The Cost of Prejudice and Discrimination

Words: 1039
Topic: Business & Economics

It is common for human beings to experience and practice prejudice and discrimination. Prejudice refers to the “the inflexible and irrational attitudes and opinions that are held by members of one group about another, while discrimination refers to behaviors that are directed towards another group” (Lang, 2006).

Prejudice prompts individuals to have predetermined beliefs about a certain populace or its cultural practices. Prejudicial notions can either be positive or negative. Prejudice begets discrimination and prejudicial individuals use their preconceived notions to protect their own interests. Consequently, a person will deny certain opportunities to a certain group of people. The reasoning behind these types of actions is that a discriminator believes that members of a particular group do not deserve to be accorded equal opportunities.

Prejudice and discrimination are widely condemned practices that have no place in modern institutional practices. Discrimination has a lot of negative consequences to the society, individuals, and institutions. Prejudice and discrimination can bar investments in human capital, contribute to poor human resource practices, and promote social unrest. This paper focuses on the price of prejudice and discrimination. The paper explores the costs that are often suffered by individual or institutional discriminators.

Discrimination in workplaces and institutions occurs on various levels. Consequently, discrimination issues are not restricted to women and minority groups. Most instances of discrimination in institutions occur along the lines of color, age, gender, ethnicity, religion, and disability. In some cases, prejudice and discrimination will occur on subconscious levels.

One of the most effective ways of measuring discrimination is by using wage-gap disparities between different groups of people (Charles & Guryan, 2008). For instance, a wage gap between men and women who are doing the same job is a strong indicator of discrimination. However, the true worth and productivity of any worker depends on several other factors other than gender, color, race, religion, and gender among others.

The first price that discriminators have to pay for their actions is that their institutions often have a damaged reputation. Any company or institution that engages in practices that are discriminatory in nature risks ruining its reputation. For instance, if an institution purports to support discrimination in order to gain profits, in the end the losses always surpass the gains.

For instance, a few years ago Exxon Mobil was highly criticized by the Women’s Council for sponsoring a golf tournament that discriminates against women (Pope & Sydnor, 2011). The bad publicity that Exxon Mobil suffered from this incidence had higher economic costs than the gains that the company made after sponsoring the tournament.

Prejudice and discrimination kill the spirit of competition within an institution. Most businesses are built and sustained by the spirit of competition. However, discrimination eliminates the spirit of competition because the best person does not always get the privileged opportunity. Every institution should make sure that the best and brightest employees advance before the rest. The winning spirit that is fostered by this practice is often transferred to the institution’s performance.

Furthermore, if the best and brightest employees are not adequately acknowledged their productivity will drop and subsequently affect the institution’s functionality. The price of engaging in discrimination is steep for institutions because they often lose their ability to scale upwards. In addition, if the spirit of competition is killed within an institution, this phenomenon is often reflected in the company’s output.

It is in an institution’s best interest to keep the morale of its workers on a high level. A company’s overall morale is a pre-determinant of its future economic output. Institutions use a wide array of tactics to boost the morale of their workers. However, prejudice and discrimination are known killers of employee morale. A study that was conducted by an independent research organization indicated that “job satisfaction is lowest when employees are subjected to discrimination” (Arrow, 2003).

Employees are apprehensive in nature and they are fully aware when they are being short-changed or exploited. Consequently, introducing discrimination in an institution is a sure way of killing employee-morale. When employees are discriminated against, they will embrace a carefree attitude against the plight of the institution. Henceforth, workers will refrain from taking any form of initiative on behalf of their institutions. This practice will introduce redundancy in an institution.

Most institutions rely on maximization of turnover in order to remain profitable or reliable. Even non-profit organizations rely on their ability to reach their targeted populations. However, discrimination undermines an institution’s ability to maximize rates of turnover. If an organization starts to practice discrimination, it will fail to benefit from customer loyalty, marketability, and client attraction (Becker, 2007).

All these factors are directly related to rates of turnover. Retention of employees is also important when it comes to maintaining healthy turnover rates. For example, employees will anxiously leave a company that they consider to be discriminatory. On the other hand, if an institution keeps changing its employees it will be difficult for it to achieve a good turnover.

Prejudice and discrimination also convey the wrong message to potential clients and business partners. Whenever prospective clients decide to check out a potential service provider, any signs of discrimination act as deterrents of cooperation. Potential clients can also sense when an institution is discriminating against its employees. Consequently, discrimination will greatly tamper with an institution’s desire to maintain upward mobility.

Discrimination and prejudice limit an institution’s hiring pool. A company that does not engage in discrimination is at liberty to choose from a wide array of employee-talent (Charles & Guryan, 2008). On the other hand, prejudices will prevent an institution from accessing a wide choice of services. Furthermore, worthy employees and other service providers will shun enlisting their services in an institution that is known to discriminate.

For instance, the media is known to uncover cases of discrimination in reputable institutions. Therefore, an institution’s public association with discrimination can easily damage its reputation.

Discrimination can also result in legal costs for the company. Any party that associates with a prejudicial organization can go to court and seek compensation under “Title VII of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color, religion, national origin, and sex” (Lang, 2006). This and other legislations can make a company incur high legal costs.


Arrow, K.J. (2003). Discrimination in Labor Markets. Princeton, NJ: Princeton University Press.

Becker, G.S. (2007). The Economics of Discrimination. Chicago, IL: University of Chicago Press.

Charles, K. K., & Guryan, J. (2008). Prejudice and wages: an empirical assessment of Becker’s The economics of discrimination. Journal of Political Economy, 116(5), 773-809.

Lang, K. (2006). A language theory of discrimination. The Quarterly Journal of Economics, 23(1), 363-382.

Pope, D. G., & Sydnor, J. R. (2011). What’s in a Picture- Evidence of Discrimination. Journal of Human Resources, 46(1), 53-92.