Reactions to employment quotas are seldom mild. Protagonists argue that they create incentives for minority-majority convergence in skill distributions. In their view, quotas, unlike simple transfers, promote income equality via equality of worker productivities. Antagonists argue that quotas are socially costly; they result in both sacrificing standards and inefficient use of resources. My objective is to present an analytical framework showing that, in this as in most cases, effects are not necessarily what they seem. I assume that quotas are target minority-majority employment ratios for skilled or highly paid occupations. I also assume that in covered occupations firms must pay the same wage to all workers who have the same job title. The presumption is that target ratios are not easily satisfied with available supplies of skilled minority workers, so that quotas create an effective shortage of these workers. Associated with this shortage is the incentive to distinguish between demographic (color or sex) and skill