The economics of sports 5th by michael a leed and allmen chapter 10

Employer Discrimination• Assume for simplicity that the supply of both players is the same • Panel b in Figure 10.1 indicates that the wages of both kinds of players will be the same • P

Chapter 10

Discrimination:

Theory, Measurement, and Consequences

FIFTH EDITIONThe Economics of Sports

MICHAEL A LEEDS | PETER VON ALLMEN

• Jackie Robinson became the first black player in

MLB’s modern era (NL; hired by manager Branch Rickie)

Learning Objectives

• Understand the Becker model of discrimination

• Describe how various forms of discrimination can occur in professional sports

• Evaluate gender discrimination in college sports

Empirical Studies and Definitions

• A major study finds that all players face the same

opportunities in MLB, NFL and NBA

• Some economic studies find that there are differences in pay in the NBA as well as European soccer

• They also find evidence of discrimination in the NFL draft

• We need to distinguish between

– Prejudice a feeling or emotion

– Discrimination an action

• Economists separate two issues

– Equal access to work (draft order)

– Equal pay for equal work (equal salaries to equally

talented players in same positions)

10.1 Becker’s Theory of

Discrimination

• Gary Becker (1957) uses neoclassical theory to

analyze and evaluate discrimination like any other

“good”

– Neoclassical theory assumes that people

maximize utility subject to constraint

– Economists focus much more on the outcome of discrimination than on its origin

• Becker considers prejudice a taste

– Discrimination is indulging that taste

– This indulgence comes at a cost

• We can reduce discrimination by raising its cost

• As people with a taste for discrimination maximize their utility, their willingness to pay to indulge their tastes has a variety of effects

– English-speaking (E) and French-speaking (F)

• We assume for now that, although the players’ styles may differ, they are equally productive

– They have the same MP L

Employer Discrimination

• If a hockey team owner dislikes Francophones,

employing them brings a psychic cost

– He feels that he pays them more than others

– The perceived wage is

• wF = (1+dF)wE

– dF = discrimination coefficient (%)

• If the employer pays both F and E the same, he

feels as if he is paying F more

• As a result, the demand for F falls

Employer Discrimination

• Assume for simplicity that the supply of both

players is the same

• Panel b in Figure 10.1 indicates that the wages of both kinds of players will be the same

• Panel a in Figure 10.1 indicates that with

discrimination, the demand for Francophones falls– At any given wage, the employers’ distaste for them reduces their willingness to hire them

• As a result, F’s wage falls relative to E’s

– WE > WF

Figure 10.1

Who Wins and Who Loses:

Summary

• Francophone players lose

– Pay is lower and fewer are employed (Figure10.1)

• Anglophone players win

– Pay is higher and more are employed

– Less qualified workers are hired

• Unequal pay for equal work results

• Prejudiced employers lose

– Francophones’ lower pay offsets psychic cost

– Employers pay more for worse players

Statistical Discrimination

• What if productivity differs across the two groups?

• Group statistics may indicate nothing about

individual performance

• The use of group averages to judge individual

productivity is called statistical discrimination

– Employers may use it if obtaining individual

information is costly

• Small differences in group statistics can have a

strong impact on a team’s hiring practices and may result in decisions that look like taste discrimination – Statistical discrimination may generate a self-

fulfilling prophesy

Does Anyone Win with Employer Discrimination?

• Consider the case of racial discrimination in MLB

• Blacks were effectively barred from organized

baseball from 1888 to 1947 by a “gentlemen’s

agreement”

• One group that benefited from discrimination was

white players of that era

• More white players played in the major leagues than would have been possible otherwise

• Figure 10.2 reflects the result of assuming that there

is a large supply of white players (deep pool of

talent) willing to play at market wages—no blacks are hired

Figure 10.2

• Figures 10.3 shows the market for Negro League

• Figure 10.4 shows the MLB market

• Tastes of consumers changed, both blacks and whites

Figure 10.3

Figure 10.4

Competition Can Eliminate

Discrimination

• Unprejudiced employers have an advantage over

prejudiced employers

– They hire more productive players (and get higher

revenue if consumers and employees are not prejudiced) – They do not have to pay as much as teams with

Anglophones

– They have higher profits

• As more unprejudiced employers enter, or as more people worry about profit than taste

– Pay of Francophones is driven up

– Pay eventually equals those of Anglophones

• Perfect competition eliminates discrimination

Competition and Discrimination

• In the 1950s, integrated teams were better

– Dodgers, Giants, Indians, Braves, and White Sox were dominant teams

• Dodgers and Giants won pennants

– Only the Yankees were good and remained white

• Owners had recognized black talent but could not act on it

• MLB kept Bill Veeck from buying the Phillies in 1943

– Veeck had wanted to hire Negro League players– He was the first to integrate AL with 1947

Cleveland Indians

When Markets Are Not

• The standard model is presented in Figure 10.5

• Without discrimination, the employer pays the same low wage (found on the supply curve) to all players– In this figure, the wage is $800 while the value of the player is $1000

Figure 10.5

Figure 10.6

Monopsony Model with

Discrimination

• Figure 10.6 shows the wages paid to F players

• It assumes that

– F players are more productive than E players, so

F players are worth $1500 rather than $1000 that

E players receive (for example)

– Employers discriminate against F players, which shifts the demand curve from D to D’

• F players are paid more than E players

($960>$800)

• F players are paid less than they are worth because

of monopsony power and because of discrimination

– They feel like they are being paid less

• In 1880s, a few blacks played in the American Association – The first was Moses Fleetwood Walker for Toledo in 1884 – Cap Anson, a dominant player for Chicago White

Stockings, played in an exhibition game against Toledo team with Moses Fleetwood Walker

– Next year he had a contract not to include black players – White players drove blacks out of MLB by 1888

Employee Discrimination History

• Attempts to reintegrate MLB started after WWII

even as employee discrimination was rampant

• The Dodgers traded 5 players for Al Gionfriddo &

$100,000, a marginal player, who was willing to

take the locker next to Robinson (& “carry the

money”)

• In 1947, Dodger players circulated a petition

refusing to play with Robinson

• Dodgers manager, Leo Durocher, called a late-night meeting and (in an exquisite speech of which there are different versions) said

– See the next slide

– …I hear that some of you don’t want to play with

Robinson Some of you have drawn a petition Well, you know what you can do with that petition

– I hear Dixie Walker is going to write Mr Rickey a letter asking to be traded Just hand him the letter, Dixie, and you’re gone! I don’t care if a fellow is yellow or black or if he has stripes like a fuckin’ zebra

– I am the manager, and I say he plays …I’ll play an elephant if he can do the job, and to make room for him I’ll send my own brother home

– He’s going to win pennants for us He’s going to put money in your pockets and money in mine

Discrimination in Perfect

Competition

• Assume the labor market is perfectly competitive

– The supply curve is horizontal

• Prejudiced players require a compensation above the market wage: w/(1-dj)

– Such a wage does not exist

• Prejudiced players are replaced by those willing to take the market wage

• Alternatively, the employer could ban black players

– Players no longer require a premium wage

• Segregation thus results in this case from employee discrimination

– Dixie Walker refused to play alongside Robinson

– Walker was not refusing to play

– He just did not want to play with Robinson

• Dodgers traded Walker to the Pirates in 1948

– Teams separate into integrated and non-integrated teams

– Pay and treatment on those teams is not affected by race

A Digression into Boxing

• Jack Johnson and “unforgivable blackness”

– In some ways, he resembled Muhammad Ali

– Times did not tolerate a brash black man who taunted his

opponents

– Race riots accompanied his title win and defenses (1915)

– He spurred the search for a great white hope

• No black man fought for the title between 1915 and 1936

• Joe Louis was a supremely talented fighter

– He was groomed with Jack Johnson in mind

– His achievement went beyond boxing 2 bouts v Max Schmeling – He became symbol of American ideals v Nazism

• Schmeling beat Louis in 193

• The rematch in 1938 brought interracial celebration rather than riots

Consumer Discrimination

• Consumers have a taste for discrimination if they prefer not to purchase goods or services from

members of a specific group

– Customers feel a psychic cost

• Some fans feel they pay a higher price p(1+dk)

when watching black players

– p is the price of watching white players

• Consumer discrimination can be difficult to isolate

• A team feels pressure to discriminate

– It fears that fans will go elsewhere

– Unprejudiced employers are led to discriminate

Consumer Discrimination

• Consumer discrimination can affect attendance

• Consumers could show their taste for discrimination

by supporting teams that have fewer players from the group that they dislike

• Consumers could follow teams that are integrated but do so with less intensity—going to fewer games, buying fewer jerseys, watching the team less on

television

Detecting Consumer

Discrimination

• Studying consumer behavior can be difficult

– It is not obvious how to separate taste for the

team from the taste for individual players

• Several studies focus on memorabilia rather than game attendance

– Do fans prefer the cards of white players, all else equal?

– Evidence suggests they do

Measuring Discrimination

• In 1988 Kahn & Scherer asked:

– Is there racial discrimination in the NBA?

– How can there be when the NBA is 80% Black?

• Black players earn more than white ones on average

• The theory of discrimination says that

– Average pay is suggestive but not conclusive

– Discrimination means paying equals unequally

– Compare black players with otherwise identical

whites

• Kahn and Scherer found that black players received about 20% less than white players

– Collectively, UEFA feared loss of national identity

on club teams if clubs use too many foreigners

– Individual teams tried to hire many foreign

• Because the EU (Treaty of Rome…) allows free

movement of labor, teams had to adjust

• 3 + 2 Rule limited each team to three starting

players from other countries in 1991

– It, too, was struck down—by the “Bosman Ruling”

• Jean-Marc Bosman tried to move from Liege (a team

in the Belgian League) to Dunkerque (France); he

was blocked and appealed to the European Court of Justice

• UEFA’s current regulation requires “eight players

from every 25-man squad to have been developed

in the fielding club’s national association”

Positional Discrimination

• Positional (or role) discrimination occurs if players have unequal access to specific positions in team sports

• Players are stacked in specific positions

• Consider positions in the NFL in 2010

– 83 percent of quarterbacks are white

– 84 percent of wide receivers are black

– In general, white players are more likely to be on offense than on defense

• Table 10.1 reports similar inequalities in MLB

Table 10.1

Hockey and Football

• Hockey has changed since the fall of the Wall

• Role discrimination is a possible form of statistical

self-• This could be happening in the NFL

– Because there are few black quarterback and their low incidence could be discouraging others from trying

• Women are represented in all major sports, though they

generally have little say in personnel decisions

• Division I college coaching resembles professional ranks

– Minorities are underrepresented at Division II and III schools – Fewer women are coaching – even in women’s sports

• Do minority coaches have to be better?

– Manning finds that minority NFL coaches have better records – Kahn finds that minority NBA coaches are no more likely to

be fired

Gender Equity—A Special Case?

• Gender equity is harder to measure

• Men & women are seldom in the same venue

– Babe Didrikson Zaharias, Annika Sorenstam, and Michelle Wie entered the PGA—they are exceptions – Even the same sport may vary: tennis & figure

skating

• Mixed competition is rare

– Mixed tennis doubles is a contrived event

– Horse & auto racing are the only real examples

– We do not know if there are few women because demand or supply is low

Fan Demand for Women’s Sports

• Demand for women’s professional team sports,

such as soccer or basketball, is much lower than for men’s sports

• Women fare much better in individual sports

– Tennis is a primary example

• Wimbledon TV ratings of women’s tennis is high

– Women are paid more in gymnastics and figure skating

• Women have recently encountered problems in golf

– Number of women’s tournaments has fallen

10.3 Title IX & Discrimination in College Sports

• Title IX has been credited with the success of US

women in soccer and the Olympics

• Titles deals with more than sports

– It is part of 1972 Education Amendments to the

1964 Civil Rights Act

– It mandates equal access & opportunities for

women in federally funded education programs

• Secondary schools and college

Title IX Compliance

• Compliance has a long history

– It is overseen by the Office of Civil Rights in the

Department of Education

• There are three ways to comply

– Funding and participation must be proportional to

enrollment

• 5% gap is allowed – School must show history of expansion of programs – School must accommodate interests of students

• Very few programs are truly in compliance

• No school has been penalized/sanctioned

Title IX Impact

• Some results are desirable Title IX

– Spurred rapid growth in women’s sports

• Most of the growth was in the 1970s and 1980s

– Gave women grounds to seek remediation

• Some results are undesirable

– Many colleges have cut men’s programs rather than expand women’s programs

– As rewards to coaching have risen, women

coaches have disappeared

• Fell from ~80% of coaches in women’s sports to ~44%