Tagarov B.Zh.Published in:
Russian Journal of Labor Economics
– Volume 6, Number 2 (April-June 2019)

JEL classification: J01, J31, L15

Keywords: information asymmetry, labor force, labor market, market signals, statistical discrimination


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Abstract:

This article analyzes the phenomenon of statistical discrimination. A brief review of the studies on this topic is provided. The reasons for statistical discrimination are identified. All characteristics of discrimination are divided into two groups: changeable and immutable. Results are given for the effects of discrimination based on different characteristics on employees behavior. It is shown that the requirements of qualification level and other characteristics established for budget organizations employees are one of the forms of statistical discrimination.

Highlights:

• The reason for statistical discrimination is the asymmetry in the labour market, forcing the employer to take recruitment and wages decisions based on easily accessible group characteristics.
• Statistical discrimination is based on the employer's view of three characteristics of social groups: average labour productivity, transparency of labour productivity information and level of difference in labour productivity within a group.
• The characteristics of discrimination can be divided into changeable (dependent of the employee's actions) and immutable.
• When discrimination is based on immutable characteristics, all worker groups are less motivated to invest in human capital. This can result in a self-reinforcing discrimination.
• By combating this kind of discrimination where certain groups are given an advantage over others in working conditions, the state is also can worse the negative consequences.
• When discrimination is based on changeable characteristics, all worker groups are encouraged to improve them, for example by investing in education.
• If expenses to acquire "good" characteristics depend on the real competences of an employee, the problem of statistical discrimination disappears. If the information signal can be improved without enhancing skills, the characteristic loses its information function.
• Statistical discrimination by public organizations has a more negative impact on non-productive expenses of formal education than discrimination in the private sector.

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