• Institutional discrimination is the denial of opportunities and equal rights to individuals and groups
that result from the normal operations of society. Social scientists are particularly concerned with the
ways in which patterns of employment, education, criminal justice, housing, health care, and
government operations maintain the social significance of race and ethnicity.
• A few documented examples of institutional discrimination include:
1) Standards for assessing credit risks works against African Americans and Hispanics seeking to
establish businesses because many lack conventional credit references. Business in low-income areas
where these groups often reside also have much higher insurance costs.
2) IQ testing favors middle-class children, especially the White middle-class, because of the types of
3) The entire criminal justice system, from the patrol officer to the judge and jury, is dominated by
Whites who find it difficult to understand life in poverty areas.
4) Hiring practices often require several years’ experience at jobs only recently opened to members of
5) Many jobs automatically eliminate people with felony records or past drug offenses, which
disproportionately reduce employment opportunities for people of color.
The Informal Economy and the Underclass
• The secondary labor market affecting many members of racial and ethnic minorities has come to be
called the informal economy. The informal economy (or underground economy) consists of transfers of
money, goods, and services that are not reported to the government. This label describes much of the
work in inner-city neighborhoods and poverty-stricken rural areas.
• Workers are employed in the informal economy seasonally or infrequently. The work they do may
resemble the work of traditional occupations, such as mechanic, cook, or electrician, but these workers
lack the formal credentials to enter such employment. The informal economy also includes unregulated
child-care services, garage sales, and the unreported income of craftspeople and street vendors.
• According to the dual labor market model, minorities have been relegated to the informal economy.
Although the informal economy may offer emplo