Equal rights and the U.S. economy

By Chrystia Freeland
May 18, 2012

Are equal rights good for the economy? Campaigns against discrimination, like the battles for women’s rights and civil rights in the 1960s and the fight for gay marriage equality today, are usually framed as struggles for justice.

We think of these issues as entirely separate from economic concerns and sometimes as even running counter to them. Equal pay legislation and rules against discrimination have often been opposed by business on the grounds they would raise costs.

But there is actually a powerful economic argument for equal rights. If you believe that talent isn’t determined by gender, race or sexual orientation, but is instead a roll of the genetic dice, then the most productive society will be the perfectly fair one. A society that is blind to gender, race and sexual orientation will choose the best person for the job – not just the best white, straight man.

That logic sounds good, and if you support equal rights for moral reasons, you will want it to be right, too. But is it? A draft paper by four U.S. economists makes the strong empirical case that it is. Fairness, they contend, has made the economy more productive. Chang-Tai Hsieh, Erik Hurst, Charles Jones and Peter Klenow argue that as much as 20 percent of the growth in productivity in the United States over the past 50 years can be attributed to expanded opportunities for women and blacks.

“Changes in things that have affected women or blacks specifically have yielded a sizable impact on overall U.S. earnings growth,” Hurst told me. “That is a big effect.”

“If we believe in a world where there was discrimination faced by women and blacks, then not having women and blacks as lawyers and doctors, for example, was costly for society, if we think they are born with the same distribution of talent as white men,” Hurst said.

Richard Florida, a professor at the Rotman School of Management at the University of Toronto and a long-standing advocate of the view that diversity is a driver of economic growth, cheered the results.

“Places that are segregated really don’t grow.”

In case you are behind in your viewing of Mad Men, the paper by Hurst et al. is a reminder of how truly supreme white men were in the United States half a century ago. In 1960, 96 percent of lawyers were white men, 94 percent of doctors were white men and 86 percent of managers were white men. The subsequent 50 years were a revolution. By 2008, white men accounted for just 61 percent of lawyers, 63 percent of doctors and 57 percent of managers.

Few women or blacks would describe the United States today as a perfectly color- or gender-neutral economy. But that huge shift over the past 50 years is a testament to the lowering of discriminatory barriers, which the economists term “a reduction in frictions.” Overall, the change was tremendously beneficial to the economy – the paper attributes as much as 20 percent of increased productivity over the past half-century to greater equality and “the resulting improved allocation of talent.”

Naturally enough, female and black workers have felt the change directly in their paychecks. According to the paper, the reduction in frictions since 1960 increased real wages for white women 39 percent; those of black women, who suffered double discrimination and therefore got a double boost, 57 percent; and those of black men 44 percent.

But while the economy as a whole benefited, there was one group that lost out. The paper calculates that the “reduced friction” for women and blacks meant that the real wages of white men were 4.3 percent lower than they would have been without the increased competition.

That result explains a political reality that we often don’t like to admit: Gains for women and blacks have come at a price for white men, and that is surely why some of them still resist the rights revolution.

“The decline in frictions had some cost for the white men,” Hurst said. “This is why majorities tend to construct barriers to minorities – you can extract rents.”

Hurst told me that he hoped to publish the research, which was still a preliminary draft, as a National Bureau of Economic Research working paper in a couple of weeks. At the end of their paper, he and his three colleagues reveal the tantalizing next direction their research will take.

The story in their draft paper on women and blacks is positive – the United States has become fairer and therefore richer. But the four economists suspect that for one category of Americans, the poor, the external barriers to professional success have actually increased.

“We suspect that similar barriers facing children from less affluent families and from regions of the country hit by adverse economic shocks have worsened in the last few decades,” the economists write. “If so, this could explain both the adverse trends in aggregate productivity and the fortunes of less-skilled Americans over the last decades.”

Hurst made sure I understood that this final point was just a hypothesis. The economists plan to run it through their model over the next few months and report on their results later this year. But if their theory pans out, their work will tell a story about America over the past 50 years that many of us intuitively will feel to be true – a country that discriminates less and less on the basis of gender, race and now sexual orientation, but where the class divide is becoming so stark as to constitute a new form of discrimination.

22 comments

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The people of America may can achieve equal rights, but those government bureaucrats, and politicians will never be equal to the ordinary American. They live high off the hog while we live to support them.

Posted by zxyer | Report as abusive

What’s the difference between a verbal hypothesis and a hypothesis that’s been run through a hypothetical model? Science generally requires a little more than merely coming up with the same answer twice by different routes.

Posted by Ian_Kemmish | Report as abusive

“That result explains a political reality that we often don’t like to admit: Gains for women and blacks have come at a price for white men, and that is surely why some of them still resist the rights revolution.”

I used wonder about this possibility for years. I finally came to the conclusion that the real culprits were illegal labor, job destruction through offshoring and hidden inflation.

Illegal labor takes away opportunities for legal citizens to find entry level jobs when they are young or when they are older and needing a stop-gap way to pay the bills while recovering from a set back that resulted in losing their previous job.

Offhshoring has eliminated millions of jobs and lowered the wages of those that remained. Combined with…

Inflation has been far higher than is officially reported and wages have not kept up anywhere near the real rate.

Those 3 causes have had far more impact than the increase in the workforce from women and minorities.

Posted by LBK2 | Report as abusive

A great article, with one exception.
“Marriage” is a Sacrament of the Christian Faith, initiated by Christ, with it’s Foundation in the Ten Commandants.
Gay Unions, same sex unions, Civil Unions, is fine
NOT Marriage.
“EQUAL RIGHTS” for ALL. Man, Woman, Gay, Straight, Race.

The Real Issues in this Election Year are Economy, Jobs,
Cut the Size and Scope of Government to a level we can afford, just like we have to do at home, if I can not afford it I don’t buy it……….
The United States Government has become THE WORST AND MOST WASTEFUL CHARITY ORGANIZATION ON EARTH.

Posted by VincentLawrence | Report as abusive

The argument that there are no meaningful economically related traits that are unevenly distributed by ethnic, racial or sexual groups is a naive, very old viewpoint. It is also in conflict with the past half century of genetic research.

Actually, this is an “Enlightenment” point of view that is over 200 years old and by any fair standard must be characterized as more religious than scientific. Restating the “Tabula Raza” opinion serves no one except those who are the beneficiaries of current policies, rather than the society as a whole, as claimed.

It is also a quasi-religious, and racist, view that everyone other than whites is entitled to have their own society and culture respected. Of course, everyone respects the rich and powerful whites who rules this land and who deny any affinity to their own poor.

Essentially, this opinion supports the notion that the world, and the country, is better off without poor white people. Morally, this is racism. There is no “reverse” and the use of such terms is itself racist.

Posted by usagadfly | Report as abusive

This assumes that all people that finish these degrees are the best for the job. Has the huge financial and social cost of Affirmative Action accounted for in this study? I doubt it. There are many people graduating and admitted to top schools and jobs soly based on their gender or ethnicity. They were not the best candidates! A real study should be done to show the loss of talent and decline in white males attending college as a result of these reverse discrimination techniques still incorporated in every facet of society. I would imagine that would not show a 20% increase in productivity.

Additionally, the real wages of average American workers is the same and some argue lower than 1979. Regardless of race or gender, I am not sure how anyone could insinuate our workforce or economy to be better off presently than it was during the 60′s.

Posted by 55usaidwhat | Report as abusive

Kind of obvious points in this article, however I will add a few thoughts: I agree with the idea that a less discriminative society will, in general, be more successful: look at certain states in the Middle East and the result of their abominable treatment of women. Nothing too successful going on there. As well, after the revolution in idustry and the dominance of a money economy, the struggle has always been about jobs. Wasn’t the push for a national and “institutionalized” education program largely to get teenage boys out of the work-force and away from competing for jobs? That has resulted in millions of antsy, bored and ritalin- injected boys sitting in flourescent-lighted holding-cells for most of their teen years just to remove them from early participation in the American work force. Its no wonder they all seem to be a bit confused with their gender roles/expectations these days. About the “less-skilled” Americans’ demise. I’m not sure it can be linked to domestic equal/nonequal opportunity in a signficant way, rather, didn’t American business move overseas to employ every other country’s cheaper unskilled/semi-skilled labor? That might be a wee factor in the plunge of this particular class. (please forgive any/all spelling errors)

Posted by nbjmomgw | Report as abusive

LOL. Straight white men? Really, Christina? The best person should get the job, period. As it stands now, many of ‘those’ people tend to be straight, white men.

While I fully agree that it is in our collective best interest to become a more equal society, there’s no need to demonize the group that is on average deemed “best” right now. We need to work on bringing everyone to the same level, statements like yours serve better to create a negative image of straight, white men. This does not help the drive towards true equality. You can do better.

Posted by Adam_S | Report as abusive

Freeland states airily that “If you believe that talent isn’t determined by gender, race, or sexual orientation, but is instead a roll of the genetic dice, then the most productive society will be the perfectly fair one.” This idea that the criterion for fairness or justice is the “roll of the genetic dice” is utterly absurd.

A primary function of culture is to put collective limits on such exogamous factors. The fine-grained social structures, modes of knowing, and processes of cultural reproduction on which productivity depends require a degree of insulation from such dice throws. You can’t abstract all that structure and process away. If otherwise, why not just leave the weak to die?

Also, sex is not just a meaningless datapoint, like a style of clothes. Individual sex is the atom of the social groupings by which society reproduces (or doesn’t) itself. The breakdown of economic relevance of the bonded male group – with its huge collective self-identification and capacity of self-sacrifice (soldiers epitomize) and its replacement by a much more opportunistic style has involved huge costs on its own.

Compare the old-boy networks of Wall Street banks of yore, risking their own money, with today’s systemically parasitical, state-supported Goldman Sachs / JP Morgan / and Citibank. ‘Old-boy’ has a negative connotation today, but in its absence you have males gone rogue.

Chances are, by the standards these economists used to calculate their findings, feeding kids more prepared and processed food (the root of the obesity epidemic), having two cars and two commutes, and buying childcare services have all added to US ‘wealth’ and ‘productivity’. Ditto, presumably, for the ‘correctional services’ provided America’s $37 billion-a-year incarceral system – imprisoning males 15 to 1. Any such accounting of productivity is so irrelevant to real human and ecological needs to invite the derision that mainstream economics richly deserves.

Posted by cvznch | Report as abusive

It costs women $500+/week just to be women!!!!

That’s lifetime-earnings. Why? Child-Bearing, Childcare & Household responsibilities, Guilt, Poor Negotiating Skills!

BUT… the same is true of many White Men!!! Why?

- Turn down promotions – esp. w/ moves, your career suffers 20x!

- Decline overtime often, you’ll not be considered next time.

- Come in late often, or refuse to travel for your job, you’ll suffer carreer setbacks in many ways.

WHO does that most? Women! Why?

BUT…. We found MOST Male/Female differences in pay came from STARTING SALARY DIFFERENCES!!! What caused that? Do employers offer women less (not traditionally bread winners?). Or do women accept less, negotiate less well? Dunno.

“If you believe that talent isn’t determined by gender, race or sexual orientation, but is instead a roll of the genetic dice….”

NO! As just explained, PERFORMANCE is key, not genetics!

Performance=Skill times Motivation! NOTE: 1×0=0!

You’re absolutely right that Skills exist everywhere! But Lack of Motivation (Family/Personal Needs), Putting constraints on Employers will curtail your career, curtail your earnings. Sadly, women suffer child/household care most; but some men suffer similarly.

Posted by Avid_Researcher | Report as abusive

Feminists do NOT fight for equal rights. They fight AGAINST equal rights. Where were feminists when fathers demanded equal protection in family court? Where were feminists when fathers demanded cancer prevention for boys (Obamacare already provides cancer prevention for girls)? Feminists were AGAINST it. And now, men want the violence against women act to protect male victims also, and again feminists are AGAINST IT. Stop lying. Stop playing the victim. Nobody likes a self pitying tyrant.

Posted by AnthonyZarat | Report as abusive

I would add for their consideration the wealth gap. Even though blacks have increased their incomes over the past fifty years as a result of a fairer society, the wealth gap has served as a major constraint on continued prosperity.

Posted by AltonDrew | Report as abusive

Sounds like more of the same old university poppycock that continually gets so many companies in trouble. While I applaud the greater acceptance of minorities into the upper levels of mgmt, I don’t know how anyone can quantify productivity gains without also taking into account the losses caused by mgmt stupidly promoting under qualified minorities and destroying moral within the workforce. I had a front row seat while the Big Three auto companies generated thousands of little cancers throughout their organizations because a masters degree from the U of Calcutta was more important than competency, hard work and success on the job. Ultimately, Chrysler and GM went under and Ford came mighty close. In the end they had so many boobs in positions of authority that no one was left to right the ship, the few that could took buyouts whenever they were offered. Toyota and Honda never put diversity over competence, the results are clear for all to see. So go measure that before you claim all these productivity gains.

Posted by phantom51 | Report as abusive

You have made a great case for fairness, but, much, most of this modern world was handed off to these other gender, races after our world of high tech was created by white men. True this new generation is thriving in this new modern world of technology, however, what percentages of the population, other than white men have displayed true innovation of invention that creates out of a thought process, not just an innovative twist on known technology?
I have worked for years in a corporate high tech environment that was populated by true genius of many races, but mostly men and a couple of women. This environment was charged by hiring the truly gifted and always on the look out for talent regardless of race or gender. I personally think that a high tech environment will decline over time now that the playing field has been massaged to allow those less mentally gifted to push out white men. Be careful what you wish for; you might just get it.

Posted by Still_Here | Report as abusive

You are correct Ms. Freeland, but the world you are describing, one where the best person is hired, is not the economic world we live in. Those are great intentions, but when the government is tasked with creating a “fair” economic world, anything but that is accomplished. Report the truth, Ms. Freeland. In reality we have quotas in almost every facet of our economy-especially where the government is most involved: Mortgage loans, student loans, the banking industry in general, our education system, the military, and every other civil government entity. Of course, “technically” they are not quotas because most often hard numbers are not required. One just has to carry the burden of proof of compliance with any number of “parameters” the government “suggests”, or incur substantial fines and legal action. To paraphrase and improvise the famous Clinton statement, it depends upon what you mean by “quotas”.

Posted by beofaction | Report as abusive

Their preliminary results are consistent with what I’ve observed in my working life (since the late ’70s). It will be very interesting to see the final result after they’ve completed their analysis of the data.

Posted by leslie20 | Report as abusive

I want to know how to understand the new form of discrimination.

Posted by crownsjtu | Report as abusive

This kind of politicized and uninformed desire for “fairness” can wreak destruction in the work place.

Quotas have caused immeasurable harm in government agencies.

Short of a certain sex, race or ethnicity? Don’t fire anyone who falls in these groups (no matter have egregious their behavior), and be ready to pass over the most qualified applicants if your “rainbow” statistics are too out of sync.

Equality of opportunity is a great goal. Statistically enforced parity is leftist totalitarianism.

There are MANY jobs which will never attract a perfectly balanced pool of applicants and never will.

Most supposed imbalances in our work force these days are about natural differences, affinities, choices and proclivities – not unfairness or discrimination.

Posted by Parker1227 | Report as abusive

Very interesting piece – what the article however ignores is the role of government action in producing this major change. Without policies favoring women and racial minorities, the figures for Income gains they have experienced would be much lower. This may explain why the feeling that government is too big and powerful today is most often articulated by white men.

Posted by Lissandreau | Report as abusive

When we allow people to be individuals, not just another part of some stereotyped group (be it women, men, race, whatever), we’re essentially letting them grow. You take off the shackles of having to act/be a certain way, outgrow your biology, limitations, cultural expectations, etc., then you start to grow.

And that’s why a lot of people/countries try to keep select groups of gender/whatever down- they want to sustain their egos over those they can control. It happens to men as well, when they have to be fearful of being scorned for doing something more typically ‘feminine’ – they’ve lost control over natural parts of themselves, that have been taken over by adhering to stereotype.

Posted by ahms | Report as abusive

An important article, Chrystia. It’s been known for 100 years that economic freedom leads to higher personal income and that political and economic freedoms are tightly linked. Most of us are pretty ignorant about the thinking and events that got us to our current economic system. I just read Sylvia Nasar’s “Grand Pursuit” – a fun read about history, biography and economics.

Competition leads to increased productivity. Higher productivity should lead to higher real income. In the slightly longer term, white males’ incomes should eventually increase faster than they would have without competition from women and black males.

Posted by seanblanton | Report as abusive

‘Inclusive economies are successful economies’, Why Nations Fail, Acemoglu and Robinson.

Posted by basilbeshkov | Report as abusive