Who pays the cost of discrimination?

Suppose that there are just two groups of people from which employers can recruit employees. The two groups are identical in every respect except two.

  • In the first case, the people in Group B work for a lower wage than do the members of Group A.
  • In the second case, the people in the two groups bear physical marks so that employers can readily whether a candidate for employment belongs to Group A or to Group B. The marks are otherwise insignificant. The physical features cannot possibly interfere with a person’s ability to perform any task.

Except for these two differences, the members of Group A differ not at all from the members of Group B. The interests, talents, aspirations, habits, and character traits of the people in Group A exactly match those of the people in Group B.

In such a world, why would an employer ever hire a person from Group A? Such a choice burdens the employer with a greater cost without any greater productivity to pay those costs.