Job applicants meet systematic discrimination based on group affiliation. ‘When an employer receives two CVs from highly-qualified applicants, stereotypes come into play,’ says Thomas de Haan.
text: Shaghayegh Yousefi
Although discrimination on the basis of gender and ethnicity are prohibited, people are treated differently in the labour market. Researchers at The Choice Lab believe this may be explained to some extent by statistical discrimination.
Information about group affiliation
Statistical discrimination arises when an employer favours members of a group because they lack information about the quality of the employees, and therefore uses group affiliation to fill their knowledge gaps. Different stereotypes can be used to compensate for a lack of knowledge.
For example, an employer may think that employing women of childbearing age is less profitable because they take more leave. Or that a customs officer stops certain types of men at border controls.
‘We’re not talking about discrimination of individuals because the employer doesn’t like the group he/she is affiliated with. This kind of discrimination does occur, but in the longer term, this type of practice will result in companies losing out,’ says Thomas de Haan.
De Haan is a post-doctoral fellow at The Choice Lab, Department of Economics. He is one of the authors behind a new study on discrimination in the labour market.
In the study, an experiment is carried out to find out what happens when an employer uses information about group affiliation to distinguish between applicants, who, on paper, are equally qualified.
The study is one of the first to demonstrate systematic discrimination in a laboratory trial, and is going to be published in the prestigious journal The Economic Journal.
Other researchers have conducted similar experiments on discrimination in the labour market, but de Haan also wanted to introduce competition between two groups. He thereby established realistic and authentic situations.
The participants in the trial were assigned to a purple or a green group. These ‘employees’ could choose how much they wanted to invest in education. Those who choose higher education send stronger signals about their capabilities to the employer. The employer then chooses to employ a green or a purple employee, who, on paper, are equally qualified.
‘However, although the employer has information about the candidates’ education and qualifications, they still can’t be sure that an employee is of a certain quality and will thereby be good at the job,’ says de Haan.
‘Discrimination in the Labour Market: The Curse of Competition between Workers’ written by Thomas de Haan, Theo Offerman and Randolph Sloof. The paper has been accepted for publication in the prestigious journal The Economic Journal. NHH pays its researchers bonuses for publications in selected top international journals like this.
Once an employer has hired an employee, they can establish what they will earn from the employment relationship. Although the groups are basically identical, there will be small, random differences between them. These differences may be all it takes for one group to be more profitable to the employer than the other group.
The employer can thus discriminate based on one group being historically more profitable than the other one.
‘In our experiment, we started with two groups with equal opportunities. Discrimination arose as a result of small, random differences that arose between the groups during the experiment.'
The study thereby shows that discrimination starts when employees are compared with other, equally qualified applicants.
It is only when an employer receives two CVs from highly-qualified applicants that stereotypes and background knowledge come into play. As soon as small differences arise between the groups, employers start hiring members of the group that do best on average.
When transferred to reality, de Haan believes the study may have a number of consequences.
‘Among other things, the quota system must be supplemented with other measures. A quota system only works as long as it is actually in operation. As soon as it stops, discrimination will return, if the groups are still different.’
Refuse to discriminate
Although discrimination arises in the experiment, a lot of employers refuse to discriminate. The expected yield on education is thereby high enough to ensure that the group discriminated against continues to choose education.
‘If an employee's CV shows that their education and other qualifications are clearly stronger than their competitor’s, they will be hired irrespective of group affiliation. Investing in education is thus worthwhile even though systematic discrimination takes place in the labour market.'