Why would a wage differential due to discrimination be unlikely to persist in a competitive labor market?
A) There is a cost advantage for firms that do not discriminate.
B) Workers who are victims of discrimination will eventually drop out of the labor market.
C) Competing firms will hire fewer of the workers who are temporarily victimized by discrimination.
D) Discrimination cannot exist in markets.

Question

Quizplus · Accepted Answer

In a competitive labor market, firms that discriminate will face a cost disadvantage compared to firms that do not discriminate. Discrimination can result in lower productivity, reduced morale and higher turnover. Discrimination may also reduce the pool of qualified applicants and limit diversity in the labor force. These factors can lead to reduced profitability for firms that discriminate, giving an advantage to those that do not. Therefore, a wage differential due to discrimination is unlikely to persist in a competitive labor market.

Why Would a Wage Differential Due to Discrimination Be Unlikely