What Happens When Employers are Free to Discriminate?

Pub. Date
19 June, 2012

Research on employers' discrimination is limited by the unlawfulness of such activity. As such, researchers have focused on the intention to hire, rather than hiring decisions and wage settlements. Instead, we rely on a virtual labour market, the UK Fantasy Football league, where employers can freely exercise their taste for racial discrimination in terms of hiring, firing and market valuation . We find black players are valued more highly than white players, but the difference disappears after controlling for on-field performance and other observable characteristics. However, the market values player performance differently according to race. There is a greater valuation of black player performance relative to white player performance in the lower parts of the performance distribution, whereas at high performance levels white player performance is valued more highly than black player performance. There is also evidence that employers evaluate player performance differently by race when making hiring and firing decisions. Employer demand for players rises with their performance, but less so in the case of black players. This finding is consistent with racial discrimination. However, there is no racial differential in the weight employers attach to performance in the most recent game: this has a large effect on employers\' decision to hire players for the next game regardless of race.