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|The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (August 2013)|
The employment discrimination is a form of discrimination based on race, sex, religion, national origin, physical disability, and age by employers. Earnings differentials or occupational differentiation is not in and of itself evidence of employment discrimination. Discrimination can be intended and involve disparate treatment of a group or be unintended, yet create disparate impact for a group.
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In neoclassical economics theory, labor market discrimination is defined as the different treatment of two equally qualified individuals on account of their gender, race, age disability and Religion etc. Discrimination is harmful since it affects the economic outcomes of equally productive workers directly and indirectly through feedback effects. Darity and Mason  summarize that the standard approach used in identifying employment discrimination is to isolate group productivity differences (education, work experience). Differences in outcomes (such as earnings, job placement) that cannot be attributed to worker qualifications are attributed to discriminatory treatment.
In the non-neoclassical view, discrimination is the main source of inequality in the labor market and is seen in the persistent gender and racial earnings disparity in the U.S. Non-neoclassical economists define discrimination more broadly than neoclassical economists. For example, the feminist economist Deborah Figart  defines labor market discrimination as “a multi-dimensional interaction of economic, social, political, and cultural forces in both the workplace and the family, resulting in different outcomes involving pay, employment, and status”. That is, discrimination is not only about measurable outcomes but also about unquantifiable consequences. It is important to note that the process is as important as the outcomes. Furthermore, gender norms are embedded in labor markets and shape employer preferences as well worker preferences; therefore, it is not easy to separate discrimination from productivity-related inequality.
Although labor market inequalities have declined after the U.S. Civil Rights Act of 1964, the movement towards equality has slowed down after mid-1970s, especially more in gender terms than racial terms. The key issue in the debate on employment discrimination is the persistence of discrimination, namely, why discrimination persists in a capitalist economy.
Gender earnings gap or the concentration of men and women workers in different occupations or industries in and of itself is not evidence of discrimination. Therefore, empirical studies seek to identify the extent to which earnings differentials are due to worker qualification differences. Many studies find that qualification differences do not explain more than a portion of the earnings differences. The portion of the earnings gap that cannot be explained by qualifications is then attributed to discrimination. One prominent formal procedure for identifying the explained and unexplained portions of the gender wage differentials or wage gap is the Oaxaca-Blinder decomposition procedure.
Another type of statistical evidence of discrimination is gathered by focusing on homogeneous groups. This approach has the advantage of studying economic outcomes of groups with very similar qualifications.
In a well-known longitudinal study, the University of Michigan Law School (U.S.A.) graduates were surveyed between 1987 and 1993, and later between 1994 and 2000 to measure the changes in the wage gap. The group was intentionally chosen to have very similar characteristics. Although the gap in earnings between men and women was very small immediately after graduation, it widened in 15 years to the point that women earned 60 percent of what men earned. Even after factoring in women's choice of working for fewer hours, and worker qualifications and other factors, such as grades in law school and detailed work history data, in 2000 men were ahead of women by 11 percent in their earnings, which might be attributed to discrimination.
Other studies on relatively homogeneous group of college graduates produced a similar unexplained gap, even for the highly educated women, such as Harvard MBAs in the United States. One such study focused on gender wage differences in 1985 between the college graduates. The graduates were chosen from the ones who earned their degree one or two years earlier. The researchers took college major, GPA (grade point average) and the educational institution the graduates attended into consideration. Yet, even after these factors were accounted for, there remained a 10-15 percent pay gap based on gender. Another study based on a 1993 survey of all college graduates had similar results for black and white women regarding gender differences in earnings. Both black women and white women made less money compared to white, non-Hispanic men. However, the results of earnings were mixed for Hispanic and Asian women when their earnings were compared to white, non-Hispanic men. A 2006 study looked at Harvard graduates. The researchers also controlled for educational performance such as GPA, SAT scores and college major, as well as time out of work and current occupation. The results showed 30 percent of the wage gap was unexplained. Therefore, although not all of the unexplained gaps attribute to discrimination, the results of the studies signal gender discrimination, even if these women are highly educated. Human capitalists argue that measurement and data problems contribute to this unexplained gap.
One very recent example of the employment discrimination is to be seen among female Chief Financial Officers (CFOs) in the US. Although 62% of accountants and auditors are women, they are only 9% when it comes to the CFO post. According to the research not only are they underrepresented in the profession, but they are also underpaid, 16% less on average. 
Audit (or matched pairs) studies are done to examine hiring discrimination. In order to examine racial discrimination, the Urban Institute relied on a matched pairs study. They studied the employment outcomes for Hispanic, white and black men who were between the ages 19–25 in the early 1990s. The job position was entry-level. Thus, they matched pairs of black and white men and pairs of Hispanic and non-Hispanic men as testers. The testers applied for the advertised openings for the new positions. All of the testers were given fabricated resumes where all characteristics but their race/ethnicity was nearly identical. In addition, they went through training sessions for the interviews. If both people in the pair were offered the job or if both were rejected, the conclusion was there was no discrimination. However, if one person from the pair was given the job while the other was rejected, then they concluded there was discrimination. The Institute found out that black men were three times more likely to be refused for a job compared to white men; while the Hispanic men were three times more likely to be discriminated.
The Fair Employment Council of Greater Washington, Inc. did a similar test for women via pairing testers by race. The study found that the white female testers had higher chances of call back for interviews and job offers compared to black female testers. The percentage for interviews was by 10 percent more for the white testers. Among those interviewed, 50 percent white women were offered the job, while only 11 percent of black candidates received jobs offers. The white testers were also offered higher pay for the same job in cases where the same job was also offered to the black testers. The pay difference was 15 cents per hour more for the white candidates. Furthermore, black women were "steered" toward lower level jobs, while white women were even given some higher-level positions that were unadvertised.
A matched-pairs study of homogeneous group audit experiment was done in the restaurants in Philadelphia, United States. Pseudo candidates handed their resumes to a random worker in the restaurants for the resume to be forwarded to the manager, which removed the effect of first impression on the employer. Also, the resumes were written in a three-level scale based on the qualifications of the pseudo applicants and resumes for each qualification level were delivered in three separate weeks. The results showed that male applicants were favored significantly. Men had higher interview callbacks or job offers. In addition, men did even better in high-pay restaurants compared to low-pay ones. In the low-price restaurants, for each man who received a job offer, the woman was rejected 29 percent of the time. There were no such cases where a man did not get the job offer but a woman did. In the high-priced restaurants, when the man got an offer, the woman was rejected 43 percent of the time. The same pattern that signaled discrimination was observed for the interviews. At the high-priced restaurants, women had 40 percent less chance of being interviewed and 50 percent less chance of receiving the job. Therefore, based on this study, it is correct to conclude discrimination in the same job may lead to gender wage discrimination. Note the high-priced restaurants are more likely to offer higher wages and higher tips for its workers compared to those with low prices,.
Another experiment is the study of the effect of "blind" symphony orchestra auditions by Goldin and Rouse. In this case, the gender of the candidate was not known by the election committee because the auditions were done behind a curtain. Thus, only the skills were considered. As a result, the number of women accepted increased after “blind” auditions from less than 5 percent in 1970 to 25 percent in 1996 in the top five symphony orchestras in the U.S. In other words, a change occurred. This study tests for discrimination directly. The finding implies there was gender discrimination against woman musicians before the adoption of the screen on identity. However, this discriminatory practice was eliminated after the adoption and only qualifications of the individuals were taken into account.
Darity and Mason  summarize results of discriminatory behavior observed in other countries on the basis of "correspondence tests". In this type of tests, the researches design fabricated resumes that signal the ethnicity of the pseudo applicants via the names on the resumes and send these letters to the employers. However, the qualifications written in the resumes are comparable. In England, Afro-American, Indian or Pakistani names were not called back for the interviews but Anglo-Saxons were called. In Australian audits, Greek or Vietnamese names had the same result; Anglo-Saxons were favored. According to the experiment done in the University of Michigan’s study, strikingly, even the “skin shade” and physical features of the individuals had negative effects the further the skin color and physical features were from white characteristics.
Darity and Mason  summarize the court cases on discrimination, in which employers were found guilty and huge awards were rewarded for plaintiffs. They argue that such cases establish the existence of discrimination. The plaintiffs were women or non-whites (St. Petersburg Times, 1997; Inter Press Service, 1996; The Chicago Tribune, 1997; The New York Times, 1993; the Christian Science Monitor, 1983; Los Angeles Times, 1996). Some examples are the following: In 1997, the allegations for the Publix Super Markets were “gender biases in on the job training, promotion, tenure and layoff policies; wage discrimination; occupational segregation; hostile work environment” (St. Petersburg Times, 1997, pp. 77). In 1996, allegations for Texaco were “racially discriminatory hiring, promotion and salary policies” (Inter Press Service, 1996; The Chicago Tribune, 1997, pp. 77). The six black workers, who were the plaintiffs, gave the taped racist comments of the white corporate officials as evidence (Inter Press Service, 1996; The Chicago Tribune, 1997). In 1983, the General Motors Corporation was sued both for gender and racial discrimination (the Christian Science Monitor, 1983). In 1993, the Shoney International was accused of “racial bias in promotion, tenure, and layoff policies; wage discrimination; hostile work environment (The New York Times, 1993, pp. 77) ”. The victims were granted $105 million (The New York Times, 1993). In 1996, the plaintiffs of the Pitney Bowes, Inc. case were granted $11.1 million (Los Angeles Times, 1996).
Neoclassical labor economists explain the existence and persistence of discrimination based on tastes for discrimination and statistical discrimination theories. While overcrowding model moves away from neoclassical theory, the institutional models are non-neoclassical.
The profitability of the company that discriminates is decreased, and the loss is "directly proportional to how much the employer's decision was based on prejudice, rather than on merit." Indeed, choosing a worker with lower performance (in comparison to salary) causes losses proportional to the difference in performance. Similarly, the customers who discriminate against certain kinds of workers in favor of less effective have to pay more for their services, in the average.
If a company discriminates, it typically loses profitability and market share to the companies that do not discriminate, unless the state limits free competition protecting the discriminators.
However, there is a counter-argument against Becker's claim. As Becker conceptualized, discrimination is the personal prejudice or a "taste" associated with a specific group, originally formulated to explain employment discrimination based on race. The theory is based on the idea that markets punish the discriminator in the long run as discrimination is costly in the long run for the discriminator. There are three types of discrimination, namely: employer, employee and customer.
In the first one, the employer has a taste for discriminating against women and is willing to pay the higher cost of hiring men instead of women. Thus, the non-pecuniary cost brings an additional cost of discrimination in dollar terms; the full cost of employing women is the wage paid plus this additional cost of discrimination. For the total cost of men and women to be equal, women are paid less than men. In the second type, the male employees have a distaste for working with women employees. Because of the non-pecuniary cost, they must be paid more than women. In the third type, the customers or clients have a distaste for being served by woman employees. Therefore, the customers are willing to pay higher prices for a good or a service in order not to be served by women. The as-if non-pecuniary cost is associated with purchasing goods or services from women.
Becker's theory states that discrimination cannot exist in the long run because it is costly. However, discrimination seems to persist in the long run; it declined only after the Civil Rights Act, as it was seen in the economic history. Regardless, it is argued that Becker’s theory holds for occupational segregation. For instance, men are more likely to work as truck drivers, or the female customers are more likely to choose to be served by women lingerie salespersons because of preferences. However, this segregation cannot explain the wage differentials. In other words, occupational segregation is an outcome of group-typing of employment between different groups but consumer discrimination does not cause wage differentials. Thus, customer discrimination theory fails to explain the combination of employment segregation and the wage differentials. However, the data points out the jobs associated with women suffer from lower pay.
Edmund Phelps  introduced the assumption of uncertainty in hiring decisions. When employers make a hiring decision, although they can scrutinize the qualifications of the applicants, they cannot know for sure which applicant would perform better or would be more stable. Thus, they are more likely to hire the male applicants over the females, if they believe on average men are more productive and more stable. This general view affects the decision of the employer about the individual on the basis of information on the group averages.
Blau et al.  point out the harmful consequences of discrimination via feedback effects regardless of the initial cause of discrimination. The non-neoclassical insight that is not part of the statistical discrimination sheds light onto uncertainty. If a woman is given less firm-specific training and is assigned to lower-paid jobs where the cost of her resigning is low based on the general view of women, then this woman is more likely to quit her job, fulfilling the expectations, thus to reinforce group averages held by employers. However, if the employer invests a lot on her, the chance that she will stay is higher.
This non-neoclassical model was first developed by Bergmann. According to the model, outcome of the occupational segregation is wage differentials between two genders. The reasons for segregation may be socialization, individual decisions, or labor market discrimination. Wage differentials occur when the job opportunities or demand for the female-dominated sector is less than the supply of women. According to the evidence, in general female dominated jobs pay less than male dominated jobs. The pay is low because of the high number of women who choose female dominated jobs or they do not have other opportunities.
When there is no discrimination in the market and both female and male workers are equally productive, wages are the same regardless of type of the job, F or M jobs. Assume the equilibrium wages in job F is higher than that of the M jobs. Intuitively, the workers in the less paying job will transfer to the other sector. This movement ceases only when the wages in two sectors are equal. Therefore, when the market is free of discrimination, wages are the same for different types of jobs, provided that there is sufficient time for adjustment and attractiveness of each job is the same.
When there is discrimination in the M jobs against women workers, or when women prefer the F jobs, economic outcomes change. When there is a limit of available M jobs, its supply decreases; thus, wages of the M jobs increase. Because women cannot enter to the M jobs or they choose the F jobs, they “crowd” into F jobs. Consequently, higher supply of F jobs decreases its wage rates. Briefly, segregation causes the gender wage differentials regardless of the equal skills.
Another striking point of overcrowding model is productivity. Since women in the F jobs cost less, it is rational to substitute labor for capital. On the contrary, it is rational to substitute capital for labor in the M jobs. Therefore, overcrowding causes wage differentials and it makes women less productive although they were potentially equally productive initially.
The question of why women prefer working in female-dominated sectors is an important one. Some advocate this choice stems from inherently different talents or preferences; some insist it is due to the differences in socialization and division of labor in the household; some believe it is because of discrimination in some occupations.
Institutional models of discrimination indicate labor markets are not as flexible as it is explained in the competitive models. Rigidities are seen in the institutional arrangements or in the monopoly power. Race and gender differences overlap with labor market institutions. Women occupy certain jobs as versus men. However, institutional models do not explain discrimination but describe how labor markets work to disadvantage women and blacks. Thus, institutional models do not subscribe to the neoclassical definition of discrimination.
The firms hire workers outside or use internal workforce based on worker progress, which plays a role in climbing the promotion ladder. Big firms usually put the workers into groups to have similarity within the groups. When employers think certain groups have different characteristics related to their productivity, statistical discrimination may occur. Consequently, workers might be segregated based on gender and race.
Peter Doeringer and Michael Piore  established the dual labor market model. In this model, primary jobs are the ones with high firm-specific skills, high wages, good promotion opportunities and long-term attachment. On the contrary, secondary jobs are the ones with less skill requirement, lower wages, less promotion opportunities and higher labor turnover. The dual labor market model combined with the gender discrimination suggests that men dominate the primary jobs and that women are over-represented in the secondary jobs.
The difference between primary and secondary jobs also creates productivity differences, such as different level of on-the-job training. Moreover, women have lower incentives for stability since benefits of secondary jobs are less.
Moreover, lack of informal networking from male colleagues, visualizing women in the female dominated jobs and lack of encouragement do affect the economic outcomes for women. They are subject to unintentional institutional discrimination which alters their productivity, promotion and earnings negatively.
The under-representation of women in top-level management might be explained by the “pipeline” argument which states that women are newcomers and it takes time to move toward the upper levels. The other argument is about barriers that prevent women from advance positions. However, some of these barriers are non-discriminatory. Work and family conflicts is an example of why there are fewer females in the top corporate positions.
Yet, both the pipeline and work-family conflict together cannot explain the very low representation of women in the corporations. Discrimination and subtle barriers still count as a factor for preventing women from exploring opportunities. Moreover, it was found out that when the chairman or CEO of the corporation was a woman, the number of women working in the high level positions and their earnings increased around 10-20 percent. The effect of female under-representation on earnings is seen in the 1500 S&P firms studied. The findings indicate women executives earn 45 percent less than male executives based on the 2.5 percent of executives in the sample. Some of the gap is due to seniority, yet mostly it was because of the under-representation of women in CEO, chair or president positions and the fact that women managed smaller companies.
Non-neoclassical economists point out subtle barriers play a huge role in women’s disadvantage. These barriers are difficult to document and to remove. For instance, women are left out of male’s network. Moreover, the general perception is men are better at managing others, which is seen in the Catalyst’s Fortune 1000 survey. The 40 percent of women executives said that they believed man had difficulty when they were managed by women. A separate study found out majority believed in “women, more than men, manifest leadership styles associated with effective performance as leaders,… more people prefer male than female bosses”. In another study in the U.S. about origins of gender division of labor, people were asked these two questions “When jobs are scarce, men should have more right to a job than women?” and “On the whole, men make better political leaders than women do?” Some answers indicated discriminatory act.
Neoclassical economics ignores logical explanations of how self-fulfilling prophecy by the employers affect the motivation and psychology of women and minority groups and thus it alters the decision making of individuals regarding human capital. This is the feedback explanation that correlates with the drop in human capital investment (such as more schooling or training) attainment by women and minorities.
Moreover, power and social relationships link discrimination to sexism and racism, which is ignored in the neoclassical theory. Furthermore, along with the classical and Marxist theory of competition, racial-gender structure of the job is related to the bargaining power and thus wage differential. Therefore, discrimination persists since racial and gender characteristics shape who gets the higher paying jobs, both within and between occupations. In short, the power relationships are embedded in the labor market, which are neglected in the neoclassical approach,.
In addition, critics have argued that the neoclassical measurement of discrimination is flawed. As Figart  points out, conventional methods do not put gender or race into the heart of the analysis and they measure discrimination as the unexplained residual. As a result, we are not informed about the causes and nature of discrimination. She argues that gender and race should not be marginal to the analysis but at the center and suggests a more dynamic analysis for discrimination. Figart argues gender is more than a dummy variable since gender is fundamental to the economy. Moreover, the segmentation in the labor market, institutional variables and non-market factors affect wage differentials and women dominate low-paid occupations. Again, none of these is because of productivity differentials nor are they the outcome of voluntary choices. Figart also indicates how women’s jobs are associated with unskilled work. For that reason, men don’t like association of “their” jobs with women or femininity, skills are engendered.
Although empirical evidence is a tool to use to prove discrimination, it is important to pay attention to the biases involved in using this tool. The biases might cause under or over-estimation of labor market discrimination. There is lack of information on some individual qualifications which indeed affect their potential productivity. The factors such as motivation or work effort, which affects incomes, are difficult to be scaled. Moreover, information regarding the type of college degree may not be available. In short, all the job qualification related factors are not included to study gender wage gap.
An example for underestimation is the feedback effect of labor market discrimination. That is, women may choose to invest less in human capital such as pursuing a college degree based on the current wage gap, which is also a result of discrimination against women. Another reason may be the childbearing responsibilities of women standing as a negative impact on women's careers since some women may choose to withdraw from the labor market with their own will. By doing so, they give up opportunities, such as the firm-specific training that would have potentially helped with their job promotion or reduction in the wage gap. An example of over-estimation of gender discrimination is men might have been more motivated at work. Therefore, it is wrong to equate unexplained wage gap with discrimination, although most of the gap is a result of discrimination, but not all.
Furthermore, empirical evidence can also be twisted to show that discrimination does not exist or it is so trivial that it can be ignored. This was seen in the results and interpretation of the results of Armed Forces Qualifying Test, (AFQT). Neal and Johnson  claimed the economic differences in the black and white labor markets were due to the "pre-market factors," not to discrimination. Darity and Mason’s  study of the same case disagrees with the findings of Neal and Johnson’s . They take into account factors such as age family background, school quality and psychology into consideration to make the adjustments.
Although in late 20th-early 21st century discrimination is illegal, historically governments sanctioned and legally supported discrimination against certain groups. The worst forms of discrimination in recent history have been committed by governments elected through popular vote. An example would be the anti-semitic practices of Nazi-Germany, which human capital theorists claim would not have happened had free markets prevailed, because, according to them, discrimination would have caused losses. The argument is based on the idea that government officials and politicians do not care about losses as much as companies do; as a result they have less incentive not to discriminate.
Another example is the case of U.S. when a law was passed in the early 1900s, based on popular sentiment among the white population, to require applicants for civil service jobs to submit photographs. At the time blacks in the U.S. had started to compete for jobs that had previously been all-white jobs. After the passage of the law, the number of blacks in federal employment plummeted for decades.
Another example is in early 20th century comes from South Africa, where mine owners preferred to hire black workers because they were lower wage workers. In response the white majority successfully persuaded the government to enact laws that highly restricted the blacks' rights to work (see Apartheid).
Blau et al.  sum up the argument for government intervention to address discrimination. First, discrimination prevents equity or fairness, when an equally qualified person does not receive equal treatment as another on account of race or gender. Second, discrimination results in inefficient allocation of resources because workers are not hired, promoted or rewarded based on their skills or productivity.
Becker claimed discrimination in the labor market is costly to employers. His theory is based on the assumption that in order to survive in the existence of competitive markets, employers cannot discriminate in the long run. Strongly believing in the perfect functioning of markets without government or trade-union intervention, it was claimed that employer discrimination declines in the long run without political intervention. On the contrary, intervention of human capital investment and regulation of racial interactions make it worse for the disadvantaged groups. Moreover, it was claimed discrimination could only persist due to the "taste" for discrimination and lower education level of blacks explained the labor-market discrimination.
However, based on the empirical study, either human capital theory or Becker’s tastes theory does not fully explain racial occupational segregation. That is seen with the increase in black work force in the South as an effect of Civil Rights laws in the 1960s. Therefore, human-capital and "taste-for-discrimination" are not sufficient explanations and government intervention is effective. Becker's claim about employers would not discriminate as it is costly in the competitive markets is weakened by the evidence from real life facts. Sundstrom  points out, it was also costly to violate the social norms since customers could stop buying the employer's goods or services; or the workers could quit working or drop their work effort. Moreover, even if the workers or the customers did not participate in such behaviors, the employer would not take the risk of experimenting by going against the social norms. This was seen from the historical data that compares the economic outcomes for the white and black races.
Women worked in the U.S. industrial sector during the World War II. However, after the war most women quit jobs and returned home for domestic production or traditional jobs. The departure of women from industrial jobs is argued to represent a case of discrimination.
The supply theory claims voluntary movement because women worked due to extraordinary situation and they chose to quit. Their involvement was based on patriotic feelings and their exit depended on personal preferences and it was a response to feminist ideology. On the contrary, demand theory claims working class women changed occupations due to high industrial wages. Tobias and Anderson  present the counter argument for supply theory. Furthermore, there were both housewives and working class women, who had been working prior to the war in different occupations. According to Women's Bureau's interviews, majority of women who had been working wanted to continue to work after the war. Despite their will, they were laid off more than men. Most of them possibly had to choose lower-paying jobs.
The exit pattern shows their quit was not voluntarily. There were pressures women faced, such as change in position to janitorial job, more or new responsibilities at work, and additional or changed shifts that would not fit their schedules, which were all known by the management. Women lay-off rates were higher than men. Briefly, women were treated unequally postwar period at the job market although productivity of women was equal to that of men and women's wage cost was lower.
Supply and demand theories do not provide sufficient explanation regarding women's absence in industrial firms after the war. It is wrong to associate patriotism with the war-time women workers since some housewives quit their jobs at early periods of the war when the country needed their help the most. Some of the housewives were forced to quit as the second highest lay-off rate belonged to them. If their only concern was the well-being of their country at the war time, less persistence to exit would have been observed.
The demand theory partially holds as there were women who worked pre-war time for occupational and wage mobility opportunities. However, these experienced women workers voluntarily quit working more than housewives did. The reason is work-experienced women had many opportunities. However, women with less options of where to work, such as African-Americans, older married women, housewives and the ones working in lowest paying jobs, wanted to keep their jobs as long as possible. Thus, their leave was involuntarily.
Although women's job performance at least as good as men's, instead of trying to equalize pays, women's wages were kept below than men’s. Women had higher lay-off rates but also they were not rehired despite the boom in the auto industry. Some argue this was due to the lack of a civil rights movement protecting the rights of women as it did for black men. This explanation is unsatisfactory since it does not explain anti-women worker behavior of the management or lack of protection from unions. Kossoudji et al.  believe it was due to the need for two separate wage and benefits packages for men and women. Women had child care responsibilities such as day care arrangements and maternity leave.
Before the passage of the Civil Rights Act of 1964 in the U.S., employment discrimination was legal and widely practiced. The newspaper ads for various jobs indicated racial and gender discrimination explicitly and implicitly. These behaviors were all built on the assumption that women and blacks were inferior. At the turn of 21st century, discrimination is still practiced but to a lesser degree and less overtly. The progress on the evident discrimination problem is visible. However, the effect of past is persistent on the economic outcomes, such as historical wage settings that influence current wages. Women are not only under-represented in the high-rank and high-paid jobs, but they are also over-represented in the secondary and lower-paid jobs. The interviews, personal law, wage data and confidential employment records with salaries along with other evidence show gender segregation and its effects on the labor market.
Although there is some inevitable occupational segregation based people’s preferences, discrimination does exist. Moreover, persistence of discrimination remains even after government intervention. There is a decline in the wage gap due to three reasons: male wages decreased and women’s wages increased; secondly, the human capital gap between the two genders and experience gap have been closing; thirdly, legal pressures decreased discrimination but there is still inequality in the national economy of the U.S.
The correlation of Civil Rights Act and decrease in discrimination suggests the Act served its purpose. Therefore, it is correct to say leaving discrimination to diminish to the competitive markets is wrong, as Becker had claimed,. In 1961, Kennedy issued an executive order calling for a presidential commission on the status of women. In 1963, Equal Pay Act, which required the employers to pay the wages to men and women for the same work qualifications, was passed. In 1964, Title VII of the Civil Rights Act with the exception bona fide occupational qualifications (BFOQ) was accepted while the Equal Employment Opportunity Commission (EEOC) responsible to check whether the Equal Pay Act and Title VII were followed. The Title VII of the Civil Rights Act was first written to forbid employment discrimination. Initially it prohibited discrimination on the basis of race, religion and national origin. However, inclusion of the sex accepted last minute. The Title VII addresses both the disparate impact and disparate treatment. In 1965, Executive Order 11246 was passed and in 1967, it was changed to include sex, which prohibited employment discrimination by all employers with federal contracts and subcontracts. In addition, it makes sure affirmative action takes place. In 1986, sexual harassment was accepted as illegal with Supreme Court’s decision. In 1998, the largest sexual harassment settlement was negotiated with $34 million to be paid to female workers of Mitsubishi. In 2007, the United States House of Representatives banned discrimination of sexual orientation or gender identity at work.
As a result of these government policies occupational segregation decreased. The gender wage gap started to get smaller after the 1980s, most likely due to indirect feedback effects which took time, but an immediate increase in the earnings of blacks was observed in 1964. However, the laws still do not control discrimination fully in terms of hiring, promotion and training programs etc.
Executive Order 11246, which is enforced by the Office of Federal Contract Compliance, is an attempt to eliminate the gap between the advantaged and disadvantaged groups on account of gender and race. It requires contractors to observe their employment patterns. If there is under-representation of women and minorities, “goals and timetables” are created to employ more of the disadvantaged groups on account of gender and race. The pros and cons of affirmative action have been discussed. Some believe discrimination does not exist at all or even it does, prohibiting it is enough, and affirmative action is not needed. Some agree that some affirmative action is needed but they have considerations regarding the use of goals and timetables as they might be too strict. Some think strong affirmative action is needed but they are worried if there would be really sincere effort to hire the qualified individuals from the vulnerable groups.
Rodgers et al.  state minimum wage can be used as a tool to combat discrimination, as well and to promote equality. Since discrimination is embedded in the labor market and affects its functioning, and discrimination creates a basis for labor market segregation and for occupational segregation, labor markets institutions and policies can be used to reduce the inequalities. Minimum wage is one of these policies that could be used.
The minimum wage has benefits because it alters the external market wage for women, provides a mechanism for regular increases in the wages and arranges social security. It affects women in the informal sector, which is highly dominated by women partly as an outcome of discrimination, by being a reference point. However, disadvantages include: first, the wage might be very low when skills and sector aren’t taken into consideration, secondly, adjustment may take time, thirdly, enforcement may not be feasible and finally when there are public spending cuts, the real value of the wage may decline due to social security.
Others have argued that minimum wage simply shifts wage discrimination to employment discrimination. The logic is that if market wages are lower for minorities, then employers have an economic incentive to prefer hiring equally qualified minority candidates, whereas if all workers must be paid the same amount then employers will instead discriminate by not hiring minorities. Minimum wage laws could be responsible for the very high unemployment rate of black teenagers compared to white teenagers.
Laws often prohibit discrimination on the basis of 
Many countries have laws prohibiting employment discrimination. Sometimes these are part of broader anti-discrimination laws.
In Norway, research indicates that 26% of non-ethnic Norwegians (and 11% of ethnic Norwegians ) are overqualified for their work — Gro Mjeldheim Sandal states that employment discrimination is only one of the factors to account for differences in overqualification between those groups.