Essay Example: Economics of Discrimination

Economics of Discrimination

Discrimination in the workplace affects not only individual opportunity, but also long-run economic growth by limiting how effectively human and physical capital are used.

I. Discrimination and economic efficiency

Market discrimination constitutes an inefficiency, defined as the quality or state of being inefficient or something that is inefficient (Merriam-Webster). When employers or institutions favor certain demographic groups, they impose barriers analogous to the spatial frictions that Heise and Porzio identify in their frictional labor market model. Those authors show that frictions impeding labor mobility allow low-productivity firms to expand, thereby misallocating labor and reducing aggregate productivity (Heise and Porzio). In turn, discrimination-induced misallocation depresses overall economic output and undermines macroeconomic growth rather than merely reflecting individual bias.

II. Increasing educational attainment and why it is relevant to me

Education represents an investment in human capital, the economic value of a worker’s experience, skills, and training (Lindner). By raising skill levels, greater educational attainment reduces reliance on stereotypes and statistical discrimination in both hiring and wage-setting. The global average private return to one additional year of schooling is estimated at around 9 percent, with even higher estimated returns for women in many contexts (Psacharopoulos and Patrinos). Enhanced human capital not only increases individual productivity and wages but also delivers broader economic gains by boosting the overall skill level of the labor force. Personally, pursuing further education expands my career mobility, increases my earning potential, and offers a buffer against the adverse wage effects of discriminatory practices.

Note: This section includes information based on general knowledge, as specific supporting data was not available.

III. Increasing national savings and why it is relevant to me

National savings, the aggregate of private and public sector saving, provides the resources necessary for capital accumulation and investment in physical assets. Savings finance investment in machinery, infrastructure, and technology, which in turn elevates capital per worker. Labor productivity, measured as real GDP per hour worked, is primarily driven by investment in physical capital, technological progress, and human capital development (McLaughlin). As capital deepens, each worker’s marginal product of labor rises, fostering higher real wages over time. For me, greater national savings promise enhanced long-term financial stability, stronger retirement security, and a more resilient economy capable of withstanding shocks.

Note: This section includes information based on general knowledge, as specific supporting data was not available.

IV. Long-run macroeconomic outcomes

By reducing workplace discrimination, economies can allocate labor more efficiently across firms and sectors, mitigating the productivity losses associated with misallocation (Heise and Porzio). Complementing this, investments in education and the accumulation of physical capital via savings enhance labor productivity and support sustained GDP growth (McLaughlin). Higher productivity expands output and raises living standards, enabling consumers to enjoy a greater variety of goods and services at lower real cost (McLaughlin). These combined forces—equal opportunity, human capital development, and robust investment—pave the way for durable long-run growth and stability.

Ending sentence

For me, both increasing educational attainment and national savings are important because they reduce the economic impact of discrimination while supporting higher wages, greater stability, and long-run growth.

References

Inefficiency. Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/inefficiency. Accessed 17 Dec. 2025.

Heise, Sebastian, and Tommaso Porzio. “Labor Misallocation Across Firms and Regions.” NBER Working Paper Series, no. 30298, July 2022, https://doi.org/10.3386/w30298.

Lindner, Ellen. “What Is Human Capital?” Investopedia, www.investopedia.com/terms/h/humancapital.asp. Accessed 17 Dec. 2025.

McLaughlin, Paige. “Labor Productivity: What It Is, Calculation, and How to Improve It.” Investopedia, www.investopedia.com/terms/l/labor-productivity.asp. Accessed 17 Dec. 2025.

Psacharopoulos, George, and Harry Anthony Patrinos. “Returns to Education: A Decennial Review of the Global Literature.” Education Economics, vol. 26, no. 5, 2018, pp. 445–458.