Job Discrimination, Market Forces and the Invisibility Hypothesis
The Invisibility Hypothesis holds that the job skills of disadvantaged workers are not easily observed by potential new employers, but that promotion enhances visibility and alleviates this problem. Then, at a competitive labor market equilibrium, disadvantaged workers will be paid less on average and promoted less often than other workers with the same education and ability, even if their employers are unprejudiced and know their workers’ abilities. As a result of the discriminatory wage and promotion policies, disadvantaged workers will experience lower returns to investments in human capital than other workers. An aﬀirmative action program that eliminates discrimination and brings about eﬀiciency initially forces the promotion of unqualiﬁed workers.
Milgrom, Paul R. and Oster, Sharon, "Job Discrimination, Market Forces and the Invisibility Hypothesis" (1984). Cowles Foundation Discussion Papers. 942.