Customer-Based Discrimination and Sexual Orientation: Evidence from Geographic Variation in Occupational Sorting

Discrimination against minorities in the work place is a complex phenomenon that has several labor market effects as well as a rich variety of causes. One such cause of discriminatory practices against minority workers is customer-based discrimination. This occurs when prejudice leads individuals to prefer commercial interactions with certain groups of workers over others. Under customer-based discrimination, otherwise identical employees across different classes of workers are not perfect substitutes, as race, gender or sexual orientation becomes a component of workplace productivity. While several studies address customer discrimination as a component of racial discrimination, to my knowledge this is the first paper to attempt to specifically identify customer discrimination against gay and lesbian workers. To test the prevalence of customer discrimination against gay and lesbian workers in the United States, I exploit geographic variation in attitudes towards homosexuality to see if occupational sorting choices vary amongst gay workers in less prejudiced parts of the country versus more prejudiced parts of the country. To this end, I construct a novel state-level index of attitudes towards homosexuality using individual survey responses to questions about taste. Multiple specifications provide evidence that gay men do sort away from customer service jobs in areas of the country with strong levels of distaste for homosexuality. This sorting is consistent with the model of customer-based discrimination. I find less evidence that this occupational sorting exists amongst lesbian women consistent with many studies across the discrimination literature that find less labor market penalties for lesbians then for gay men.