Assess each of the following statements. Do you think they are true, false, or ambiguous? Explain.
The marginal productivity theory of income distribution is inconsistent with the presence of income disparities associated with gender, race, or ethnicity.
False. Income disparities associated with gender, race, and ethnicity can be explained by the marginal productivity theory of income distribution, provided that differences in marginal productivity across people are correlated with gender, race, or ethnicity. One possible source for such correlation is past discrimination. For example, such discrimination can lower individuals’ marginal productivity by preventing them from acquiring the human capital that would raise their productivity. Another possible source of the correlation is differences in work experience that are associated with gender, race, or ethnicity. For example, in jobs for which work experience or length of tenure is important, women may earn lower wages because, on average, more women than men take child-care-related absences from work.
Companies that engage in workplace discrimination but whose competitors do not are likely to earn less profit as a result of their actions.
True. Companies that discriminate when their competitors do not are likely to hire less able workers because they discriminate against more able workers who are considered to be of the wrong gender, race, ethnicity, or other characteristic. And with less able workers, such companies are likely to earn less profit than their competitors who don’t discriminate.
Workers who are paid less because they have less experience are not the victims of discrimination.
Ambiguous. In general, workers who are paid less because they have less experience may or may not be the victims of discrimination. The answer depends on the reason for the lack of experience. If workers have less experience because they are young or have chosen to do something else rather than gain experience, then they are not victims of discrimination as long as the lower earnings are commensurate with the lower level of experience (as opposed, e.g., to earning a lot less while having just a little less experience). But if workers lack experience because previous job discrimination prevented them from gaining experience, then they are indeed victims of discrimination when they are paid less.