Workers can have good or bad work habits. These traits are transmitted from one generation to the next through a learning and imitation process, which depends on parents' investment in the trait and the social environment where
children live. If a suffciently high proportion of employers have taste-based prejudices against minority workers, we show that their prejudices are always selffulfilled in steady state and minority workers end up having, on average, worse work habits than majority workers. This leads to a ghetto culture. Affirmative Action can improve the welfare of minorities whereas integration can be beneficial to minority workers but detrimental to workers from the majority group.