Managers' claims that reducing employment discrimination will lead to higher costs and decreased personnel efficiency in organizations are not supported by theory or empirical evidence. Economic theories, in fact, indicate that discrimination does not have a rational economic basis and that reducing discrimination should lead to increased, rather than decreased, efficiency in the long run. Analysis of discriminatory practices in hiring, selection, placement, and promotion within organizations demonstrates that, while truly equitable employment practices may result in greater costs and reduced efficiency in the short run, most the negative efficiency and cost impacts tend to be temporary. Futhermore, many existing discriminatory practices are not attributable to efficiency considerations. Proponents of employment equity should understand the economic concepts in the efficiency versus discrimination issues in order to distinguish between accurate and fallacious arguments and turn efficiency arguments in their favor. In dealing with racial attitudes of organization members, various mechanisms to reduce discrimination may be employed, depending on the organizational sector and type of discrimination being addressed. (Author/MJL)