Self-perpetuating discrimination

Discrimination and Worker Evaluation
by Costas Cavounidis, Kevin Lang – #21612 (LS)

Abstract:

We develop a model of self-sustaining discrimination in wages, coupled with higher unemployment and shorter employment duration among blacks. While white workers are hired and retained indefinitely without monitoring, black workers are monitored and fired if a negative signal is received. The fired workers, who return to the pool of job-seekers, lower the average productivity of black job-seekers, perpetuating the cycle of lower wages and discriminatory monitoring. Under suitable parameter values the model has two steady states, one corresponding to each population group. Discrimination can persist even if the productivity of blacks exceeds
that of whites.

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derrida derider
derrida derider
6 years ago

This is a variation of the Schelling model, where discrimination is individually rational while being socially suboptimal. Basically it sets up a self-reinforcing cycle where the payoff to honesty, effort and education is reduced in the discriminated-against group, which leads to less of these, which leads to further “statistical” discrimination.

It comes under the broad heading of “market failure due to asymmetric information” – the most common and effective reason markets fail to meet social needs.

GrueBleen
GrueBleen
6 years ago

Now let me see … Wikipedia says that Schelling says that “…addressing global warming is a bargaining problem; if the world is able to reduce emissions, poor countries will receive most of the benefits but rich countries will bear most of the costs.”

That kind of clear, rational idiocy gives one very good reason to believe in the pronouncements of Thomas Schelling, doesn’t it. I am, however, having just little difficulty understanding precisely how the “discrimination is individually rational while being socially suboptimal”.

Besides, he won the Nobel Memorial Economics prize (2005), didn’t he ? Even Schelling would have to admit that such “collateral damage” is unimportant.

GrueBleen
GrueBleen
6 years ago
Reply to  Nicholas Gruen

Why do you imagine that this is a sensible question to ask me, Nicholas ?

Is there something unique about Schelling that makes his idiocy unquestionable ?

And apart from any such considerations, I still don’t see how the reported discrimination is “individually rational while being socially suboptimal” What exactly does the “individual ration[ality]” consist of as opposed somehow to supposed “socially suboptimal[ity]” ?

Usually I find Derrida Derider’s comments illuminating, but I just found this one obscure. So, if my comment wasn’t sensible, Nicholas, what comment should I have made ?

GrueBleen
GrueBleen
6 years ago
Reply to  Nicholas Gruen

“Evidently.”

Yep, another of your deeply illuminating comments, DD. You’ve been making quite a few of them of late.

conrad
conrad
6 years ago
Reply to  GrueBleen

That’s easy GreenBlue. Here’s an example. Let’s say I want to employ someone to do some maths for me. In case I’m feeling bigoted, I won’t bother employing white Australians, because they are likely to be poor at it compared to other groups. This will save me time and effort. I can just chuck out all applications with names that don’t sound like they come from East Asia or Russia where people can do maths. So it is individually rational for me.

The problem with this is that if everyone starts doing it, then it will become rational for white Australians never to bother learning maths, since they know they won’t get a good paying job using these skills anyway. This might lead to lots of socially undesirable things. They might be angry and resort to violence because they can’t get good paying jobs, it might become more expensive to employ anyone with these skills because the white Australians who could have been employed were removed from the pool etc. .

Of course, white Australians are in the majority, so this is not such a good example since it is unlikely to happen on a large scale, but if you do it to minority groups on a large scale, then you can potentially end up with groups that simply don’t share the ideals of the majority. For example, part of the endemic race problems in France are surely due to this. People won’t employ Arabs due to negative stereotyping, so you get high unemployment and many of the young kids wonder why they would bother with traditional study etc. anyway (this is clearly rational in both cases — one gets you the likely best employee, the other means you don’t waste your time on something that won’t be useful). So many simply begin to lead lifestyles that are not very socially productive. This is expensive because crime is expensive and dangerous because more radical groups work out ways to capitalize on the resentment it causes.

GrueBleen
GrueBleen
6 years ago
Reply to  conrad

That’s a lovely story you’ve made up for us, Conrad, but I just don’t see it’s applicability to the situation that Cavounidis and Lang were reporting on. I may not be entirely with it, but I think, from my reading of the abstract, that C&L were reporting on discrimination that happens to American negroes after they’ve been employed – ie after all the costs of the employment process, and necessary training and acclimatisation etc. have been paid.

I’m sorry, but I just have great difficulty classifying that as “individually rational” or indeed in any sense, rational. But please enlighten me.

conrad
conrad
6 years ago
Reply to  conrad

GB — if you are going to do poorly at something, then it is clearly rational to do something else. If you are doing poorly at something because of discrimination, then it is rational to do something where people cannot stop you via these methods. If this is the job-market, then this clearly limits what you can do.

If you are not doing what you are best at because of discrimination, presumably in the best case, on a broader scale, this means a loss of workplace productivity. Of course, you might also feel animosity etc. towards those who discriminate against you, so the consequences can be far more wide spread.

GrueBleen
GrueBleen
6 years ago
Reply to  conrad

Way too deep for me, Conrad. I think I’ll just stick with the idea that isn’t rational – by which I mean sensible and/or profitable – for an employer to go through all the effort and cost of recruiting, employing, acclimatising and even training a black employee if you than summarily sack him or her at their first “negative” (whatever that means) “signal” (whatever that means).

Unless you’re saying that employers are doing very poorly at employing blacks and they should do something else instead.

derrida derider
derrida derider
6 years ago
Reply to  conrad

Way too deep for me, Conrad

Evidently.

Chris Lloyd
Chris Lloyd
6 years ago
Reply to  conrad

GB in classic trolling style has latched on to your phrase “individually rational” and is just going to run with it – never mind that you were referring to the Schelling model and not claiming that the discrimination in the article was rational, merely that the result was of the same nature.

While we are on the topic, Schelling says that “…addressing global warming is a bargaining problem; if the world is able to reduce emissions, poor countries will receive most of the benefits but rich countries will bear most of the costs.” Hard to see how anybody would disagree with that. It’s a fact. Could you ever argue the reverse? GB would no doubt shriek that we have a moral responsibility to make a unilateral sacrifice because our ancestors produced most of the warming. Sigh.

Moz of Yarramulla
Moz of Yarramulla
6 years ago

Is it fair to sum that up as “if you look for problems you will find them”?

That’s slightly different to Conrad’s scenario (which also sounds plausible), but I’m reading the abstract as concerned with the aphorism “everyone breaks the law, what matters is who gets punished”. Which is also true in many countries.

I can imagine that if you watch a group of staff for infractions or problems you will find them, but not see the same problems in an equivalent group of staff that you’re not watching. Regardless of the distinguishing character of the groups. When that becomes social knowledge “everyone knows white men can’t jump” you would end up with the self-reinforcing issue described.

I see that in my field (IT) where for reasons that seem utterly stupid to me some employers will not even interview applicants with non-Anglo names. There is, however, a first-mover advantage in not doing that if you can somehow find useful staff in the pool of discriminated-against. Some places I’ve worked deliberately employ STEM-qualified women because they ask for lower salaries, for example.