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Labor Market Arbitrage

The Economist explains how discrimination in the labor market can be reduced by competition in product markets. As in the U.S., Korean women obtain at least the same education as men; but their rates of labor-force participation are much further below those of men than is true in the U.S., and that’s even true for highly educated women. This provides room for companies to hire equally or more qualified women at the same or even lower wages than men. Korean companies are loath to do this, but American companies in Korea are not. Everybody benefits from this labor-market arbitrage, which helps break down wage discrimination and job barriers. This reminds me of the anecdote about Alan Greenspan‘s consulting company which, so it is said, hired mainly women. Greenspan felt they were as competent as men and, because of discrimination, he could outbid the market and still get more productive workers per dollar than if he hired men.