COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 708R "Job Discrimination, Market Forces and the Invisibility Hypothesis" Paul R. Milgrom and Sharon Oster June 1984 The Invisibility Hypothesis holds that the job skills of disadvantaged workers are not
easily discovered by potential new employers, but that promotion enhances visibility and
alleviates this problem. Then, at a competitive labor market equilibrium, firms profit by
hiding talented disadvantaged workers in low level jobs. Consequently, those workers are
paid less on average and promoted less often than others with the same education and
ability. As a result of the inefficient and discriminatory wage and promotion policies,
disadvantaged workers experience lower returns to investments in human capital than other
workers. |
