On the Perseverance of Discrimination and the Effectiveness of Affirmative Action

Give a girl an education and introduce her properly into the world, and ten to one but she has the means of settling well, without further expense to anybody (Jane Austen in Mans…eld Park, ch. 1, 1814). Although nowadays women do have access to education, the odds are not as favourable to women as Ms. Austen probably would have hoped for, 200 years after she wrote Mans…eld Park. In 2012 a little over one percent of the CEOs of the Fortune 500 Companies was black and merely four percent was female1. In that same year in the European Union, females accounted for only two and a half percent of the CEO positions2. In the UK currently one out of twelve members of the supreme court is female3. Discrimination is prohibited by law and frowned upon by most. Then why does this clear segregation at the top exist? Following Milgrom and Oster (1987), a labour market with persistent job discrimination cannot hold. Basic economic theory predicts that if a certain group of people is discriminated by some (or even most) employers, the underpaid and underemployed group will be hired by the other non-discriminating employers. Those employers seek the highest pro…ts and are attracted by the low wages of the discriminated group. The labour demand for the discriminated group will grow and by consequence their wages will rise. However, empirical evidence shows di¤erent results. Although many have shed their light on this complex subject, no explanation has been accepted unanimously by economists. This paper addresses this well discussed issue from a new point of view in order to seek the answer to the question why segregation in the labour market is a persistent phenomenon.