Labor Economics Assignment Example | Topics and Well Written Essays - 2500 words

Labor Economics - Assignment Example Becker’s concept of taste based discrimination states that firms that do not employ minorities do bear the cost of discrimination together with the minorities themselves. Discriminating firms usually have a higher cost of operation since they bear the cost of discrimination. Becker’s concept shows that minorities in such an environment usually work harder and are more productive hence would accept a lower wage. This means that the cost of production is lower hence the firms become more profitable. The discriminating firms however are at a higher cost as majority employees tend to demand relatively higher wages and their productivity is average. As a result more employees would be required to achieve acceptable productivity. Entry of a non discriminating firm under a constant return to scale means increase in number of employee is directly proportional to productivity. A non discriminating firm that has a high specialization of minorities would ideally have higher productivity per employees and therefore an increase in number of more productive employees would mean a subsequence increase in productivity and thus more profitability. This is because the wage bill is also lower than that of a discriminating firm. Entry of non discriminating firm under decreasing return of scale DRTS would lead to constant production and decreased overhead cost. Also since increase in work force does not adequately increase the production. The cost of having more employees is drastically reduced and since the minority workers produce maximally the cost of the wage bill remains relatively low and hence the firm becomes more profitable. In such a firm it would lead to more efficiency as the production process require less man power for efficiency and use of minority who are efficient and extremely productive would lead to the most desired state of profitability. 3. Suppose that men earn on average