Briefly describe how competition may reduce discrimination. Give an example.

Question

What will be an ideal response?

Answer 1

Student examples will vary. A sample answer follows: In competitive industries,
firms that discriminate may lose out ultimately to firms that do not. The
nondiscriminating firm can hire the unfavored but equally competent workers and have
a cost advantage over firms that discriminate. This cost advantage may allow the
nondiscriminating firm to undercut its discriminating competitors’ prices and either force
them out of business or make them change their hiring practices. That is, in the long
run, competition has the potential to reduce discrimination. For example, Edward and
Halim both have tech companies. Based on past experience, Edward favors hiring
young white males from prestigious universities for tech jobs. Halim believes in taking
longer to interview and then hiring people who show aptitude even if their educational
credentials are not as impressive. Over time, Halim is able to hire several workers for
lower starting salaries than Edward does. Because Halim screens them so carefully,
they prove to be just as productive as Edward’s workers; in fact, some are even more
productive because they are “hungry” and want to prove their worth. Eventually, a
consultant tells Edward that his hiring practices are hurting his bottom line, so he begins
to hire a more diverse workforce.