Early-Career Discrimination: Spiraling or Self-Correcting?

Abstract

Do workers from social groups with comparable productivity distributions obtain comparable lifetime earnings? We study how a small amount of early-career discrimination propagates over time when workers’ productivity is revealed through employment. Breakdown learning environments that track on-the-job failures grant a disproportionately large advantage to marginally more favored groups, whereas breakthrough learning environments that track successes guarantee comparable earnings to groups of comparable productivity. This discrepancy persists with large labor markets, flexible wages, inconclusive signals, and misspecified employer beliefs. Allowing for investment in productivity exacerbates inequality between groups under breakdown learning.