Sexual Orientation Discrimination in Hiring

Little research has been done to examine discrimination against gays and lesbians in the labor market. Badgett (1995) was the first to investigate labor market outcomes of gays and lesbians using a random data set. While her results suggested lower earnings for lesbians compared to heterosexual females, later studies indicated the contrary and indeed repeatedly documented an income premium for lesbian women. Considering the wage penalty we observe for most social minorities in the labor market (women, ethnic minorities), this result appears as striking. The apparently "privileged" labor market situation can be reconciled with the existence of labor market discrimination, however. Problems like sample selection and unobserved heterogeneity - in particular lesbians' violation of stereotypical female gender roles - might be responsible for their higher earnings. To investigate whether discrimination against lesbians actually does exist, a labor market experiment is conducted. Job applications of candidates, who are equivalent in their human capital but differ in their sexual orientation, are sent out in response to job advertisements. Furthermore, to test whether increased masculinity affects labor market outcomes, the applicants differ in their perceived gender identity. While results show a strong negative effect for lesbian orientation, gender identity does not have a significant overall impact on hiring chances.