Discrimination in Hiring: Evidence from Retail Sales
Early Career Reseach Award
More than fifty years after the U.S. prohibited employers from using the race as a factor in employment decisions, the persistence of racialized labor market outcomes—including segregation and pay gaps—remains among the most striking features of the labor market. Controlling for education and experience, black and Hispanic workers have significantly lower employment rates and wages than white workers, especially for less-educated workers (Altonji and Blank 1999, Ritter and Taylor 2011, Lang and Lehmann 2012). There are two prevailing theories of employment discrimination. Taste-based discrimination (Becker, 1957) is the simplest, and perhaps the presumptive, theory of discrimination. If employers have an intrinsic taste for hiring same-race workers then they lower the hiring bar for their own race, leading to labor market segregation and wage disparities (e.g. Black, 1995). Screening discrimination (Cornell and Welch, 1996), although less prominent in the literature, poses an alternative theory of racialized labor market outcomes. This model adapts the classical Phelps (1972) theory of statistical discrimination to allow employers to be better at screening same-race applicants, and is consistent with the greater likelihood that managers hire their own race. This assumption is corroborated by evidence from psychology, linguistics, and legal scholarship that finds that people communicate more effectively with those who share the same background.