Literature Review: Sexual Orientation and Wages

Heterogeneity in wage has been studied extensively in economics. One well-established finding is that often times income inequality is not such a bad thing. There is no better way to motivate the workers to put in effort than incentives that reflect the workers’ productivity. However, income inequality promotes efficiency only as long as a difference in individual productivity is driving a wage gap. Intuitively, if income is arbitrarily low or high regardless of productivity, this type of wage gap can be a source of inefficiency and unhappiness. One way that this can occur is through discrimination. Many theoretical and empirical studies of race-based or gender-based discrimination have been conducted, but the literature on the sexual orientation based wage gap is relatively new. Disclosing sexual orientation to the public has not been popular among the L/G/B/T people in the past. Generally, individuals with any sexuality that deviates from heterosexuality have been subject to some form of discrimination. It can easily be imagined that the disclosure of sexual behaviors that deviate from social norms would not have been done frequently. More recently, however, many societies have become more open to diversity. Social acceptance of non-hetero sexualities, therefore, has increased over time, and more sexual orientation minorities have found the courage to disclose their sexuality. Hence, society’s growing openness with regards to sexual orientation has allowed for easier collection of data on sexual behavior and self-reported sexual orientation. This, however, does not imply that the discrimination against non-heterosexual persons has become less prevalent. As the number of sexual orientation minorities disclosing their sexuality at work increases, the scale of direct discrimination toward the minority grows as well. Consequently, the civil rights of sexual orientation minorities in the work-