Employee Discrimination

Employee Discrimination

Introduction

The case of Bakeer v. Nippon Cargo Airlines is a pure example of an unethical issue revolving around employee discrimination. In this case former four flight engineers were fired and those four flight engineers sued the company as they believed that the company was involved in employee discrimination. The other flight engineers, who were Japanese counterparts, were offered new opportunities and benefits.

Discussion

Employer-Based Discrimination

In 1955, Gary S. Becker wrote his Nobel Prize-winning doctoral dissertation on the economics of discrimination. His work advances the theory that discrimination, contrary to the Marxist view, is costly to the individual who discriminates. He hypothesizes that because employer-based discrimination is costly, in the sense that employers must forgo profits in order to pay for their tastes for discrimination, increased competition will lower profits and thus the ability of discriminating firms' to practice discrimination. Therefore, the market structure in the output market affects the ability of individual firms to discriminate. By refusing to hire individuals based on characteristics that have nothing to do with productivity and thereby reducing the pool of possible employees, discriminating firms will, in the long run, face higher labor costs. Increased competition in the output market will force these firms to find lower cost production methods. Increased competition will squeeze higher cost firms, including discriminating firms, out of the market. According to Becker's theory, only non-discriminating firms will continue to operate. The result also suggests an important implication for wage equality across races. In the long run, each employee will be paid his or her marginal product multiplied by the price of the output she or he is producing. Or stated another way, workers will be paid a wage that reflects exactly the value they add to the firm. Without any racial or other type of discrimination, wage gaps between equally skilled and productive whites and non-whites should no longer exist (Repa, 1999).

This does not mean that average wage inequality across races will disappear or even decline. Kenneth Arrow (1972, 1973) and Edmund Phelps (1972) stress that a skills gap and imperfect information can explain racial wage differentials. African American workers have on average fewer years of schooling; thus, their wages may be lower. One way to test Becker's (1957) model is to analyze firms that have experienced an increase in competition through an exogenous change in regulation. In the 1970s, the banking system experienced such a regulatory change.

Before the 1970s, banks were unable to operate across state lines. Banking regulations up to this point required banks to operate as independent entities within each state border. Although Bank of America could have branches in any state, each state operation had to operate independently. Customers who wanted to change the address of their accounts were required to open new accounts if they moved across state lines. These restrictions limited banking competition to within the state borders; banks in one state were not in competition with banks in another. Innovations, such as the automated teller machine, that make distance banking easier weaken the ...