Discrimination

Sociological factors also influence wages in ways that are independent of supply and demand conditions in the labor market. One example is discrimination. Discrimination occurs whenever one person is treated preferentially over another even though both individuals are equal except for some characteristics such as sex, race, religion or nationality. While each of us has individual likes and dislikes discrimination typically involves a common taste or preference on the part of one social group against another making discrimination a sociological fact. 

Does discrimination play a role in the wage determination process? The answer is surely yes. For example day laborer wages are the lowest. Why are the day laborer wages the lowest? It is obvious that discrimination is based on sex, race, religion or nationality. 

The earning gap between the sexes is another form of discrimination. Many studies point that women who were year-round full-time workers earned only 64 percent as much as their male counterparts. The existence of an earnings differential between two groups does not of course prove that discrimination is the cause. Many research shows that half or more of the male/female earnings gap is due to legitimate market-related factors such as length of work experience, college major and number of career interruptions for family reasons (a class-action lawsuit that claims that the financial services and media company - Bloomberg L.P., of discriminating against pregnant employees). There is unquestionable evidence that some employers systematically reward women differently than men (and minorities - immigrants differently than whites) with respect to pay and promotions to the extent that discrimination occurs. Therefore wages and other market outcomes are determined by factors that are separate from the market forces of supply and demand. This is not to say that market forces are irrelevant however for the employers that desire to discriminate they are constrained in the exercise of their prejudice by the need to hire the most qualified productive employees possible for the firm to make a profit.