4 Economic Discrimination

Harrison Hensley, Maria Isidoro-Chino, and Yudis Subedi


Income inequality is one of many major issues that has been known to contribute to economic discrimination. Economic discrimination can be defined in one of two ways. Societal economic discrimination is the “long-lasting inequality in economic well-being among individuals based on their color, gender, or ethnic ties” (Cain 2). Market labor discrimination is defined as the “differences in pay or wage rates for equally productive groups” (Cain 2). In either case, economic discrimination is a concept that takes into account several economic factors that, in essence, contributes to the inequality seen across the United States and around the world. It is still a growing issue among many developed countries and among developing nations.

Gary Becker’s book The Economics of Discrimination (1957) has been a pivotal influence on this topic. He raises awareness to this growing issue by particularly focusing in on wage rate and how it arises as a result of productivity differences and pay differences among two group (African Americans and whites) when considering both discriminatory and non-discriminatory factors separately (Blau and Ferber 316). He also focuses on the effect of wage rate in terms of racial preference among customers, co-workers, and employees. Within a competitive model, Becker analyzes the relationship between “racial prejudice among whites and discrimination against minorities” (Charles and Guryan 1).

The current chapter discusses several implications of economic discrimination such as racial discrimination and the wage gap across several groups in the efforts to see how such factors contribute to the growing trend of income inequality. An overview and analysis of  Becker’s (1957) work will also be introduced and discussed . We will also be discussing trends across the United States, regionally and across different cities, as well as the legal system and its contributions to economic discrimination, and the concept of intergenerational income mobility and its impact on income inequality.

The Economics of Discrimination: An Overview

As stated before, Becker (1957) focused on racial wage gaps and prejudice faced in the labor market. The model assumes a perfectly competitive economy with constant returns to scale, where whites and African Americans are seen as perfect substitutes for production (Charles and Guryan 4). Within the model, prejudice was measured as an aversion for contact amongst the two races and utility was dependent on employer profits and the employment of black individuals, where for each black individual brought into the labor market, there was disutility that came with these individuals (Charles and Guryan 4). The conditions for the model state that labor would be hired up to the point where marginal product is equal to marginal costs for every one-unit of production increase. In essence, the wage of a black individuals also takes into account the prejudice (or disutility) that they face by employers (Charles and Guryan 5). This resulted in some controversy to the extent in which the wages of black individuals were weighed more heavily than the wages of their white counterparts resulting in employers to hire more white individuals than blacks. The reasoning behind this was that it was more costly to hire black individuals and the more prejudice an employer was, the less likely they were to hire a black individual and were more inclined to hire white individuals. Black individuals are more likely to be hired by less prejudice employers because they are seen as the cheapest form of labor, in terms of utility (Charles and Guryan 5).

There are several predictions that arise from this model. One is that even though prejudice plays a role in the number of black and white individuals hired in the labor market, it does not determine the racial wage gap that is seen (Charles and Guryan 5). This means that prejudice is not necessarily a factor that contributes to the wage differences seen among blacks and whites because black individuals can be hired by employers who do not discriminate against race and could eventually be hired for the same positions that white individuals are hired for. However, another prediction made from this model is that there is, to some extent, a systematic relationship between the distribution of the marginal level of prejudice among employers and the wage gap (Charles and Guryan 6) which ends up affecting the number of black employees in the labor workforce. When taking this into account, it was found that there is a negative relation between the number of black individuals employed and the wage gap such that as more black individuals are hired, the wage gap becomes bigger, when holding level of prejudice constant. When holding the number of black individuals in the labor force constant, the higher the level of prejudice within the distribution of employers, the more likely it is to affect the wage gap among the two races (Charles and Guryan 7).

The Employer Discrimination Model takes into account racial prejudice that employees may face when it comes to the hiring process and the amount of wages that they work for. It essentially demonstrates that employers are more likely to hire white individuals meanwhile the labor of black individuals is seen a cheap, in terms of utility, therefore an abundant of black individuals are only hired for that matter, otherwise they are less likely to be hired at all. This contributes to the racial wage gap to the extent in which individuals who work for low paying jobs end up receiving lower wages for their work. Black individuals are often employed within these jobs, therefore, they earn less. On the other hand, individuals who work for high paying jobs end up receiving higher wages than their counterparts. Since white individuals are more likely to be seen as fit for these jobs, in the employer’s eyes, they earn more regardless of  the work that they do. In essence, racial prejudice is one of the many possible factors that contribute to the economic discrimination seen within society.

Discrimination across the United States

There are other possible contributing basis to economic discrimination. Some of the basis that develop discrimination are wages, job availability, workers’ age, ethnicity, race, color, sex, disability and religion. People also discriminate others on an ongoing rate in business-like banking services and even when responding to the prices or availability of goods and services. Among the different issues of discrimination, racial discrimination cause disparity, implication and violation of human rights through making differences in earning and employment opportunities in the United States. Despite having an equal employment policy in the United States, there have been many issues of discrimination from the employers. As per the National Bureau of Economic Research, conducted to measure the impact situational factors like the job application pool had an employee selection decision influenced by unconscious bias (Francis 2019). In this study, there were 10 black and white applicants asked to apply for a job in a small company. During the process of selection, the candidates with white-sounding names received 50 percent more callback than candidates with black-sounding names. The study concluded with a stereotypical term, without regard for the candidate’s race and color, only the least number of black candidates are able to get hired from the majority. Today’s global digital world presents even more implications related to addressing unconscious biases. Nowadays most of the recruiters use social media to source desired candidates for various positions!  Social networks like Facebook and LinkedIn allows for increased discrimination in employment. Some researchers found that self-reported racial/ethnic discrimination is related to a risk for health problems, including mortality, psychiatric disorders and cardiovascular diseases (Williams et al 1997). Even the doctors are also becoming the victims of employment discrimination. Like, a doctor can be discriminated against in terms of his/her color, sex, religious beliefs and disability.

Brian B. Boutwell states that while a single individual or a group can perceive that discrimination against their group exists, but they do not always feel that they, themselves, have been disrespected or discriminated against (2017). It’s important to understand that people who are likely to discriminate against others need to analyze how important it is for themselves. In the United States, the majority of many identity groups believe that discrimination exists against their own group, party or organization. Popularly, most immigrants face high levels of discrimination in the United States. Immigration status discrimination occurs when employers treats an individual differently based on their citizenship status. This type of discrimination deals largely with abusive requests for paperwork related to one’s immigration status and has a longstanding history in the United States as compared to the other countries of the world.

Al Szymanski states that black people are becoming genuinely integrated into the U.S. economic structure even though there is discrimination against blacks in the U.S. working class (1975). Even today, black people believe in a handful of traditional occupations. They consider agriculture labor, domestic work, and certain menial labor. Some of the firms assign black minorities to unskilled and degrading jobs creating inequality in the labor market. Paying less to blacks than whites makes sense to perpetuate racism and systematic inequality. Such racism and inequality can be addressed by changing policy in public education, employment discrimination, social safety net system and the criminal justice system. Involving in the higher education is the most effective way to change the labor income gap.

According to Nazroo, both the United States and the United Nations have socio economic inequalities, underpinned by racism, that have caused ethnic inequalities in health (2003). Increasing such inequalities in different times causes discrimination among individuals from different backgrounds and ethnicities. Studies also have found that Asians, Blacks and Latinos encounter very elevated levels of racial discrimination even when purchasing a home or getting services in hospitals. Today, many people face stunning discrimination in the evaluation of mortgage loan applications. The required application for people seeking a loan to buy a home includes information about the buyers’ ethnicity, race and sex for monitoring purposes. When the buyer denies filling out all this information, the loan officer or originator is supposed to do so if the form is completed in person. Here, mortgage discrimination is highly expected even if the buyer is well-qualified for the loan because of the loan officer’s nature. The perceptions of discrimination are mainly related in actions due to the attitudes of individuals that they interact with.

Comparing the U.S. to Other Countries in Terms of Discrimination

The United States has been a very multicultural country where many people practice different cultures. Here, the people speak different languages and follow different religions in different areas. The majority of the people speak English though Spanish is considered to be the second language in official use. Despite this fact, people speak their own mother language among their groups and societies. The most important reason behind the United States becoming one of the multicultural societies is mainly due to most foreigner’s belief that the United States is the land of opportunity. Many immigrants around the globe travel to the U.S with hopes and dreams of attaining economic stability, as well as a better style of life. Unfortunately, the minority groups in the US are often subject to discrimination varying from racist comments to violent hate crimes. Today, racism and discrimination are existing most strongly in conservative regions like the south and Mid-West, as well as in small towns and rural areas. Generally, a formal racial discrimination was largely banned in the mid-20th century and it came to be perceived as being socially and morally unacceptable. Even then, some research shows a large section of Americans admitting to holding discriminatory viewpoints, so some people claim that the US is a country not yet achieved racial equality (Kleck 1981). As compare to the other nations around the globe, the US has increasing discrimination that mostly occurs due to racism or colorism, a form of racially-based discrimination where people are treated unequally due to the color of their skin. There have been many issues of discrimination in American history and frequent amendments to US laws, but also there are loopholes where people are denied goods based on their race. Most of the racial stratifications continue to occur in employment, housing, education, lending and government. As of today, the major racially and ethnically structured institutions are Native American reservations, boarding schools, and naturalization and immigration laws, and internet camps. Different countries of the world look for different ways to minimize discrimination against their new and permanent citizens. Canada and Australia are known to have a different strategy to solve inequality and discrimination against immigrants. They used a merit-based point system to determine who is qualified, assigning a number of points to criteria like education, language skills and employment history. It’s known that the United States is also politically preparing to emulate the Canadian and Australian system which could be beneficial for undocumented immigrants who works in many low-skills industries like farming and construction.

Racial Discrimination

Racial discrimination has been ingrained within our society for years and before the Civil Rights movement existed in a far more open form. Now as the legal and moral code of the United States has evolved there is more reason for economic analysis of the current situation of racial discrimination. Empirical analysis can be hard in this case. Market-based theory would predict the elimination of racial discrimination. This should occur in perfectly competitive markets as employers would only hire employees that are best fit for the particular position. This would lead to the least costly and most efficient means of production. Hiring someone who may be less skilled or less suited for the job would result in higher overall production costs and make the firm less competitive. Since firms are found discriminating and are therefore less efficient, there must be other external factors that influence economic discrimination. Theoretically a supplier of any good or the recruitment of labor should be unbiased. A supplier should be willing to sell to anyone willing to pay a certain price. A recruiter should only be worried about the skills that individual that influences their productivity. There is, however, a key component related to transactions regarding labor and services: relationships. The largest cause of discrimination in the workforce is employee-employee relations. Where historically white blue-collar workers would require compensation to work alongside Blacks. Theoretically shareholders would prefer the unbiased recruitment of labor where the most unbiased firms would be more successful maximizing utility. Other more discriminating firms would be pushed out creating a sort of Darwinism effect. Whether intentional or not, discrimination occurs within the workplace and within transaction due of outside social pressures or underlying biases. Which does no coincide with standard economic theory which would predict firms be unbiased. This is why it is so hard to quantify economic discrimination in real terms. Underlying social aspect of friends and referrals within a company, in conjunction with difficulty to identify the difference between statistical discrimination that is calculated using the marginal productivity of an individual and taste-based discrimination for individuals that have an affinity for others regardless of their economic productivity (Kenneth 1998).

Education has always been key when looking at the amount of potential income of individuals. The current system of education and social class tends to have more negative impacts on Blacks and minorities. Black men in general receive a much lower income return to their education than White men.  In 1960 Blacks with high school educations earned on average $1,400 less than that of Whites with the same level of education and $3,800 less than that of college educated individuals (Wright 1978). Segregation and unequal opportunity played a large role. Since the Civil Rights movement the Black-white earning ratio has risen from about .65 to .75 in 2009 (Sundstrom). This social class pertains to a person’s overall income in relation to their productive capacity. In general managers and higher positions tend to receive higher wages than that of the workers under them. Whites tend to hold these positions far more than Blacks. Blacks are also more concentrated in the working class. It is found however, that the Blacks and Whites in any particular working position have a similar level of education which tends to not be indicative of the overall level education between Blacks and Whites. An issue arises when Black tend to be unable to receive the same level of educational attainment whether that is from unavailability of opportunity or social blockades (Wright 1978).

While Emancipation freed slaves under the law, many former slaves were still tied to agriculture down South through sharecropping and tenant farming. There wasn’t much opportunity for the south for other types of labor and Black were especially biased towards agriculture. This was in large part due to education of African Americans in the South. Illiteracy was as high as 80.8% among Blacks at this time with 83.7% illiteracy in the South alone in 1870. In contrast only 12.5% of Whites were illiterate at this time and only 25.5% Southern WHites were illiterate. This number drops to 25.8% for Southern Blacks in 1930 and was one of the factors contributing the Great Migration of African Americans from the South that started around WW1. The literacy rates in the North tend to be much higher which corresponds with higher levels of education. This leads to more opportunity of high-skilled and managerial position that pay more. Northern states have tended to be a place of less-discrimination and more overall opportunity (Sundstrom).

There are racial socioeconomic patterns within ethnic groups, socioeconomic patterning of health across ethnic groups, age, the life course, and migration, the impact of racial discrimination and discrimination on health. There seems to be an underlying problem of data as it can not fully explain the dimensions involved in this problem relating to equality. This part of the underlying problem that minorities deal with relating to income inequality as well. The study by James Nazroo concludes that some of these differences can be accounted for individual risk. This typically varies across racial groups. In addition. Racism is not only experienced individually but is a social force that influences policy and implementation (Nazroo, James Y.).

The worsening health of African-American health can partially be attributed to growing income-inequality. Overall life stress can cause health decline in the long run. Structural locations of Blacks as well as experiences related to racial bias can affect psychological processes relating to wellbeing. In order to measure discrepancies between overall life quality of Blacks and Whites and relate that to health, the author surveyed 1139 adults (Williams, David R, et al.) Whites tended to have higher educational attainment, higher household incomes, smaller household size, held higher end working positions, had lower levels of stress relating to discrimination, and lower level of stress overall (Williams, David R., et al.) This means that African Americans need to spend more money and more resources dedicated to health related causes. With higher costs of healthcare social programs such as Medicaid and Welfare are sometimes the only option for lower-income individuals. Since Blacks tend to have more health issues related to their social-economic status their reliance on government programs is higher which is why government aid can be an important factor is providing more equal opportunities.

The Wage Gap

The wage gap is referred to as the discriminatory pay that is seen between men and women, as well as between minority groups, and within minority groups in terms of the pay gap between men and women of the minority groups. Minorities are also impacted by the amount of pay they get as opposed to a white male. In essence, economic discrimination is the result of such differences in pay seen among many groups within society to the extent in which it impairs the distribution of income among these individuals. It also impairs the likelihood of these individuals to see any improvements in their life considering that this is not the only type of discrimination that many end up facing (besides pay there is race discrimination, which is discussed in the previous section, and intergenerational mobility, discussed in the next section).

Around the 1970s, there was a societal transition in which it was commonly accepted to see women switch their roles as caretakers of the household to working jobs in the labor force market, a male-dominated industry. One of the many outcomes that helped make this transition is the use of birth-control pills among young women. The pill effectively delayed both marriage and motherhood which opened up the opportunity for women to work for higher wages in the labor market (Goldin and Katz [2002] and Bailey [2006]). Women were able to hold certain professional jobs as a wide variety of white-collar jobs became available to them (Borghans, Ter Weel, and Weinberg 4). Such jobs entail administrative and clerical work, computer work, etc. At this point up to the early 1990s, the gender wage gap shrank rapidly as an increase in “people” task jobs fairly grew in demand (Borghans, Ter Weel, and Weinberg 1). Such “people” tasks essentially fell in line with the rise and increase use of computer and innovative work practices as many jobs in the manufacturing sectors vastly shrunk (Borghans, Ter Weel, and Weinberg 1). Rather than needing employees to perform physical labor, in Britain, Germany, and the United States, there was increase in demand for employees who attained excellent people tasks. In fact, the majority of these jobs had higher employment of women than men (Borghans, Ter Weel, and Weinberg 2).

However, it was also the case that women were often put into lower-paying occupations, industries, establishments, and occupations within establishments (Bayard et al. 2003). This indicates that even though there was a rise in the employment of women during the late 1970s and women have gained more of an opportunity to attain higher education and do the same jobs that men usually dominated, they faced segregation to the extent in which it was difficult for them to get these higher paying jobs and were often put to do lower paying jobs. Workplace authority is also a factor that drives many of the gender wage gaps seen in industries and firms seeing that “it is an important aspect of an individual’s development in the workforce” (Bishu and Alkadry 72).  Bishu and Alkadry state that “disparity in access to workplace authority is a condition where individuals who are equally qualified are denied access to authority opportunities based on non-work-related attributes including race, gender, and/or other factors” (72). In fact, in many gender-based workplace authority disparities make the following inferences: women are often denied access to position of authority in the workforce and that if they are given a position of authority, they often exercise a different level of authority and face lower economic returns compared to their male counterparts (72). In essence, this shows that though women have prevailed in the workforce for the past couple of years and have faced an increase in wages they are able to earn, they still face many constraints that prevent them from moving up the economic ladder and it also takes a toll on how they are perceived in the workforce. They are often viewed as not being able to do the same jobs or exhibit the same amount of work as their male counterparts can complete/do.

The hiring and promotion process of a job often shows signs of discrimination among women and minorities within the workforce and within certain jobs/careers. It was found that women and minorities are often denied opportunities that could eventually enhance the benefits and pay that they are able to receive. (Bishu and Alkadry 72). The glass ceiling phenomenon is a phenomenon that creates artificial barriers which discriminates and lacks the equal opportunity of individuals being promoted to higher positions that pay relatively higher wages (72). In many cases, individuals who are women or minorities do qualify for such higher positions, however, these barriers prevent them from actually working for these higher positions and the higher the position is and the more that position pays, the more difficult it is for women and minorities to  actually work and be qualified (in the employers eyes) for these positions. Not only does this phenomenon result in a lack of equal opportunity for all individuals, it creates unequal job-related opportunities in terms of income and occupational status (Bishu and Alkadry 73). Women and minorities end up making less than their white male counterparts.

The leaky pipe and sticky floor effect are two other phenomenon that put women and minorities at a disadvantage during the hiring and promotion process in the workforce. At different stages of their career trajectory, women and minorities face disadvantages that cause them to “leak out” before they are able to reach any sort of management positions or any higher positions that pay higher wages (Zeng 2011). This means that these individuals tend to face difficulties even at the starting position that they attain which ends up affecting their likelihood of moving up to higher positions or to attain any management positions. The sticky floor effect is the concept in which women and minorities are often placed and stuck in lower paying positions that they have a difficult time getting out from (Zeng 2011). This ends up creating this gap of representation in which women and minorities are less likely to be represented among higher occupations within their career while predominantly represented within these lower occupations. It also creates this distortion among income distribution between these groups and their male counterparts in which lower paying position tend to pay out lower wages partly because they are seen as inferior jobs to do which ends up creating this stigma that both women and minorities are not fit to work any other position that does not fall into the category of a low-paying occupationa (Bishu and Alkadry 73). In fact, individuals who face discrimination within the workforce are often automatically excluded from the opportunity for growth and promotion opportunities.

Representation of both genders in the workforce has also been controversial. There are often more women in redistributive agencies( e.g., dealing with clients) as opposed to men who there is usually an abundance in both distributive and policy influencing agencies (Bishu and Alkadry 74). Women are also more likely to be hired in occupations within the concentrations of education and social services while men tend to be hired in occupations within the concentrations of STEM fields and finance occupations (Bishu and Alkadry 74). Not only does this result in misrepresentation of individuals in such occupations, it creates this gender-based discrimination that goes back to how women were seen as prior to the 1970s. Prior to the turn of the 1970s, women were seen as the caretakers of the household or were primarily teachers meanwhile it was more common to see men do jobs that were labor intensive. This, in essences, shows that even though there have been more opportunities for women and are able to attain the same jobs and wages as men, they still face difficulties and societal norms also contribute to the ability for women to really move up within occupations and difficulties in getting the benefits that men are easily given.

In general, the gender wage gap is something that has raised some issues ever since it became common to have women join the labor force. Though societal norms have changed and there is more opportunity for many individuals, there are still difficulties that they face that contribute to how much such individuals end up earning and their ability to move up in terms of their economic classes. Such difficulties are usually present within the jobs/careers they work for seeing that they end up earning a certain wage based off of their current position and the skills that they have. Even though women or minorities have acquired the qualities and skills that they need to move up a position, the promotion and hiring process are often rigged so that they end up excluding such individuals or making it difficult for them to actually become managers or CEOs. If they were to acquire such positions, there are much different expectations expected from women and minorities compared to their white male counterparts.


The United States has been known as the land of opportunity. Joseph P. Ferrie describes it as a true “city on a hill (Fierre 2005).” The U.S. during the 19th century proved to be a time when the socio-economic status of an individual entering the country was by no means going to hinder the potential wealth that individual could achieve. An immigrant from Europe could start a business that would make him a millionaire or a family with nothing could start a farm and be far more well off than they could have ever imagined. The Unites States did not have the societal walls that barricaded people from high level success like other countries at the time. This was what was known “American Exceptionalism,” a status that has declined in recent years (Fierre 2005). Through the early part of Americas history there had been an abundance of land that allowed Americans and immigrants alike to begin small farms. Agriculture, until about 1917, was the dominant industry that contributed to U.S. GDP and before the use of extensive technology in production, farming had low fixed costs (Smiley 1994). The agriculture sector began to replace the small-farm business man and farm hands with a new invention, the tractor. A large decline began in the 1930s during the Great Depression when many small farmers and families were forced of their land. The late 18th century was also an era of big business in the U.S. and this time was one the closest forms of competitive capitalism in U.S. history. The data concludes that the United States was exceptional through the 1920s but began to decline until about 1950 (Fierre 2005). The Economic Golden Age from 1947 to 1973 was actually a time of growing income equality.  A mix of social welfare programs, taxes, and high paying blue collar work meant that lower and middle income-distribution individuals became relatively wealthier. The 1970s, however, ended that story and an era of stagflation began. A mixture of high inflation and high unemployment lead to a major decline in productivity that hadn’t been seen in 25 years. This in conjunction with rising skill premium and tax cuts for the 1% meant that income inequality began rising rapidly (Levinson 2017). Since the 1970s the United States level of intergenerational mobility has been no different that of other developed countries. In some aspects, actually worse (Fierre 2005). “American Exceptionalism” had fizzled out to “American Unexceptionalism” under this new Neo-Liberal Capitalist system.

Historically African Americans have fared worse the Whites in terms of mobility and income inequality; and there is a large discrepancy in intergenerational mobility between whites and blacks. Plus income inequality seems to grow as intergenerational mobility decreases. There are a number of factors that affect the intergenerational mobility of an individual. One of which can be the family that they were born into. Whether it is the race, parents, the home experience, the social factors, or even, perhaps, genetics. Overall it seems difficult to extract these variable independently and review them objectively.

The educational attainment of an individual is directly related to the earnings and welfare of that person. Parents overall income, education, and time invested with their children can have a large impact on mobility. Parents with larger incomes are able to invest capital more in there children. More highly educated parents tend to have these higher incomes as well more skills and abilities that can be directly transferred to their children. In addition, more able parents tend to have more able children (Gayle, et al. ). Although, mother’s tends to have a greater impact, overall welfare of an individual is correlated highly with those that have two parents versus one (or none). Using income elasticities and statistical data Bloome found that people not raised in two-parent homes are 250% more likely to be in the bottom quintile (Bloome). There are three principle discoveries from Bloome’s research: people raised out of two parent households are more likely to be downwardly mobile, income is largely negatively affected by more childhood transitions, and the family structure intergenerational mobility strongly contribute to the income equality of adults (Bloome). In addition, single parents tend to have to spend more time receiving an income as opposed to spending time with their child. Children that have both parents spending an average amount time with them during their first five years are 29% more likely to graduate college (13% from the father and 16% from mothers. There tends to be an even greater causal effect of quality of schooling and credit constraints during the first five years of schooling that even that of time investments. Thus it become important for economic policies to zero in on those single parent families and those with lower incomes(Gayle, George-Levi, et al.).

Education is extremely important in regards to bothe income inequality and intergenerational mobility. Mazumder finds that educational attainment for blacks tends to be lower than whites. Historically this gap has been large but slowly, overtime, has decreased. Partially attributed to the skills acquired when black children are young and less access to well financed public schools. Whites also tend to have have much higher ratio of college degrees compared to highschool and a higher ratio compared to blacks. This problem is exacerbated in single parent homes. Mobility tends to be even harder with black families with little discrebency for white families that are single parent. Income inequality is exacerbated by this reality that educational attainment is harder for Blacks then for whites (Mazumder).

Melissa Kearney finds that white men are twice as likely a black and three times as Hispanic to be in management, business, and finance.White woman are 1.5 time more likely than black and Hispanic woman to be in management, business, and finance.Black and hispanic woman are 1.5 times more likely to be in service industries such as maid and housekeepers. Whites tend to be in these position that earn more money. Parents can then pass on the increased wealth on to their children to provide higher level of education and other opportunities that provide skill in the long term (Kearney 2006).

Due to discrimination, Blacks may be seen as a less important human-capital investment therefore there is less investment in their education. Recent increase in the mean income of blacks suggest that black children are ending to earn more than their parents. When looking at overall income distribution black systematically earn less than whites. Correlations between black son earning and white son earning indicate that the upward mobility of black is much lower and downward mobility tends to be much greater. In terms of statistical evidence: 17% of whites remain in the bottom decile as they go from children to adults while that number is 32% of black children; 32% of white in the bottom quartile remain while 63% of blacks remain. Whites born in the top quartile have a 45 percent chance of remaining while black only have a 15% chance which indicates a lot stronger downward mobility for black as well as weak upward mobility.Despite this there has been a growing black middle class as well as more black business owners, more blacks in public office as well as financial professionals in recent years (Kearney 2006).

The work of Chetty and Hendren find that geography can also play a role in intergenerational mobility in the United States. Neighborhoods that child grows up has a long term effect on their wealth attainment. Every year that a child is exposed to higher income area will increase that child’s income. The income of the child that moves will begin to move toward that of the permanent residents at a rate of 4% per year. This means that a child moved from a low income area to a higher one at a very young age would quickly be able to achieve more economic mobility. More policies that would give people the means an the knowledge to move would be beneficial in alleviating some income inequality by providing incentives to move to areas where more economic success could be had. Most importantly where high quality schools and more resources are available for kids, which tend to be in higher income neighborhoods. Blacks and other minorities tend to live in lower income areas overall and due to lack of mobility stay within these low income areas. This is a societal issue that alleviated through policy change (Chetty & Hendren 2016).

In their second paper Chetty and Hendren find that the specific county that a child grows up significantly impacts their income at adulthood. Counties that are one standard deviation better than the average in their estimate can increase the potential income of a childhood in adulthood by 10%. The better counties tend to be those with less poverty, less income inequality, fewer single parent homes, and less crime. These counties that are concentrated at the higher end tend to be largely more populated by whites. A total of one-fifth of the black-white income gap can be attributed to the discrepancies in counties which is much larger that formerly anticipated (Chetty & Hendren 2016).

The issue of intergenerational income mobility and inequality is exacerbated in wealthier countries. These countries that usually have more inequality tend to have lower mobilities. What has been dubbed “The Great Gatsby Curve” illustrate this effect and finds a negative correlation. This also happens in countries have higher return to education. Those were educated tend have the resources and ability to educate their children. This means poorer less educated individuals fall further and further behind. Corak finds, much like before, that family circumstance may have a larger impact than there own determination and work ethic. Low income family tend to fall into poverty traps where the parents and their children are unable to rise to a higher income level. In order to help level the playing field there needs to be more government investment on education in lower income areas (Corak 2013).

Corak raises some interesting ideas relating to the “American Dream” where, largely, the concept pertains to an individual being able to make their own destiny within the United States. The idea typically corresponds with little government intervention within the system heavily relying on people’s ability and drive for economic success. Unfortunately the system punishes blacks and other minorities innate social pressures. For this reason there should be increased government involvement in the economic wellbeing of those who are at a disadvantage. Whether that is because of where they live or because of their economic circumstance. Children especially should be born with a statistical disadvantage that may cause less mobility and exacerbates the issue of income inequality. Government policy can aid with this issue. This can be seen in Canada. They tend to have half the levels of inequality of the U.S. The U.S. might be one of the largest spenders of education per child at $15,000 but this money is mostly distributed within the upper decile. In Canada educational spending is more evenly distributed among different deciles of income. Although Canada may not have the same underlying social issues of the U.S. and the population much smaller it is feasible to believe that there could be a more equal distribution of government resources among all income distributions (Corak 2013).

Economic analysis finds that in terms of education that those that schools that host wealthier children tend to receive more support. Ideally this wealth would be distributed more equally among school districts and neighborhoods. As seen earlier in Chetty and Hendren’s work, one reason neighborhoods have an impact on mobility is the schools available in those areas. Unfortunately this is the nature of our system but more evenly distributed tax dollars may help decrease this gap. There are other way that the government could potentially provide for families with more economic constraints. One is increasing credit for black families with financial constraints. This could almost be seen as a budget for families to increase the human capital of their children. This could be used on things such as books or even go towards tuition for better schools. Second the government could increase incentive to for families to move to areas where income and opportunities are higher. This would provide an innate benefit for the whole family and as we learned earlier would greatly benefit a child’s potential outcome into adulthood (Chetty & Hendren 2016).

Discrimination within the Legal System

Citizens of every nation must be aware that they are protected by laws and orders of equality and dignity both inside and outside their living standard. Still, people become the victim of discrimination mostly due to race, sex and sexual orientation. Minorities have no dignity even at the workplace no matter what job and what position the individual hold, within a company. The sexual Discrimination Act of 1975 provides no or very limited protection to both women and men. The most important cause behind this is not that employers are not responsible. They are not serious to enforce the Act and to become liable for their employees’ actions. The discrimination of each kind begins with unfair treatment or insulting someone, criticizing or just by their appearance. There is no difference in eye of the people who has a sexual nature whether he/she engages in verbal or non-verbal acts. The main victim of sexual discrimination within the workplace have always been the women. The main issue has always been equal pay for women. The evidence shows that the cause of sexual harassment is because of the legitimacy of the legal systems of the modern democracy. The judicial system is not consistent with their own stated procedure and the quality of standards of justice. Many people argue that our western societies are undergoing a legitimation crisis, occurring specially in criminal justice systems because they fail to live up to their stated commitments regarding treating defendants without regards to their personal characteristics, like race, ethnicity and gender. An evidence for this assertion, as per the research, indicates that black defendants are being sentenced more severely than white defendants. According to the American Sociological Review by Kleck Gary, there are five different practices that can produces racial differentiation in criminal sentences, which are likely to be viewed as illegitimate (1981). Imposing more severe dispositions on members of a subordinate racial group primarily is a direct result of the conscious or unconscious racial partiality of the sentencing decision makers. The other one is disregarding of minority crime victims. In this, the offenders of any race who victimize minority-group members as severely as those who victimize nonminority members. Some of the discrimination also takes place as a consequence of class prejudice, as many of the victims are from middle or lower-class members. The lower-class have more chances of facing racial discrimination because of indifference of middle-class decision makers towards culturally different defendants. Sometimes a low-income defendant receives more severe sentences than higher-income defendants because of not being able to afford to hire an outside private attorney or by not making bail. This type of racial differentials in sentencing outcome happens in economic discrimination. Also, there are also institutional racism takes place in one of more of the options above. Like, if any racial-minority defendants are likely to have prior criminal convictions, the determination for sentencing become easier as compare to the less minority defendants.


So far, different issues that contribute to economic discrimination have been examined. Societal economic discrimination is considered the long-lasting inequality in economic well-being among the individuals, and market labor discrimination is the inequality found in employment. There are many implications of economic discrimination that are analyzed at three levels: the home, the firm, and the state. These are compared with the main issues of some other countries too. The United States, being a very multicultural country, is always at risk of economic discrimination from ground level to central governing bodies.

Many of the Socio-economic issues in the U.S. today have a deep root in the history of the country. Education and opportunity seems to be a common denominator among a lot of the racially based income inequality. The government policy of the U.S. tends to favor those who are wealthy which are the majority white individuals. Rising costs of health and the lack of social programs to aid poorer families and individuals prolong the issue. While government intervention may be seen as evil by the wealthy and influential government policy in necessary to defeat economic discrimination and allow for the mobility of underprivileged children.

There were some findings that helped to explain how the wage gap contributes to labor market discrimination, another implication of economic discrimination. Often times women and minorities are put to do the jobs that pay lower wages and their labor is often seen as cheap to the employers (according to the Employer Discrimination Model derived by Becker (1957)). It is also the case that certain standards are held for these two groups that differ to the standards held towards their white, male counterparts. In terms of work authority, the promotion and hiring process is rigged in such a way that prevents both women and minorities to work for positions that pay higher wages. If they do manage to get a top position, they are usually treated differently. Also, many times within these top positions, there is a lack of representation such that a women and/or minorities may make up a small percentation of individuals who are likely to become CEOs, for example. This raises some concern to the extent in which representation plays an important aspect within the job market and if less individuals of particular groups are being hired, it raises concerns as to whether prejudice, bias, or stereotypes influence employers who promote/hire their employees.

Another important part discussed in this paper is how legal prohibitions and public activism, can promote significant change. However, displaying anti-discrimination slogans and proposing amendments of the Civil Right Act is not enough unless people are educated and understand the output of economic discrimination failure in their own lives and in the whole country. Many researchers have indicated a significant increase in economic discrimination over recent years. It’s time for us to make a way joining organizations and promoting positive relations. But there’s a challenge unless we share a common humanity and take a role in respecting the rights of all to enjoy it equally with dignity and the same opportunities to thrive.



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Income Inequality and Intergenerational Mobility by John Kane, editor is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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