Topic 2 - Estimating the changing extent of gender discrimination

Professor Christine GreenhalghP Cahuc and A Zylberberg (2004) Labor Economics, Chapter 5

Compensating Wage Differentials and Discrimination, part 4. 

A Manning (2003) Monopsony in Motion, Chapter 7: Gender Discrimination in Labor Markets.

A Manning and J Swaffield (2008), ‘The gender gap in early-career wage growth’, The Economic Journal Vol. 118 No. 530 July.

The Economic Journal (2008) Vol. 118 No. 526 February, Feature: Women’s Part-Time Work. This includes five articles examining several aspects of the topic. See especially the two articles by M Gregory and S Connolly and one by Manning and Petrongolo.

Gross pay gaps in EuropeSource The Guardian 16 March 2009

Wage Differentials – Fair and Unfair• Cahuc and Zylberberg outline compensating

differentials arising under perfect competition• Describe this as ‘Hedonic Theory of Wages’• In this case all differentials are fair rates • Monopsony can be serious barrier to operation of

perfect competition – here differentials are not perfectly related to marginal productivity

• But Manning in ‘Monopsony in Motion’ was unable to find dramatic differences in M and F labour supply elasticities to firms

• Reason – two offsetting effects – F less likely search widely among employers, but F more likely to quit into non-participation

Discrimination - Which gender pay gap to look at?

• Many women take on the role of carers for children, disabled and elderly

• Expect these women to have gaps in employment and/or to work part-time

• Anticipation of events such as family formation can cause women to make– lower investments in human capital and– choices of occupations compatible with caring

• Differences in current gross hourly earnings reflect these choices

Gender differences in human capital investment

• Experience accumulation is lower

• On-the-job training may be below men

• Pre- entry differences in quantity and type of formal education

• Choice of first job indicative of future career

• Survey evidence of ambition/attitudes to work

M & F employment rates by age in 1979 & 2002 Source: see next slide

Gender wage gaps by age and education 2002

Source: Previous and this slide:Data from UK

LFS, as shown in H Robinson Ch 15 of The Labour Market Under New Labour, eds. Dickens, Gregg, Wadsworth 2003

Gender segregation by Occupn. 2002Share in F(M) employment

% Female within Occupn.

Managers 10 (18) 31

Professionals 10 (12) 43

Assoc. Prof. 13 (13) 47

Administrative 24 (5) 81

Skilled trades 2 (20) 9

Personal service 13 (2) 86

Sales 12 (4) 72

Processing 3 (13) 17

Elementary 12 (12) 47

Wage decomposition techniques

Estimating wage equations (hedonic)ln w = xβ + eα + ε

w is hourly wagex is vector of personal characteristicse is vector of characteristics of jobε is random errorβ vector of coefficients on personal variablesα is vector of coefficients on job variables

The Blinder-Oaxaca Method of Estimating Discrimination

• Estimate separate wage equations for males M and females F

• Simplify notation to include both x and e variables in X list

ln w = X β + ε• Gap between male and female wages is due to

differences in characteristics X • Plus differences in rewards for given X

ln wM – ln wF = (XM – XF) βM + XF(βM - βF ) Second element is estimate of discrimination D

Measurement problems and alternative estimators

• In wage regressions if have omitted characteristics such as motivation and commitment to career –> this would overstate D

• If fewer very low paid women chose to work then don’t observe those with lowest wage offers –> this would understate D

• Alternative direct estimators hard to find but Goldin and Rouse orchestra auditions is a classic controlled experiment

• Introduction of ‘blind auditions’ in 1970s & 80s for major US symphony orchestras led to more women being hired

Early evidence for the UKSource Greenhalgh EJ Vol.90 1980

Using Blinder-Oaxaca decomposition - Unexplained differentials 1971

Married to single men 14%Single men to single women 24%Single women to married women 3%

Unexplained differentials 1975Married to single men 10%Single men to single women 10%Single women to married women 12%

Recent study of labour force entrants in 1990s

• Manning and Swaffield EJ 2008 article• Uses BHPS data 1991-2002 (large

representative dataset)• Gender pay gap on entry is zero – equality

at the start• 10 years later gender pay gap has emerged

during early careers• Gap continues to widen reaching a

maximum at c. age 40• Later birth cohorts show smaller gaps than

earlier ones but still significant

How big is early career gap? • Early career = up to 10 years in labour force• Manning and Swaffield characterise wage

gap after ten years as ‘25 log points’ • Means that log ratio male to female wages

is 0.25 • Exponentiating gives the actual ratio as 1.28• So men’s wages have grown faster to reach

level 28% above females by ten years after labour market entry

What explains this early career gap?

Three broad factors:• Human capital differences

Some women intermit or work part-time

Do men also get more training?• Job-shopping

Do men change jobs to find right niche?• Psychological differences

Are men more ambitious?

Decomposition Results (in log points)

• Gap after ten years 25

• Human capital 11

Work experience 6.5

Training 4.5

• Job shopping 1.5

• Psychology 4.5

• Unexplained 8

Explaining gender differences in skills acquisition

• Gender gap in training is driven by the pattern among the less skilled

• More early school leaver men than women enter apprenticeships

• Among graduates women get more training than men

• Choices of entry occupations do differ but this is not the deciding factor for differences in wage growth (provided get training)

Changing attitudes to workSource Fortin in OXREP 2005

Gender Birth date

Women 1936-45

Women Post 1965

Men 1936-45

Men Post 1965

Scarce jobs men first

0.32 0.15 0.32 0.21

Housewife

fulfilling 0.65 0.57 0.67 0.63

Good pay important

0.68 0.79 0.73 0.83

Useful job to society

0.46 0.40 0.39 0.38

Ideal no. children

2.63 2.39 2.55 2.42

Actual no. children

2.60 1.11 2.48 0.76

The Work-Life Balancing Act• Gregory & Connolly EJ Feb 2008 title piece

‘The price of reconciliation…’• Good News

– More women in further and higher education – Labour force attachment is strengthening – Moving into an expanding range of occupations

• Bad News– Pay gap between Full- and Part-time women

widening steadily– Part-time jobs polarised in low-paid

occupations– Legislation does not address this inequality

The Part-Time Pay PenaltyManning and Petrongolo EJ Feb2008

• PTPP was 14% in 1975 rising to 28% in 1995 after which no clear trend

Estimating the factors accounting for this gap • Can explain majority of gap using characteristics

of person and of their job• Occupation is by far the biggest – explains 70%

In rank order other characteristics are: • Education, Industry, Employer size and Region• Within occupations the part time pay penalty is

quite small

Moving Down – Part-Time Work and Occupational Change

• Connolly and Gregory analyse women moving from FT to PT working

• Look at average qualification level by occupation and rank jobs by skill level

• Between 14% and 25% of women moving to PT work move to a lower skill occupation

• Worst affected are former managers• Least affected are those staying with same

employer• Downgrading constitutes a ‘hidden brain drain’

Policy OptionsMinimum Wages:• Since 1999 when UK MW was introduced

can see small effects on wages of both FT and PT women

• Relative gain for PT women very small Equal Treatment: • Legislation in 2000 ensures PT cannot be

treated less favourably than FT• Not very effective because major gap is

across occupations not within

More Policy Options Rights to Flexible Working:• From 2003 legislation requires employers to

consider seriously requests to change hours • Applies only to parents of children aged < 6 • Can refuse; some evidence higher paid

women get more refusalsEmployer Reviews of Equal Pay• Government has encouraged employers to

conduct reviews within organisations• So far this is voluntary

Policy movement in the recession?• Article in The Guardian 16 March 2009:

“Equal pay is a step too far in recession, says rights body” heading

• Equalities and Human Rights Commission says equal pay reviews should not be forced on employers in recession, keep voluntary

• TUC’s equality department begs to differ, saying pay audits are a crucial part of eliminating the pay gap

• Unison (large public sector trade union) claims voluntary approach has not worked