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The Economic Cost of Discrimination

Charles R. Jacobson

Siena Heights University

The Economic Cost of Discrimination

         It has been known, for decades, that there is an economic cost attached to discrimination. Peterson (2020) has calculated that just in the African American community alone discriminatory practices have cost the economy over sixteen trillion dollars. This doesn’t include calculations for the loss of intergenerational wealth which would make this number much higher. This paper will define some forms of discrimination faced in the workplace, what policies are effective at mitigating discrimination, and look further into the economic costs associated with discrimination.

Outline

This paper will focus on the following research questions:

●       What is discrimination?

●       What policies can be put into place to stop discrimination?

●       What is the economic cost of discrimination?

Definitions

What is discrimination? Discrimination has been a problem in the corporate environment for almost as long as corporations have existed (Becker, 1971; Rodger, 2006 as cited in Palumba & Manna, 2019). Discrimination can both be treating someone differently based on an individual characteristic they might have (Tomei, 2003),  or can be treating them the same as others depending on their individual circumstances and abilities (Minow, 1988). The workplace is one of the most prevalent locations where discrimination exists (De Castro et al., 2008) and can, therefore, be one of the most economically damaging. People can be discriminated against for almost any reason that makes them different from the people in charge. Race, age, sex, and sexual orientation are just some of the personal characteristics that are targeted for discrimination.

          There are many different ways that a worker can be discriminated against. Some of the ways companies discriminate are very visible methods of discrimination. Lower pay for the same job and fewer promotions are two that are easily seen and understood discriminatory practices in the workplace. Some of the other discriminatory practices are a little less visible. Unjustified workloads meant to make the employee fail, and organizational tasks that don’t match the employee's skills also make it more difficult for the employee to succeed are two methods also represented in the table. Each of the discriminatory methods mentioned in the table results in a disconnect of the employee to their workplace. Phrases such as organizational conflict, organizational cynicism, reduced work motivation, work disengagement, and job-related stress are all definitions of a reduction in employee well-being.  Employee well-being has been linked to higher productivity (Keys, 2000) so each of these discriminatory practices would contribute to a reduction in employee productivity. 

Policies

Burns (2022) writes that there are ways to limit the amount of discrimination in the workplace. Part of the process is to confront it when it is seen. For that to be safe a workplace policy needs to be in place and utilized to make sure that whistleblowers are protected. There need to be systems in place for intervention, training, and reporting. She also offers that there needs to be continuous attention paid to recruitment, orientation, and inclusion. Also, bystander training is also important so that allies can be forged when discriminatory actions occur. Most importantly company-wide programs have to be in place to ensure that reporting and resolving instances of discrimination can be addressed most effectively.

Limits

Trying to understand the financial implications of discrimination is difficult as the subtlety of some of the discriminatory practices is hard to quantify.

Palumbo and Manna (2019) write:

“Self-reported past experiences of prejudiced treatment are effective in providing information about the occurrence or not of discriminatory practices at work (Dhanani et al., 2018); however, self-reports do not allow to objectively gauge the occurrence of prejudiced treatments in the workplace. Discrimination at work may be performed either in an overt way – i.e. pay gaps and diminished performance ratings (Hekman et al., 2017) – or in a tacit manner – i.e. abuses and mistreatments (Jones et al., 2016). Whatever their nature, discriminatory acts are intended to assert the “[…] dominance of ‘superior’ groups and the subjugation of ‘inferior’ groups” in the workplace (Cheung et al., 2016, p. 115).”

While the occurrences are able to be determined, many times at a subjective level, it makes it difficult to quantify and objectively determine the exact economic consequence of these discriminatory actions. According to Sapling happy employees are up to 20% more productive at work (Sapling as cited in Hills, 2022), and although working in a non-discriminatory workplace would be just a segment of what would make a worker happy, it would definitely play a significant role.

Personal Application

I have experienced discrimination at work both from superiors and from customers. As an employee, I experienced age discrimination when I first began my career in jewelry sales. There were quite a few older employees with much more experience than me. I was 23 when I first began working in the jewelry business. I had fellow employees that were in their sixties and had been selling jewelry for more than 40 years. They had seen everything and knew their way around. I always joke that I knew absolutely nothing about jewelry and didn’t even know what color blue topaz was. Which is a pretty true statement. I worked in a corporate environment at the time which had a store manager, district manager, and regional manager chain of command. I performed pretty well right from the start.  I beat my assistant manager in sales in my first full month.  It came time for my manager to go on vacation and he left me in charge, I was there for about five months at the time. I reported to the district manager directly for the duration of my boss’ vacation. Needless to say, my fellow employees were not happy that I had been given that role with such little experience and at my age. Needless to say, it was a very uncomfortable, unproductive week which ended up reflecting poorly on me and my abilities to lead a store. I felt many of the same feelings that are shown in the table.  I definitely felt a reduction in self-efficacy, reduced work motivation, and impaired organizational commitment. That bad week was very difficult for me to get past, it took some time for me to regain myself. My district manager had bad things to say about me to my manager, and I felt betrayed by my fellow employees. I had a lot of hurdles to overcome. I was able to fight through and am a better salesperson and manager because of the experience.

When a person is selling a luxury item, which by definition is nothing that a customer needs, trust is the ultimate factor in whether someone will purchase or not. Being young can work against a salesperson. It is evident when a customer comes in and sees a younger staff member and an older staff member, who are both available, many times they will go to the older staff member. Many times they will also choose a man over a woman salesperson if both are available. It happens weekly that one of my female salespeople asks someone if they can help them and the customer will say I need to see him and come to me with a request to change a watch battery. The funny part is the woman that asked to help them has changed more batteries in her lifetime than I have, but the customer perceives me as the repair person because I am a man.  I do my best to defer back to my female salespeople to serve as a lesson to the customer. We work on a team/individual bonus structure so it has a material effect on each of our incomes.

We work for a family-owned jewelry store with an owner and many employees at our main store that has a strong connection to the old country and old country ways. Needless to say it is not as easy being a female employee as it is being a male employee when dealing with our home office. I have been a buffer for years and have fought to make sure that our female employees were treated equally to our male employees. My assistant manager has worked for me for over 25 years and is the highest-paid female employee in our company's history. Luckily the owner is a reasonable person and with some conversation can be persuaded to reprogram his mind from how he was raised. It helps that I make sure that he sees what my employees do and I make sure that they get full credit to help build standing with him.  I would say that it is not even an issue at this point, but there were some struggles in the beginning over 27 years ago. Unfortunately, we are a small business so there is not really any room for upward advancement, so pay and extra perks are the best I can do.        

Conclusion

         It is almost impossible to determine the exact monetary cost of discriminatory practices. However, it can be determined that there is an economic cost in acting in a discriminatory manner. Discriminatory behavior at the workplace has a negative effect on employee well-being which in turn leads to a decrease in employee productivity and turnover. Sapling writes that good workplace policy positively affects worker productivity by up to 20% (Sapling as cited in Hills, 2022), and employee turnover costs companies up to 5.4% of their annual budgets (Moore et al., 2022). Looking at these numbers it is easy to see that discriminatory practices can have a substantial negative effect at both the personal and corporate levels.

References

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Burns, S. T. (2022). Workplace mistreatment for US women: best practices for counselors. Humanities & Social Sciences Communications, 9(1)https://doi.org/10.1057/s41599-022-01154-z

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