Most countries have some anti-discrimination laws, requiring employers to pay people with different productivities equally, or to give someone who took parental leave their job back after they return. One reason why unequally productive people are paid equally is evaluation “relative to opportunity”, i.e. the bar for a promotion or a raise is lower for someone from a historically disadvantaged group or who has family responsibilities. Suppose that there is a consensus in society for supporting certain groups. Why might the cost of this support be placed only on specific employers, namely those who employ the target group? Why doesn’t the support take the form of direct subsidies from the government to the target group, financed by taxing all employers equally?
An explanation from political economy is as follows. Clever people in society or government want to pay a larger subsidy to high-income members of the target group, perhaps because the clever people are themselves high-income and belong to the target group. However, the majority of voters would not like high-income people getting a bigger subsidy. So the clever people disguise the subsidy as something that looks equal, namely every member of the target group gets the same duration of parental leave, the same guarantee of their job back at the end of leave, the same privileges and special treatment for promotions and raises. The value of these guarantees and privileges is greater for higher-paying jobs. For example, a promotion from a high-paying job usually gives a bigger salary increase than from a low-paying job. A guarantee of getting a high-paying job back after parental leave is worth more than a guaranteed low-paid job. Thus the support provided to the high-income members of the target group is more valuable.
Further, productivity at a high-income job is typically more responsive to the employee’s human capital, and the skills deteriorate faster. A truck driver who has not driven for some years retains a greater fraction of driving ability than a surgeon retains from surgical technique after not operating for the same number of years. The productivity difference between an employee returning from parental leave and someone continuously employed is on average greater for higher-paying jobs. So the cost to an employer of keeping a job for a returning employee instead of hiring a new person is greater if the job is higher-paid. The subsidy to the high-income members of the target group thus costs more per person.
Income is positively correlated with intelligence, so the smart members of the target group are likely the wealthy members who benefit from this kind of unequal subsidy. They are likely to vote and campaign in favour of the unequal support, instead of an equal cash subsidy for everyone. The less smart members of the target group who lose from an unequal subsidy (compared to an equal one) are less likely to understand that they lose. This makes them abstain from opposing the unequal subsidy.
In effect, the smart members of the target group redistribute a baseline-equal subsidy from the less smart (and less wealthy) to themselves, at the social cost of losing some efficiency in the economy. Keeping a job for someone when a more productive potential hire is available means losing the difference in the productivities of the two people. Such efficiency losses are typical of re-distributive policies that are not cash transfers.
In principle, the cost of the current policies could still be equally distributed between employers by taxing them all and subsidising those who employ the target group. Or equivalently, taxing only those who don’t employ the target group. However, to equalise the cost to employers, the firms employing highly-paid members of the target group must be compensated more than the ones employing low-paid members. The differential compensation to firms would call attention to the unequal support that people with different incomes are receiving, thus weakening the disguise of the subsidy. The clever people want to avoid that, so do not campaign for equalising the costs of anti-discrimination laws across employers.