DISCRIMINATION UNDER IMPERFECT COMPETITION - A WAY OF EARNING OR WASTING MONEY

How would firms allocate their employees between two differently paid jobs? Suppose that a number of equally skilled workers belonging to tw o distinguishable groups are competent enough for both positions. It i s then profitable to employ the group with the higher labour supply el asticity in the high wage occupation. This explains why less wealthy g roups are discriminated against, but it suggests that discrimination o f women may be a waste from the standpoint of the employer in an impor tant category of cases.