If a firm offers higher starting salaries to Asian job candidates than to white job candidates because Asians as a group have higher SAT scores,this is an example of ________.

Question

Quizplus · Accepted Answer

This is an example of statistical discrimination, which is when employers use observable characteristics of a group (in this case, Asian job candidates having higher SAT scores) to make assumptions about individual members of that group (that the individual Asian candidate is likely to be high-performing). It is not taste-based discrimination because the decision is not based on a preference for one group over another, but rather on statistical probabilities. It is also not a compensating wage differential because the wage differential is not intended to compensate for any particular hardship or advantage associated with being part of a particular group.

If a Firm Offers Higher Starting Salaries to Asian Job