Discrimination as social cartel

This is based on a comment I made within a discussion group I am involved with.


In the matter of equal employment opportunity (EEO), being against quotas and extraneous paperwork is straightforward enough. Beyond that, we get into very difficult territory.

The Victorian Liberal Party, for example, has requirements for male and female officeholders throughout its entire structure. This was because politically organised women had numbers and money and insisted on the provision when the Liberal Party was being formed. They had had long, bitter experience of being used as activist fodder while being such out of decision-making and wanted to avoid that happening in the new Party. (Margaret Fitzherbert’s book Liberal Women is good on the history.)

There is also a long history of various exclusions: in effect, social “cartels” where signalling one’s “soundness” to fellow members means excluding certain “out” groups. Jews, Catholics, blacks, gays, etc have all suffered such exclusions.

One of the best antidotes to that is an open labour market. Unfair dismissal legislation in particular, by raising the risks of employing someone, works against marginal workers. The riskier hiring someone is, the more people compensate by lowering risk in other ways (relying on networks who act as information conduits and informal “guarantors”, requiring prior experience, certification, and so on), hence the strongly adverse effect on marginal workers. Thus France essentially shuts young Muslim men out of its labour markets by its protection of incumbent workers. While Sweden shuts many Somali refugees out of its labour markets by high minimum wages: Somalis do much better in Minnesota, for example, (see also internat’s comment here) which has much lower minimum wages.

Just to complicate matters, if people have varying degree of ability to communicate with different sets of people, that will affect (for example) hiring patterns in ways that are hard to disentangle from actual discrimination.

But it is demonstrably true that open labour markets are compatible with considerable patterns of discrimination: or, at least, systematic patterns of disadvantage that are hard to disentangle from outright discrimination. The productivity gain from hiring disapproved workers may well be sufficiently marginal/obscure that the status loss from doing so is enough to deter such hiring.

So, a complicated matter. Certainly not an argument against labour market reform and open labour markets. On the contrary, it is a strong argument for it. But also not an area where “but competition will stop discrimination” has historically proved to be enough on its own.

Of course, one could reasonably argue that nowadays the status loss is being seen to be so stupid and nasty as to be discriminatory in the first place.

On the other hand, being ostentatiously against discrimination is patently a way to gain status, which surely drives at least some anti-discrimination regulatory activism.