This is a rather odd post for me. Typically I am posting about Cloud and Project Management but I occasionally branch out into economics and this is such an occasion.

Last night I attended CloudBase which was held at Hackney Community College. The principal Ian Ashman gave a good introduction to the work of his college.

It is striking how our social aims remain constant. The origins of Smiles’ most famous book, Self-Help, lay in a speech he gave in March 1845 in response to a request by a Mutual Improvement Society, published as The Education of the Working Classes. In it he said:

I would not have any one here think that, because I have mentioned individuals who have raised themselves by self-education from poverty to social eminence, and even wealth, these are the chief marks to be aimed at. That would be a great fallacy. Knowledge is of itself one of the highest enjoyments. The ignorant man passes through the world dead to all pleasures, save those of the senses…Every human being has a great mission to perform, noble faculties to cultivate, a vast destiny to accomplish. He should have the means of education, and of exerting freely all the powers of his godlike nature.

Hackney Community College provides an education to the mainly ethnic minority students from its locality and is working with industry, particularly IT, to get them into employment.

This brings me onto the subject of this post, “rational discrimination in employment”.

An example of “rational discrimination” is the reluctance of employers to give work to members of ethnic minority groups because they are likely to less productive than alternative candidates. This discrimination is “rational” because the employers are correct; it is more expensive to employ ethnic minority candidates “because they don’t fit in” and young women because they get pregnant.

Rational discrimination in employment is illegal and is considered by many to be morally wrong in most circumstances. Politicians talk a lot about “fairness” in employment. Employers suspect that the fairness being talked about does not apply to them. However they are wrong.

The reason for this is quite subtle and harks back to the start of this article. If those  members of ethnic minority groups who do succeed in education don’t find work others will not will follow them. A vicious circle is formed,

1. Ethic minority students see no benefit in study
2. Ethic students don’t study
3. Ethnic students are unproductive workers
4. Employers rationally avoid all ethnic students
5. and back to 1

This is a very expensive situation. Youth unemployment and racial tensions cost the country a fortune in policing, justice and welfare benefits. Employers suffer an increased tax burden as a result.

The outlawing of rational discrimination has economic benefits to employers because if the supply of productive workers increases lower labour costs will offset the cost of employment regulation. It has economic benefits to the public though general taxation.

It is likely that graduates from Hackney Community College suffer rational discrimination and one way of addressing this might be for them to do some work as freelancers. On-line labour markets such as Elance provide workers the chance to do many short jobs, “gigs” and establish a reputation.  For some graduates Freelancing may become their career but for those who seek more conventional employment their Elance reputation would reduce the risk faced by potential employers and thus remove rational discrimination.

Postscript

I am astonished that the search “rational discrimination in employment” does not return anything useful about this pretty standard economic concept. This matters because to my mind it is a far more important issue than irrational discrimination.

There is not even a Wikipedia article. Please add comments if you think they will useful to future reader and even better if you are an economics student create a Wikipedia article and I will link to it.

Please excuse this diversion and I assure you that my next posts will be IT related.

Post Postscript

For the avoidance of doubt. ElephantPM is an equal opportunities employer and is against all forms of discrimination rational or otherwise.