Discrimination in labor market

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DISCRIMINATION IN THE LABOR MARKET 1

Khoza Hlelisile

Managerial Economics

Dr Shelly

25 March 2018

DISCRIMINATION IN THE LABOR MARKET 2

INTRODUCTION

Managerial economics is concerned with the application of the economic theory and processes in

the decision making of business and administration. It lays down the rule for enhancing the

approaches adopted for effective decision-making. The main aim of managerial economics is to

assist managers to detect the effect economic forces have on the organization and demonstrate

the economic consequences resulting from the managerial behavior. It liaisons the conventional

economics with the science of decision making, to provide the tools necessary for effective

managerial decisions.

In this paper, the study of female labor participation and the wage discrimination in the market is

presented. The paper studies the gender discrimination against the women in the marketplace

which has negative consequences as it diminishes the talent available in the economy. The

gender discrimination can occur because of many social practices related to a religious or

cultural viewpoint which may have severe economic consequences. The focus of the paper is on

the gender gap between man and woman in the workplace. Joan Robinson explains the gender

gap derived at the earliest time. According to him, if an employer is a monopsonist and the

elasticities of the supply of labor in terms of man and women differ, then it is profitable for the

owner to practice wage discrimination, i.e. to pay a higher wage to those groups that have a

higher elasticity of supply.

The paper is centered on the economic consequences that result in wage discrimination between

the man and women and does not deal with other aspects of social, physiological, or religious in

the paper. The paper develops a conjecture model that provides with an opportunity to explore

DISCRIMINATION IN THE LABOR MARKET 3

the implications of economics based on gender discrimination in the labor market. The

individuals in the labor market are born with a set of entrepreneurial skills. These skills

determine how much human capital is to acquire, and whether the skills fill in the space for

managerial positions or that of workers.

The organization makes the decision as to which individual is compatible with the position and

makes decisions on the level of return gained from it. The paper studies a possible scenario

where a model is created for gender discrimination which shows the exogenous barring from

managerial positions of the women. It exhibits the discretionary practices in the labor market

which affects the overall market, the equilibrium wage rates, allocation of the respective talent

across the positions of managers and workers, and the return on investment in training of the

individuals for the managerial positions crucial for economic growth.

The study shows that the discrimination leads to a lower equilibrium in wages for both the

workers male and females which also mitigates the investments made in human capital by all the

worker’s man and women. The study shows that organizations which discriminate lead to lower

talent in the managerial positions which results in the form of few innovations in the economy

which accounts for the reduction in the average productivity level and also reduction of the

technology adaptation by the workers. Both of these accounts for lower economic growth. The

evidence that the average earnings of the women are lower than that of man because of the

business segregation coincides with the pragmatic evidence about the gap in gender wage.

The gender discrimination in the labor market is usually observed in developed countries with

the difference in the rate of pay. The difference in gender discrimination in developing countries

DISCRIMINATION IN THE LABOR MARKET 4

is observed to be in the form of differential access to wage employment. To test the implications

made the particular case of USA is taken. The paper uses monopsony perspective for studying

the gender wage gap. The monopsony framework is similar to the phrases which include

monopolistic competition, imperfect competition, upward labor supply curve, or infinite labor

supply elasticity.

Issue Analysis

According to the recent study conducted in the USA in the April 2017, the Americans women

and the wage gap factsheet shows that the median annual pay of the women who work full-time

holds up to $40,742 while the median of the man pay of the overall year is around $51,212. The

result illustrates that the United States pay women 80% cents to the women in contrast to every