A resume by any other name

    A theme brought up in “The F Word”, a piece dissecting the intersection of foreign names and society in America, was the discrimination against Dumas during her job seeking process. Looking beyond the supposed moral obligation of society to prevent this kind of discrimination from occurring, it wouldn’t be a blog of mine without discussing the economic lense of discrimination.

A study done in 2004 found that white-sounding names received almost 50% more callbacks, despite equivalent resumes.

A theme brought up in “The F Word”, a piece dissecting the intersection of foreign names and society in America, was the discrimination against Dumas during her job seeking process. Looking beyond the supposed moral obligation of society to prevent this kind of discrimination from occurring, it wouldn’t be a blog of mine without discussing the economic lense of discrimination.

Surprisingly, economists largely disagree with discrimination, whether that be against women, people of color, non-heterosexual orientations, or convicts. Besides being inequitable, discrimination is actually inefficient, harming a capitalist's pursuit of profits. In a perfectly competitive market, firms make zero economic profit in the long-run. The implications of this statement are far-reaching and are a topic to be unpacked separately, but for the sake of this discussion, understand that firms cannot make economic profit in the long run, and any firms making a non-zero number cannot remain there. Assuming other factors of production are held equal if discrimination occurs, non-discriminating firms can out-price discriminating firms, obtaining supernatural profit in the short run. This non-zero profit situation, forces discriminating firms to either exit the market or become non-discriminating, returning to the equilibrium position of zero economic profit in the long run.

But what does this even mean? Out price? Long-run? Non-zero profit? To describe this situation imagine an economy with 2 types of workers, non-swimmers and swimmers. Yet firms seem to prefer swimmers to non-swimmers (who would've guessed), and the demand for non-swimmers falls, leaving them unemployed. However, the economy doesn’t stop here, the invisible hand takes action, and profit-maximizing firms see an easy way to outcompete other firms: hiring non-swimmers. Looking at the graph below, the contraction in demand also lowered the price of hiring non-swimmers. Firms that hire non-swimmers have lower operating costs than firms that don’t, this causes swimmer only firms to either go out of business over time or be forced to hire non-swimmers. Over time demand for non-swimmers shifts back to being equal with swimmers, removing discrimination from the market. The issue with discrimination by firms aren’t caused by firm decisions, but rather when consumers or the government supports/pays for it. Going back to the 1800s, segregation wasn’t super popular among businesses, however when white consumers/government refused to be with people of color, businesses discriminated, and their profit loss was compensated for by consumer preference/government laws.

This is an extremely neoclassical view of the labor market, a hopeful view about the almighty invisible hand, long-run, and rational (crazy, I know) decision-makers. However, as Keynes put it, “In the long run we are all dead”. Return to equilibrium is a ridiculous hope to the current affairs that plague our society, so why does this continue? Possibly my favorite microeconomic topic works perfectly to explain this, the market for asymmetrical information. We’ve covered this in previous blogs, about how consumer behavior works to disrupt economic outcomes. How do agents properly convey information to the principal through a resume? There is no meter on the resume that shows the human capital of candidates making job hiring easy. Oftentimes, principals use sweeping generalizations to try and bridge the gap of information in the job hiring market. Identity, like race, age, gender, religion, and sexual orientation suddenly become relevant descriptors, despite their imperfect nature.

Returning to our economy with swimmers and non-swimmers, let’s dissect the real-world implications of this fact. Even though swimmers and non-swimmers should have equal human capital, assume that swimmers are often associated as hard-working and more talented than their non-swimming counterparts. When the principal (hiring agent) is faced with 2 candidates of similar skills, even if the non-swimmers are slightly above the swimmer, the principal over-values the swimmer because of the stereotype. This gap of information perpetuates the over-valuing of the swimmers, creating an inefficient outcome, despite self-rationalized decisions. 3rd party hiring platforms, like LinkedIn, ZipRecruiter, and Indeed, help to dismantle this barrier. Providing impartial ratings/recommendations of talented candidates.

Suffice it to say, despite the progress made in the non-discriminatory behavior of society. Discrimination isn’t always rooted in a conscious prejudice against one group. Often hidden and made murky by the economic forces that drive America, discrimination is fueled by many sources. That’s why economists continue to debate this topic and the remedies to this solution, very rarely can we get a one-size-fits-all economic fix. We can, however, describe the issues that human decision causes. No one's gonna read this, are they? Mrs. Valentino if you made it this far, please acknowledge me, and bridge the gap between your comprehension of my blog, and my perceived comprehension.