Using Employment Relations Frames of Reference to Think about Discrimination and (Institutional) Racism

Central to my approach for labor relations teaching is the explicit recognition of schools of thought (equivalently, “frames of reference”) on the employment relationship. Four schools of thought, in particular, illustrate sharply contrasting perspectives on labor unions, and it’s important to understand how these views are rooted in different models of the employment relationship that embrace differing assumptions. In brief, the four key models are:

1. Neoliberal egoist: Dispassionately rational employers and employees freely pursue their own self-interest in competitive labor markets; when these interests align, they transact with each other, when they do not align, they keep searching for mutually-beneficial exchanges.

2. Unitarist: Although labor markets might not be perfect, employers and employees share a unity of interests (hence “unitarist”), especially in that treating employees well improves the company’s bottom line and vice versa.

3. Pluralist: Employers and employees interact as unequals with some shared and some conflicting interests that are accepted by the other as legitimate (hence, “pluralist”), but these conflicts are economic in nature and limited to the employment relationship.

4. Critical: Employers and employees interact as unequals with key conflicting interests and significant power differentials that are embedded in societal institutions.

In this post I hope to illustrate the usefulness of explicitly considering these alternative frames of reference as a way for thinking about discrimination and (institutional) racism, especially with respect to the limitations of some perspectives.

First, some definitions would be useful. Prejudice is an individual bias against others based some identity; individual racism is prejudice based on race and beliefs of racial superiority. Discrimination is a pattern of behaviors and practices that harm members of a group. Institutional racism is the systematic allocation of resources and opportunities that advantage racial groups at the expense of other racial groups. Individual racism might be easy to see; institutional racism can be embedded in hard-to-see institutions and norms.   

Now turning to the frames of reference, in the neoliberal egoist employment relationship with perfectly-competitive markets and self-interested agents, discrimination on any basis except economic value should not exist because those who discriminate would face a competitive disadvantage, and market competition would force them to change or go out of business. But perfectly-competitive markets only exist in economics textbooks, and discrimination obviously exists. However, consider what happens if we make this model more realistic by recognizing that employers do not perfectly know an individual worker’s true qualities. In this case, for employers to generalize on the basis of demographic characteristics (for example, by assuming that parents of young children will be absent more frequently) can be rational behavior driven by profit-maximization (self-interest) rather than prejudice. This is called statistical discrimination.

As a concept, statistical discrimination is useful for thinking about how seemingly-benign self-interest can lead to racial and other forms of discrimination. But in reality, attempts to explain broad-based racial discrimination as statistical discrimination ignore the racism that leads to race being seen as a meaningful indicator in the first place, and overlook the inherent racism that causes the believed attributes to always be negative. In other words, when it comes to race, we should not see statistical discrimination as a benign explanation of patterns of inequality, but rather as ultimately rooted in racism.

In the unitarist school of thought, discrimination is largely ascribed to individual or organizational failings that can be addressed through improved organizational policies and practices that are voluntarily adopted. Unitarism rests on the assumption that workers and organizations have common interests that can be aligned. As such, conflicts in the workplace, including those pertaining to discrimination, are seen as resulting from the aberrant attitudes and behaviors (e.g., prejudice) of specific individuals, and that this can be improved through interventions like training. At an organizational level, high-functioning organizations are seen as those that tap into workers’ interests for mutual benefit, which leads to an emphasis on diversity management as a win-win source of organizational performance and respect for all individuals. Organizations that don’t do this are urged to recognize the so-called business case for diversity.

At its best, the unitarist organization can change individual attitudes and behaviors while giving employment opportunities to people of color. But talking about race is hard (even with the many tools available) and change is hard. Moreover, a unitarist approach places an excessive reliance on organizational self-interest and self-policing. What happens when an organization believes its business case is serving a racist segment of society, or segments its workforce along racial lines to make it easier to manage? Or if it doesn’t back up public relations statements with meaningful action or if its diversity training fails (as is often the case)? And since racism, prejudice, and structural inequalities are social phenomena, even the most well-intentioned organization can only have a limited impact.

In the pluralist employment relationship, discrimination stems from unequal bargaining power. African American workers, for example, might be (1) paid less than white workers because they lack the bargaining power to get higher pay, and (2) crowded into certain occupations because they lack the leverage to break into better-paying occupations or because intentionally-constructed racial divisions can lower all workers’ bargaining power. Integration and improved labor market power, not just diversity or non-discrimination are therefore highlighted. Consequently, multi-pronged institutional changes are championed, including legislative action and labor union representation to enhance workers’ power.

Unlike the previous two approaches, the pluralist school of thought recognizes the importance of power differences across racial groups. But there are limitations. Relying on labor unions or other groups to increase the power of African American workers or those with other identities requires union leaders committed to this and able to overcome racist attitudes among the rank and file. But these are not guaranteed, especially when these institutions are embedded in a society marked by racism. In other words, the pluralist approach focuses largely on the labor market, which makes it inadequate to address racism and labor market inequalities that go beyond the labor market. For example, even though many aspects of the 1930s New Deal were worker-friendly, the New Deal’s Federal Housing Administration created racially-segregated neighborhoods by making restrictive racial covenants a condition of receiving subsidized mortgages. The result of this segregation often persists today, and continues to make it more difficult for workers with marginalized identities to access good jobs in the predominantly white suburbs. So a pluralist focus on the labor market doesn’t do enough to uncover why there are power differences between white people and people of color, and fails to redress systemic racism. As with the unitarist perspective, important initiatives can emerge, but they are inadequate by themselves for combating institutionalized racism.   

Which brings us to critical schools of thought on the employment relationship in which inequalities between a dominant elite and others are rooted in a number of social inequalities, such as education, housing, banking and loans, health care, media, and political and judicial influence. The dominant elite, therefore can use these material and normative advantages to maintain its dominance, which includes controlling access to good-paying jobs. This way of thinking can be applied to various fault lines such as class and gender, but of particular relevance to racism is critical race theory which focuses on racial divisions and the ways in which white people have systemic advantages that go beyond the labor market.

Of the four conventional schools of thought on the employment relationship, the critical race theory wing of the critical school is the most powerful lens for considering institutional racism because it prompts us to consider the ways in which labor market discrimination is deeply connected to other key aspects of society that are material as well as normative, and more generally the ways in which capitalism is more accurately described as "racial capitalism" because identities are exploited for profit. In other words, we must confront how racism is embedded in societal institutions including business. Consequently, redressing racial inequalities requires deep, anti-racist structural reforms that move beyond formal equality or corporate diversity programs. Genuine equality and inclusion requires re-defining society’s values and aggressively opening up good-paying jobs to traditionally marginalized workers. And this perspective deepens the traditional pluralist thinking on labor market segmentation by revealing the complex roots of segmentation that reside outside of the usual employment relations actors, such as racialized patterns of education, housing, and health care. So opening up good paying jobs requires addressing these underlying inequalities which means confronting the racist origins of these differences.

In closing, as part of broader personal reflections and conversations about race, I hope that these perspectives are useful for thinking about discrimination and racism at an individual as well as societal level. From an individual level, for example, white people can ask themselves whether they are trying to justify decisions on the basis of statistical discrimination and what not-so-apparent advantages they’ve benefited from. At a societal level, we can ask what are the roots of racial inequalities and what’s needed to redress them.