The Discrimination Coefficient

Becker's 1957 doctoral dissertation, published as The Economics of Discrimination, introduced the concept that prejudice is not free. It is costly — and the cost is borne primarily by the discriminator. The discrimination coefficient is a measure of the premium an employer is willing to pay to indulge a preference for one type of worker over another. An employer with a coefficient of, say, twenty percent against a particular group will hire from that group only if the group's members accept wages at least twenty percent below the wages of the preferred group. The employer is, in effect, paying a tax — not to the government but to his own prejudice. The tax takes the form of higher labor costs, reduced access to the full talent pool, and a competitive disadvantage relative to employers who do not discriminate and can therefore hire the best workers at the market wage regardless