Tuesday, November 16, 2010

Using other people's discrimination

The Economist argues that sexism in South Korea could create market opportunities for open-minded business people. Women are educated to levels similar to men in South Korea, but suffer discrimination in the workplace, paid 63% less than men:

This creates an obvious opportunity. If female talent is undervalued, it should be plentiful and relatively cheap. Firms that hire more women should reap a competitive advantage. And indeed, there is evidence that one type of employer is doing just that.

Jordan Siegel of Harvard Business School reports that foreign multinationals are recruiting large numbers of educated Korean women. In South Korea, lifting the proportion of a firm’s managers who are female by ten percentage points raises its return on assets by one percentage point, Mr Siegel estimates.

There are interesting implications for other highly-educated groups facing workplace discrimination. The reluctance of most employers to reward their talents creates an opportunity for more tolerant employers to gain a competitive advantage by employing these high-quality workers at a lower cost.

In the South Korean example women benefit from the foreign companies willing to employ them, albeit at lower incomes than the men earn in other companies. The Freakonomics Blog describes an anecdote about Alan Greenspan's consulting company which supposedly hired women specifically because sexist discrimination in rival companies meant that he could hire competent women for a lower cost than the equivalent men.

One point to consider is whether or not this scenario could actually give women and other victims of discrimination a competitive advantage in looking for jobs. If employers expect these groups to accept lower wages, may they overlook traditionally priviliged (overpaid) groups? I presume this would strengthen the bargaining position of victims of discrimination in the long run, helping them to demand higher wages, and that eventually would remove their competitive advantage over priviliged groups.

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