Why do a firm's total costs rise if it discriminates in hiring?why just becvause a business discriminates does its costs rise and therefore lose profits?

Expert Answers
pohnpei397 eNotes educator| Certified Educator

Economists argue that if left to itself, the market would get rid of job discrimination.  They say there is no need for laws against discrimination because the market would be more effective in eradicating it.  This is, as you say, because total costs would go up for businesses that discriminate RELATIVE TO OTHER businesses.

The reasoning here is that talented individuals come from all races and sexes.  If you voluntarily refuse to hire people from some race or sex, you lose the best of those people and end up hiring lower-quality people from the groups you WILL hire.

In the meantime, other businesses hire the best-qualified people, regardless of race or sex.  They get all the best people so their people are more productive than yours.  This means their people make more things than yours do so their total costs (or average total costs) are lower than yours.

 

Ashley Kannan eNotes educator| Certified Educator

I might also suggest that litigation costs would increase overall costs to discrimination.  In many nations, including the United States, there are legal costs if it has been proven that a particular business has engaged in discriminating practices.  Legal suits on unfair hiring practices could cost businesses millions.  In addition to this, there are more costs to the bad publicity that is attached to businesses that engage in unfair or discriminatory hiring practices.  Business firms would have spend more money in order to offset the negative images attached to any businesses that are either perceived or actually have engaged in discrimination.