered by AA and

those not covered: any differences in growing diversity? Yes.

– Impact seems to be strong for African American women, small for white women.

– Biggest impact from “casting a wider net” in hiring;

• Helps to assure that minority hires are equally qualified.

• Even when minority hire is less qualified, actual job performance is not lower.

Future of Affirmative Action

• Because courts play pivotal role and political party in power controls the courts, future is evolving. – Courts becoming increasingly conservative.– Some AA has been banned.

• Current cases at University of MI:– Grad school: race used as a factor (adds

points but no quotas);– In 2002, US Court of Appeals said yes

constitutional; – Currently at Supreme Court.

•  Note: when AA banned in California: – Took a couple of years for state also to ban

favoritism for legacies or those supported by elected officials.

Comparable Worth• One alternative to AA.

– Would modify Title VII: mandate equal pay for jobs of equal value.

– So even very different jobs could be deemed to be of equal value.

– Complicated process: HOW determine which jobs of equal value?

• Need job evaluation. – 1) Describe all jobs in organization; actual

tasks detailed.– 2) Identify job attributes (or compensable

factors):• skill, effort, working conditions, etc.

– 3)  Each job rated on each compensable factor (given a #).

– 4)  Assign weights to each factor and produce total score.

– 5)  Use JE results to determine pay.

More on Comparable Worth

• Job evaluations:– Very complicated;– Different consultants find very different

results for same firm.

• CW is much opposed by most economists (remove wage setting from market and put it in hands of administrators).

• Studies of CW:– Public sector CW laws in four states:– Could eliminate almost half of gender

earnings gap.– Would cause 8% in business costs.

• May unemployment.• Still controversial.