COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 708 "Job Discrimination, Market Forces and the Invisibility Process" Paul R. Milgrom and Sharon Oster June 1984 The Invisibility Hypothesis holds that the job skills of disadvantaged workers are not
easily observed by potential new employers, but that promotion enhances visibility and
alleviates this problem. Then, at a competitive labor market equilibrium, disadvantaged
workers will be paid less on average and promoted less often than other workers with the
same education and ability, even if their employers are unprejudiced and know their
workers' abilities. As a result of the discriminatory wage and promotion policies,
disadvantaged workers will experience lower returns to investments in human capital than
other workers. An affirmative action program that eliminates discrimination and brings
about efficiency initially forces the promotion of unqualified workers. |
