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In order to quantify the wage gap between heterosexuals and lesbians, gays and bisexuals (LGBs), a Mincer-style wage equation is estimated via Maximum Likelihood interval regression using data from the General Social Survey 1988-2002. I find that gay men face a 15% gap compared to heterosexual men, while the wage differential between lesbians and heterosexual women is very close to zero and not statistically significant.

It is often claimed that for discrimination against LGBs to take place, the employer needs to know that the employee is LGB. I estimate an endogenous switching model in which wages and the decision whether to disclose sexual orientation to the employer are simultaneously determined. When making the disclosure decision, the employee takes into account both expected discrimination and the psychological costs of non-disclosure. Using data from the Urban Men's Health Survey, I show that gay men who do not disclose their sexual orientation to their employers would face a 16% penalty for doing so.

Discrimination against racial minorities too presupposes that the employer has a perception of the employee's race. Using data from the National Longitudinal Survey on Youth (NLSY) 1979-2002, I compute for each self-reported racial group (blacks, Hispanics and whites) a measure of the times in which they are perceived as white by NLSY interviewers. Blacks who are perceived as white even only occasionally face a wage gap (with respect to whites) that is less than half of the wage gap that black men who are always perceived as black face. For Hispanics, being always perceived as white eliminates the Hispanic-white wage gap completely. I also show that more educated people, people working in some white collar occupations, and people who are married are more likely to be perceived as white.