Job Discrimination, Market Forces, and the Invisibility Hypothesis

Paul Milgrom and Sharon Oster

The Quarterly Journal of Economics, 1987, vol. 102, issue 3, 453-476

Abstract: The Invisibility Hypothesis holds that the job skills of disadvantaged workers are not easily discovered by potential new employers, but that promotion enhances visibility and alleviates this problem. Then, at a competitive labor market equilibrium, firms profit by hiding talented disadvantaged workers in low-level jobs. Consequently, those workers are paid less on average and promoted less often than others with the same education and ability. As a result of the inefficient and discriminatory wage and promotion policies, disadvantaged workers experience lower returns to investments in human capital than other workers.

Date: 1987
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Working Paper: Job Discrimination, Market Forces and the Invisibility Hypothesis (1985)
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