The Economics of Beauty and Discrimination
Gary Becker (December 2, 1930 – May 3, 2014) was a professor of sociology and economics at the University of Chicago. A prominent figure in the social sciences, Becker was awarded a Nobel Prize in Economic sciences in 1992 for applying economic theory to analyse complex social issues such as racial discrimination, drug addiction and family organisation.
Becker challenged the Marxist view that discrimination helps the person who discriminates.[1] Becker’s analysis showed that discriminators, in accommodating their tastes, miss out on opportunities to hire inexpensive qualified labour.[2] Consequently, firms that discriminate should have lower profits. Becker’s theory was developed through the 1950s, a time which saw significant race-based discrimination against African Americans in USA. During the 1950s, African Americans earned lower wages than their Caucasian counterparts for exactly the same work. Becker developed his theory by showing that non-discriminatory firms that hired African Americans would earn higher monetary profits than discriminatory firms. While still a pertinent issue in many regions of the world, much of Becker’s work has extended beyond that of racial discrimination.
“Beauty pays”
Beauty is significantly related to whether a respondent is employed or not, and unfortunately has been proven to be an important factor within job interviews. A person who is viewed as ‘below average’ in attractiveness on average has a 12-18% lower chance of being employed. The effect of beauty on employability is similar in magnitude for males and females in 2009[3].
More attractive people typically earn higher hourly wages, also. This is true in places as diverse as Britain and Shanghai but also occurs within occupations. It’s is further seen within the education sector, with lecturers who are deemed to be more attractive receiving higher instructional ratings by their students, which could lead to university administrators setting higher salaries for these lecturers.[4]
Beauty-based discrimination
All people should have equal opportunities to be employed; unfortunately, this is not always the case. The fact that beauty is being used as a pre-requisite to employment is a clear form of discrimination. Beauty based discrimination has been recognised as an issue in Victoria, which led to legal protection based on appearance. Victoria is the only Australian state where “beauty based discrimination” is illegal. In the “physical features” provision of the equal opportunity legislation, it is illegal to discriminate on the basis of “height, weight, a disfiguring birthmark or any other feature an employer might consider unattractive”.[5]
Discrimination does not pay
Returning to Gary Becker’s economic theory of discrimination, from a firm’s perspective, discrimination does not pay. In other words, firms that discriminate have lower profits. Becker successfully challenged the Marxist view that discrimination helps the person who discriminates[6]. In basing their selection on their own preferences, instead of minimising the cost of labour, discriminators would be burdened by higher costs. Consequently firms that discriminate should have lower profits.
For example, say there are two candidates, who are have the same skills and can be considered perfect substitutes. If the employer does not discriminate, they will hire whichever candidate is cheaper. In other words, the non-discriminating firm would hire based on optimal productivity and minimize their costs by hiring the cheaper candidates. A prejudiced employer hires based on their tastes instead of minimum costs. Discriminatory firms would pay a wage above the competitive wage and would not hire enough workers. This would lead to lower output and profits.[7] This was the case with Becker’s research of race based discrimination in the US. Becker’ far-reaching implication is that in a competitive market, discriminating employers will eventually disappear or abandon discrimination. Either way, firms that discriminate cannot survive in the long run.[8]
Similarly, firms that discriminate based on beauty could be missing out on hiring the most productive workers. This would present itself as a higher opportunity cost to the discriminating firm, which could lead to lower profits.
It’s not about discrimination, it’s about productivity.
Others argue that beautiful people earn more because beautiful people are more productive. One study focuses on the impact of beauty on university examination results. In their results, beauty had a positive impact on written examinations for male students[9]. That is, attractive male students performed better in written examinations. In written exams, the student’s physical appearance is unobserved by the professor. Therefore, there is no beauty based discrimination occurring. Since beauty discrimination does not account for beautiful people performing better, this suggests that the attractive students were inherently more productive.
Is it discrimination or survival of the most productive?
Research has shown that attractive people are more likely to receive higher hourly wages. But are these higher wages caused by “lookism” (discrimination against the ugly) or is it because attractive people are more productive?[10] The literature is mixed, but one thing we can all agree on is that for employees, being beautiful pays and for employers discrimination doesn’t.
[1] http://www.econlib.org/library/Enc/bios/Becker.html
[2] Lazear, EP 2015, Gary Becker’s impact on economics and policy American Economic Review: Papers & Proceedings 2015, 105(5): 80–84 http://dx.doi.org/10.1257/aer.p20151107
[3] Borland, J & Leigh, A 2014, Unpacking the beauty premium: What channels does it operate through and has it changed over time? Economic record, vol. 90, no. 288, March, 2014, 17–32
[4] Pietro Cipriani, G & Zago 2011, A Productivity or Discrimination? Beauty and the exams, Oxford bulletin of economics and statistics, 73, 3 (2011) 0305-9049 doi: 10.1111/j.1468-0084.2010.00619.x
[5] http://www.rense.com/general12/notp.htm
6] http://www.econlib.org/library/Enc/bios/Becker.html
[7] http://www.massey.ac.nz/~hengelbr/08BorjasCh10.pdf
[8] http://www.massey.ac.nz/~hengelbr/08BorjasCh10.pdf
[9]Pietro Cipriani, G & Zago 2011, A Productivity or Discrimination? Beauty and the exams, Oxford bulletin of economics and statistics, 73, 3 (2011) 0305-9049 doi: 10.1111/j.1468-0084.2010.00619.x
[10] Kamenica E, Beauty pays: why attractive people are more successful, Journal of Economic Literature 2012, 50:2, 513–546 http://dx/doi=10.1257/jel.50.2.513