Research

05 Aug Research

If we look across the industries, wage rates differ drastically, and these differences are attributed to how much people value certain occupation or the goods and services produced within certain industry. While it’s common for sportsmen to have millions of dollars of revenue annually, common labor often has to work for minimum wage. To explain these differences one can adopt social, cultural or economic framework and conclude that certain jobs require minimum skill and education, while others require more dedication and investment. Additionally, we can say that some give consumers higher value, and thus people are ready to pay more to get access to those goods and services. While some of the differences in wage rates can seem quite unfair, the fact that wages for basketball player and a manufacturer are different, can be explained by common sense, however, when it comes to more complicated issues, like gender-based or race-based pay gaps, explaining those becomes much harder. This becomes even more confusing when we control for education, age, experience, and industry and observe that a man and a woman with similar background, working on the same position and doing same job have different wage rates.

The goal of this research paper is to evaluate gender gap, understand some of the variables which can explain it and suggest policies that will decrease gender-based wage gap. To accomplish this, I will rely on existing literature that addresses the topic and make conclusions based on existing scientific knowledge about this topic. While this paper won’t conduct regression analysis, it will discuss a potential model for building one; based on this model, one could assess how various independent variables affect gender based wage differences and what needs to be done to change that.

“While the gender gap in the performance of housework has narrowed in many countries for which data are available, it remains universal and large.” (Sayer, 2010). This existing gap makes the problem extremely important. Another reason why this topic is important is that by classical theory about labor market, we expect that wage rate within the industry, for the same position should be the same, because market regulated the wage and workers and employers simply have to accept it; however, in real like employers have higher negotiating power, and they can pretty much set wages as they prefer. What’s interesting is that, for some reason sometimes women are offered a different rate than men. This happens even then we control for various variables. So, what causes women to get lower wages? Are they worse employees? Are they less skilled? Or is it employer who simply likes to discriminate against women?

Literature Review

Considering that our primary emphasis is on existing wage gap in Unites States, looking at some of the studies conducted using American data will be extremely helpful. However, data and findings from other countries will also be considered, and especially interesting would be policies adopted by other countries to solve the problem.

Mandel and Semyonov (2014) did an extensive study about gender pay gap covering 1970-2010. They looked at convergence and divergence patterns and analyzed what caused these changes in pay. Also, they separated public sector and private sector, and saw different trends. The model that is used for studying pay gaps includes explained components which arise because of some differences between women and men and unexplained components, which means that basically, there is a gap because of discrimination rather than any real reason. They found that variables that explain wage gap include gender differences in human-capital resources, some of the sociodemographic variables, and occupational segregation. According to the findings the most important reason why men are women are paid differentially, is difference in working hours. Another reason is that women are only hired for low paying jobs, and this creates occupational segregation. However, there is a large portion of unexplained wage gap, which suggests that women are paid less, just based on their gender. Another interesting finding was that in public sector, where there is more regulation, wage gap is smaller (Mandel & Semyonov, 2014).

In addition to looking at wage discrimination for women in general, Mandel and Semyonov also assessed how gender-based gap looks when we take into account race as well. So, basically they compared not only differences among males and females, but also wage gaps for white males vs. black males and white females vs. black females. They found that there is greater pay gap among white and black men than among white and black females. This means that black men face more discrimination, because despite being a man, they are not paid more. This can be explained by the fact that black men are victims of negative stereotypes, which affects their earnings. Interestingly, in 1970-1980s racial gaps were decreasing for both genders, but this decline stopped in 2000 because of various reasons, including “overall income inequality, stagnation in occupational segregation, and an increase in the unexplained portion of the gap, a portion we contribute to economic discrimination” (Mandel & Semyonov, 2016, p. 1039). Overall, they concluded that wage gap is more gendered than racialized.

Another study by Kim (2000) studied wage-setting procedures in California and Washington and concluded that gender biases arise because of the nature of wage-setting procedures. This study provides historical background about how wages were set, how it resulted in wage discrimination and how that continued even to this day. Labor market models that are taught to students in colleges assumes that labor market is a competitive market, and thus employers and employees are price takers. However, reality is very different and as Dunlop’s (1957) study shows wages for truck drivers within the same city can range at 100%. Kim explains this by the nature of the salary survey that firms fill out to provide wage data of their employees. Turns out these required that male and female salaries were written separately. In early times women working on same position as men were paid less and this was reflected in the survey. So, next generation of employers who looked as salary surveys to determine wages saw that women working on same position is paid less and they copied the trend. Thus, even today, wages are reported separately, and there are still differences, because employers see that other companies do the same. Also, historically, men have been better at negotiating higher wages than females, because they weren’t part of the unions, and this also contributed to the discrimination (Kim, 2000).

Yamada, Koshal, Miyazima and Koshal (2002) studied labor survey data of Japan for the year 1998, and accessed gender based pay gap by controlling for age, experience and education levels. That means that they were comparing wages for males and females that were of the same age, and had same experience and education in order to eliminate wage differences due to differences in skills. They didn’t specify industries, so, we could be comparing woman, aged 25, with 12 years of education and a man with the same background working in different industries. According to the authors, the reason we see differences in women’s and men’s wages in Japan is more related to occupational discrimination rather than pay discrimination. This means that women in Japan earn less, because they are only hired for secretary and other low-skill jobs. Nevertheless, even when they are hired for the same job, women still earn only 78-81% of the wages that males earn (Yamada & Koshal & Miyazima and Koshal, 2002).

Besen-Cassino (2008) conducted an interesting study that tried to see how early these gender pay gap emerges and titled his study as a “cost of being a girl”. Considering that in USA a lot of people start working while they are still teenagers, this allows us to observe wage patterns among young girls and boys and see if wage gap exists right from the beginning. While no differences were found in wages for girls and boys aged 12-13, at age 14 these differences become pronounced and widens with age. This result was explained by the fact that at 12-13 girls and boys work on similar jobs, earning similar pays, while from the age of 14 jobs start differentiating and males enter occupations that are paying more compared to the job options that women choose (Besen-Cassino, 2008). It could be the case that choices given to women at such a young age “teach” them the industries where they can work, and thus they stick with low-paying occupations for the rest of their lives. However, the bigger problem is that when man and a woman get same education and same position and they are still getting paid differently.

Objectives and Solutions

Based on these articles, it becomes clear that gender pay gap is a complex subject that is influenced by various variables. Some of the pay gap is explained by occupational segregation, which means that women end up working for generally low-paying jobs, and this is the reason why women earn less than men. While it is fair that some industries are paying more than others, what needs to be addressed is the fact that it’s mostly women filling those positions. The most important question is what variables have shaped this reality? There could be objective reasons that women are getting more freedom from such jobs, and their schedules are more flexible, or they like those jobs better than other jobs. In this case, there’s nothing we can do to oppose occupational segregation, because women have chosen to work in low-paying positions. However, there is another variable which is really important to consider: are these women taught that they should work for specific positions which are more suited for women? If that’s the case, then it’s a cultural problem which doesn’t give women choice to pursue their interests and work wherever they want. Another even bigger problem is wage gap that exists when women and men work in the same industry, on the same position, do same tasks, and still are paid different wages. In this case, we make sure that both same similar education, working experience and age, and still these differences persist. One of the studies concluded that the reason older men are paid more than older women is because the age is viewed differently among men and women. Author explained that age is viewed more favorably among men, which is a very discriminatory reason for paying different wage rates (Angle & Wissman, 1983). What can be done to solve this problem? There are several things that I would suggest. First of all, considering that regulating wages in public sector is easier, because government can’t openly discriminate against women, public sector should be the first place where this change begins. By making women unions stronger, making their voices more important, they can lobby for higher wages. Once gender pay gap is closed in public sector and women will start choosing public sector jobs over private sector jobs, private sector employees will reconsider their offers and hopefully shrink the gap.

Additionally, gender-based employment stereotypes need to be addressed and women need to learn that there is no job that is specifically created for men. Engineers, politicians, scientists, farmers are occupations that require specific knowledge, not specific gender. This will empower women and allow them to pursue whatever they want, thus diminishing occupational segregation.

Finally, we saw that there is a large unexplained portion of wage discrimination. This means that it occurs not because employers think that women are less capable, less educated or less productive. It happens because employers see a woman and decide to discriminate her. How should we address this? Probably education is still one of the answers, because raising up children who don’t have gender based stereotypes will lead to them becoming fair employers. Meanwhile, in short run government can make it illegal to pay men and women working on same position different wages. However, this is very unlikely to happen, because government won’t intervene in private sector. Another suggestion is that maybe we should just expose the companies that do this, and boycott them, however this is also hard considering that salary related information is confidential.

Methodology

As noted before, this paper won’t attempt to run a regression and analyze specific data, however, the question that I would analyze is how do wages differ for men and women with highest education level. My hypothesis is that women and men who got PhDs and have been studying for many years to become professional should have comparable wages when working on the same position. However, there might still be occupational segregation in terms of where men vs. women start working after they get PhD. To study this question, I would run OLS regression, and observe differences in wages for men and women who have PhDs. First step would be to look at job distribution for males and females: do they go into different industries? Do they occupy different positions? And based on this, I would evaluate whether we observe occupational segregation that was present in case of Japan. Independent variables would include gender, occupation and age, while dependent variable would be the wage. If my study finds that there is occupation segregation which leads to males earning more than females, my next step would be analyzing why females chose different industries compared to men. I would not expect that women who earned PhD feel like some jobs are not for women, but it could be the case that they have to compromise their jobs because of their families, children, etc. This would show that women are given bigger burden in family and as a result even when they can earn same wage as males, they choose to earn less because of societal roles ascribed to them.

References

Angle, J. & Wissman, D. A. (1983). Work Experience, Age and Gender Discrimination.

Social Science Quarterly, 64, 66-84.

Besen-Cassino, Y. (2008). The Cost of Being a Girl: Gender Earning Differentials in the Early Labor

Markets. NWSA Journal, 20(1), 146-160.

Dunlop, John T. (1957). The Task of Contemporary Wage Theory. In John T. Dunlop (Ed.) The Theory of Wage Determination. (Vol. 3). New York: Stockton Press.

Kim, M. (2000). Employers’ Estimates of Market Wages: Implications for Wage Discrimination in the U.S. Feminist Economics, 6(2), 97-114.

Mandel, H. & Semyonov, M. (2016). Going Back in Time? Gender Differences in Trends and Sources of the Racial Pay Gap, 1970 to 2010. American Sociological Review, 81(5), 1039-1068.

Mandel, H. & Semyonov, M. (2014). Gender Pay Gap and Employment Sectors: Sources of Earnings Disparities in the United States, 1970-2010. Demography, 51, 1597-1618.

Sayer, L. C. (2010). Trends in Housework. In J. Treas, J., and S. Drobnic, (Eds.), Dividing the Domestic, Men, Women, and Household Work in Cross-National Perspective (pp. 19-38). Stanford: Stanford University Press.

Yamada, Y., Koshal, R., Miyazima, S., Koshal, M. (2002). Role of Gender in Wage Determination in the Production Sector in Japan. Perspectives on Global Development and Technology, 1, 251-268