Labour Economics assignment 1
Chapter Twelve Discrimination and Male-Female Earnings Differentials
© 2012 McGraw-Hill Ryerson Ltd.
Prepared by Dr. Amy Peng
Ryerson University
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Learning Objectives
Understand the factors that give rise to the male-female pay gap (or any pay gap for minority groups) and, especially, the importance of discrimination in explaining that gap.
Understand the methodologies that have been used to estimate discriminatory pay gaps and the challenges associated with those methods so as to have an appreciation of the difficulties of determining the extent of discrimination.
Explain how discriminatory pay gaps may be sustained in markets even though they can entail inefficient practices by not hiring the best people given their wages.
Understand the pros and cons of different policy initiatives for combating discrimination.
Understand the factors giving rise to changes in the male female pay gap over time.
Chapter 12
© 2012 McGraw-Hill Ryerson Ltd.
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Reasons and Sources of Discrimination
Reasons for discrimination:
Race
Age
Language
National Origin
Sexual Orientation
Political Affiliation
Sex
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Reasons and Sources of Discrimination
Discrimination in the labour market occurs when groups of employees with similar productivity potential are treated differently because of the:
Demographic group they belong to, or
Personal characteristics
Discrimination occurs in the following forms:
Wages
Promotion
Training
Hiring
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Reasons and Sources of Discrimination
Who can discriminate and why?
Employers: based on wage
Male co-workers: based on prejudice
Customers: based on beliefs
Unions: member preferences
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Theories of Labour Market Discrimination
Demand Theories
Supply Theories
Noncompetitive Theories
Queuing Theories
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Theories of Labour Market Discrimination
Demand theories of discrimination:
Demand for female labour is lower than male labour, causing lower employment and lower wages of female labour
Possible causes:
Underestimation of female productivity
Prejudices
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Theories of Labour Market Discrimination
Supply theories of discrimination:
Increased supply of female labour, causing lower productivity and reduced wage rate.
Crowding hypothesis: Females are segregated into female type jobs and there is an excess supply of female labour, causing lower marginal productivity of female labour and, hence, a lower wage rate.
Dual labour market: With males in the core and females in the secondary market, the wage in the secondary market is much lower.
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Theories of Labour Market Discrimination
Noncompetitive theories of discrimination:
Government, trade unions, employers, monopsony, systemic discrimination
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Theories of Labour Market Discrimination
Queuing theories:
Firms are paying efficiency wages higher than competitive wages in order to:
Reduce turnover
Improve morale
Have the advantage of a queue of workers that are waiting to be hired anytime
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Theories of Labour Market Discrimination
Productivity Differences: Choice or Discrimination?
Women differ from men in their acquired capital endowment due to:
Shorter expected length of labour market participation which, in turn, reduces their level of experience
Higher turnover rate
Higher absenteeism
Difference in household responsibilities
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Measuring Discrimination Oaxaca Decomposition
Male-female wage differentials: YF/YM
Use human capital earning functions:
Take log to the male-female wage ratio
Adding and substrating βFXF
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Pre-market
Characteristics
Discriminations
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Graphical Illustration of the Oaxaca Decomposition
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X
XM
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XF
lnYF = βF XF
LnYF
lnYM = βM XM
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Wage differentials
Pre-market
characteristics
Discriminations
Evidence on Male-Female Earnings Differentials
Different studies have focused on different aspects of discrimination such as:
Wage discrimination
Sex discrimination
Institutional discrimination
Household discrimination
Findings:
While the results are varied, on average females tend to earn about 60 to 65 percent of what males earn in part due to invisible barriers (glass ceilings) in the labour market.
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Evidence on Male-Female Earnings Differentials
Indirect evidence of discrimination as reflected in unequal pay between the groups
The question is: “What would women earn if they were men”?
By holding all productive characteristics constant and changing the sex only, one can see how the pay would be adjusted.
Discrimination occurs when equally qualified women and men are paid differently, performing the same job in the same firm.
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Evidence on Male-Female Earnings Differentials
The results of empirical studies on gender discrimination conclude that on average the wage gaps exist due to:
Household responsibilities
Family responsibilities
Occupational distribution of females into lower
paid industries
Employment of women into low paid occupations
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Policies to Combat Sex Discrimination
Conventional Equal Pay
Deals only with wage discrimination within the same job within the same establishment
Equal Value, Pay Equity, or Comparable Worth
Value procedures an important component
Equal Employment Opportunity
May benefit new recruits
Affirmative Action/Employment Equity
Facilitating Policies
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Policies to Combat Sex Discrimination
Equal pay legislation
Requires equal pay for equal value of work within the same establishment
The value is determined by a job evaluation scheme that is free of gender bias
Applicable in all Canadian jurisdictions except Alberta
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Policies to Combat Sex Discrimination
Equal Value, Pay Equity, or Comparable Worth
Equality of pay between jobs of equal value
Value determined by job evaluation scheme free of gender bias
Comparisons between jobs that are predominantly male and predominantly female
Rationale-deals with both wage discrimination and occupational segregation
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Policies to Combat Sex Discrimination
Scope of equal value initiatives:
Potentially large because it allows comparison across occupations
Limited sometimes because of the fear of the employees to complain
Enables employees to achieve pay equity through job evaluation system
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Policies to Combat Sex Discrimination
Design Features of Comparable Worth
The following features will have to be designed and worked out to facilitate the practical implementation of the policy
Definition of gender predominance
Job evaluation procedure
Procedure for adjusting payment
Exemptions
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Policies to Combat Sex Discrimination
Equal Employment Opportunity Legislation
Designed to prevent discrimination in recruiting, hiring, and promotion
Time consuming since it involves a few stages in filling in the complaint, court decision, and investigation
Increases female employment
Increases female wages
Serves as a complement to equal pay legislation
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Policies to Combat Sex Discrimination
Affirmative Action/Employment Equity Legislation
Exists only in federal jurisdiction
Covers only 10% of the Canadian labour force
Applicable to four designated groups: women, visible minorities, disabled persons, and Aboriginal people
Policies to Facilitate Female Employment
Designed to expand the range of choices for women
Increase female participation in the labour market
Improves availability of facilities and family-friendly workplaces practices
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Policies to Combat Sex Discrimination
Overall impact of Policy Initiatives:
Limited impact and scope
The effect of equal pay and equal employment opportunity policies is inconclusive
Comparable worth policies have reduced the earning gap
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Summary
Definition, causes, and consequences of discrimination
Theories of discrimination: demand, supply, noncompetitive, and queuing theories
Empirical evaluation and research
Policy categories to combat discrimination, their scope, impact, and design
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