Bigotry Reduces Prosperity for Everyone
Discrimination has lasting negative impacts on earnings. This is true in general and a new paper, published by the Becker-Friedman Institute for Economics, founded in honor of market economists Milton Friedman and Gary Becker, at the University of Chicago, found this is particularly true for women.
The paper, The Effects of Sexism on American Women, shows women who are born in sections of the U.S. where sexism is greatest tend to earn less over their lifetimes than women born in states where sexism is less common. This remains true even if the women leave the bigoted sections of the country and move elsewhere. The New York Times reported:
…the study finds that a woman’s lifelong earnings and how much she works are influenced by the levels of sexism in the state where she was born. A woman born in the Deep South is likely to face a much wider economic gender gap than a woman born on the Pacific Coast, the research shows, even if both women move to New York as adults.
One problem the study faced is the most sexist sectors of the country — the American South — are also the most racist, so racism could be at play. To remove the racist factor from the study they focused on the earnings of white women only. Sexism varies from state to state and while sexist attitudes have diminished over time, some states remain consistently more prejudiced than others. In states with strong sexist attitudes wage disparities are higher between men and women than in states where these attitudes are weaker.
I should note this attitude has negative impact on the household income when these women are living with partners. In addition, if women have less spending power, it negatively impacts all the vendors who would have benefitted from their spending. In other words, when discrimination lowers the wages of one group it has negative effects on their spouses, families and the wider economy as well. Just as the productivity of others makes the entire society richer — even if that was not the intention of the producer — reducing the productivity of specific groups due to prejudice causes the entire society to be less well off.
The Times reports one reason this happens is women born in sexist states tend to internalize certain values which negatively impact their earnings.
The economists say that women appear to internalize social norms when they are young on issues like when to have children, what tasks are appropriate for women in the work force or even how much society values the work of women.
Those traits could, in turn, affect a woman’s willingness to bargain for higher wages. “We know that whatever it is, must be something of a product of where they’re from, and continues to affect them now,” Mr. Charles said. “A notable example here might be the willingness to ask for raises, or the willingness to confront a manager over a raise that was too small. A woman imbued with her value in the marketplace is likely to reject an insufficient raise.”
Sexism, like all forms of prejudice, negatively impacts the victim in two ways. It is internalized by the victim and impacts choices they make and it comes at them from external sources reducing their choices and options. The briefing paper on this report noted that in regards to women, “sexism affects women through two channels: one is their own preferences that are shaped by where they grow up, and the other is the sexism they experience in the place they choose to live as adults.”
A woman can thus avoid some of the external sources by moving to less sexist regions but she still has internalized sexism negatively impacting her economic well being, even if she is unaware of it.
These cultural norms are not only forces that occur to women from external sources, but they are forces that also exist within women, and are strongly affected by where a woman is raised. For example, a girl may grow up within a culture that prizes stay-at-home mothers over working moms, as well as early marriages and large families. These are what the authors describe as background norms, and they are able to estimate the influence of these background norms throughout adulthood by comparing women who were born in one place and moved to different places, and those who were born in different places and moved to the same place.
However, while both internalized and residential sexism has negative impacts on women the residential, or external sexism is the larger factor. The paper argues:
…both background and residential sexism strongly affect adult women’s outcomes. Being born into a higher level of sexism reduces a woman’s relative labor market outcomes and leads her to marry and have children sooner, wherever she ends up living as an adult. The substantial long-term effects of sexism into which a woman happens to have been born are mostly dwarfed by the even bigger effects of higher residential sexism, which act in the same direction on her outcomes.
What is true for women is also true for the LGBT community as well. A paper co-produced by The Williams Institute of the UCLA Law School and the United States Agency for International Development found violations of the human rights of LGBT people negatively impacted the wider economy.
The paper, The Relationship between LGBT Inclusion and Economic Development, found.
When LGBT people are denied full participation in society because of their identities, their human rights are violated, and those violations of human rights are likely to have a harmful effect on a country’s level of economic development.
Several theoretical frameworks argue that inclusion of LGBT people is linked to a stronger economy. In the human capital approach, inclusion allows LGBT people to achieve their economic potential when they can get education and training that improves their productivity and when they are treated equally in the labor market. The capabilities approach suggests that greater rights and freedoms improve individual well-being by expanding individuals’ capabilities to be and do what they value. The post-materialist demand for human rights theory suggests that greater economic development might make countries more likely to respect the rights of LGBT people, as LGBT people can freely organize and push for legal changes and as public opinion shifts to support greater individual autonomy and minority rights. And the strategic modernization approach posits that countries hoping to present themselves asmore visibly “modern” and successful to potential trading partners might be using LGBT rights strategically as a way to promote and expand economic opportunities.
The World Economic Forum put it this way: “In the words of the UN, the fight against homophobia is now, more than ever, a ‘development imperative’.” The Williams Institute study found:
….a clear positive correlation between per capita GDP and legal rights for LGB and transgender people across countries, as measured by the Global Index on Legal Recognition of Homosexual Orientation (GILRHO) and the Transgender Rights Index (TRI) respectively. The simplest correlation shows that one additional right in the GILRHO (out of eight rights included) is associated with $1,400 more in per capita GDP and with a higher HDI [Human Development Index] value. In other words, countries with more rights for LGBT people have higher per capita income and higher levels of well-being. The positive correlation between LGBT rights and the HDI suggests that the benefits of rights extend beyond purely economic outcomes to well-being measured as educational attainment and life expectancy.
There are two factors at work in this case. Liberal market-based nations already tend to recognize LGBT rights more than authoritarian regimes or non-market nations. There is a positive correlation between freer markets and LGBT rights, and there is a positive correlation between freer markets and greater economic prosperity. Depoliticized markets increase wealth. When individual freedom is recognized prosperity increases. At the same time, economic prosperity contributes to cultural changes which increase social tolerance. The Williams Institute says, “We do not draw a firm conclusion about the direction of the causal link, that is, whether more rights cause higher levels of development or whether more developed countries tend to have more rights. The theoretical perspectives suggest that both directions are likely at work.”
Actually that is precisely the case. A society inclined toward individualism and individual rights, with economic freedom tends to be both more tolerant and more prosperous. Economic prosperity, however, also increases social tolerance just as social tolerance positively contributes to economic growth.
Prejudicial views negatively impact the economy long after the prejudice was actively pursued. For instance, a study Distrust in Finance Lingers: Jewish Persecution and Households’ Investments found that regions in Germany where anti-Jewish stereotypes about Jews “controlling finances” were prevalent reduced the likelihood of people to invest, reducing the income levels of the entire region. This study concluded:
The results contribute to the interdisciplinary debate on hatred beliefs and their long-term consequences on societies. They suggest that policies designed to eliminate race- and religious-based persecution should not only be justified by the promotion of human rights, but also by the wealth of the broader population. The results may suggest an economic paradigm to justify policies against hatred beliefs. While several non-Western cultures do not share the ethical notion of the primacy of individual interests over the collective ones, promoting the wealth of societies is universally accepted. Cultures that do not promote human rights may be persuaded by evidence that the persecution of minorities reduces not only the long-term wealth of the persecuted, but of the persecutors as well.
The idea that all values, including bigotry, are consistent with a free market is an absurd one. The evidence remains strong that tolerance and depoliticized markets are far more likely to lead to economic prosperity than either by itself. Market advocates who promote prejudice are undermining the very prosperity markets are meant to create. Some values are simply more in sync with free markets than others. Bigotry is a belief system tied to failure, not success; it doesn’t just harm the victim, but the victimizer as well.
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