Women's Work and Wages

Christina Jonung, Inga Persson

• Publisher: Routledge
• Year: 2002
• ISBN:
  9781134750856
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

At a time when women in industrialized countries have a stronger and more permanent presence in the labour market than ever before, why does the gender pay gap differ so greatly between countries? The contributors to this book use empirical studies of gender differences in family responsibilities and time allocation to demonstrate how such differences affect women's wages and analyse pay structures and wage mobility throughout Europe.

Part I

Where are We in the Economics of Gender?

1

The Gender Pay Gap

Francine D. Blau

While the gender pay gap has been an important focus of modern economists concerned with the economics of gender, it was not necessarily the primary concern of early commentators on gender inequities. For example, in the nineteenth century, with few married women employed outside the home, observers like American feminist, Charlotte Perkins Gillman (1898), and Marxist, Friedrich Engels (1884), focused on the gender division of labor itself and espoused the emancipating effects of women’s participation in market work. Among economists as well as the general public, interest in gender issues including the gender pay gap has proceeded hand in hand with the growth in women’s labor force participation. As women have come to comprise a larger share of the paid labor force and as market work has loomed larger in the typical woman’s life, interest in the determinants of gender differences in labor market outcomes has also grown.

Of these labor market outcomes, the wage is of fundamental importance as a major determinant of economic welfare for employed individuals, as well as of the potential gain to market employment for those not currently employed. Further it serves as a significant input into myriad decisions ranging from labor supply to marriage and fertility, as well as a factor influencing bargaining power and relative status within the family. Thus, I focus here on wages in confidence that I am examining a question of considerable interest to economists and of considerable importance to women’s economic well-being. However, I readily acknowledge that wages are by no means the whole story even as a measure of economic well-being.

Research on the gender pay gap has traditionally focused on the role of what might be termed, gender-specific factors, particularly gender differences in qualifications and differences in the treatment of otherwise equally qualified male and female workers (i.e., labor market discrimination). An innovative feature of recent research on gender and race differentials has been to integrate the analysis of the gender pay gap as well as other demographic differentials into the study of wage structure in general.¹ Wage structure describes the array of prices set for various labor market skills (measured and unmeasured) and rents received for employment in particular sectors of the economy.

Wage structure is potentially of considerable importance in determining the relative earnings of groups such as women who tend on average to have lower skills or to be located in lower paying sectors of the economy. In this chapter I will first consider the determinants of gender differentials, highlighting the role of wage structure. I will then illustrate the impact of wage structure by summarizing some of my recent work with Lawrence Kahn on international differences in male-female wage differentials (Blau and Kahn 1992a, 1995, 1996), and on trends over time in gender differentials in the USA (Blau and Kahn 1994, forthcoming). I will then offer some concluding thoughts and suggest some implications for public policy.

Determinants of the Gender Pay Gap: Gender Specific Factors

An initial early impetus to the study of wage differentials was provided by the British experience in World War I. Pursuant to the war effort, there was some substitution of women into traditionally male civilian jobs, although not nearly to the degree that there would be during World War II. Questions of the appropriate pay for women under these circumstances arose and stimulated a number of economic analyses of the sources of the gender pay differential – all of which gave a prominent causal role to occupational segregation (e.g., Fawcett 1918; Webb 1919; Edgeworth 1922). Modern efforts to understand the gender pay gap have generally rested on two strong pillars: the human capital explanation and models of labor market discrimination. These are gender specific explanations in that they focus on gender differences in qualifications or treatment as the cause of the pay gap.

Human capital explanations developed by Mincer and Polachek (1974), Polachek (1981) and others explain gender differences in economic outcomes on the basis of productivity differences between the sexes. This explanation is based on the gender division of labor within the family which, as we have seen, was the focus of the nineteenth-century commentators, and traces the impact of this division on the wages and occupations of men and women. Anticipating shorter and more discontinuous work lives as a consequence of their role within the family, women will have less incentive to invest in market-oriented formal education and on-the-job training than men. Their resulting smaller human capital investments will lower their earnings relative to mens. Similar considerations are also expected to produce gender differences in occupations, as women choose those where such investments are less important and where the wage penalties for workforce interruptions are smaller. In the absence of parental leave policies, women will especially avoid jobs requiring large investments in firm-specific skills because the returns to such investments are reaped only as long as one remains with the firm. Since the costs of firm-specific training are shared by employers and employees, employers are reluctant to hire women for these jobs due to their shorter expected tenure on average. The difficulty of distinguishing more career-oriented women from less career-oriented women means that the former may be the victims of such “statistical discrimination” as well (see below).

Thus, the human capital model provides a logically consistent explanation for gender differences in economic outcomes based on the traditional division of labor in the family. Not only will women earn less, but they will tend to be located in different occupations. Gender differences in industrial distribution could also occur if industries vary in their skill requirements. Thus the human capital model provides a rationale for the pay gap based on the voluntary decisions of women and men. Working in a similar direction is Beckers (1985) model in which the longer hours women spend on housework lowers the effort they put into their market jobs compared to mens and hence reduces their wages. But these models may also be viewed as shedding light on how the traditional division of labor in the family disadvantages women in the labor market. Thus, in this sense, they provide some support for the claim of the nineteenth-century observers that the traditional division of labor is of fundamental importance in determining women’s status within the larger society. To the extent that gender differences in outcomes are not fully accounted for by productivity differences derived from these and other sources, models of labor market discrimination offer an explanation.

Theoretical work on discrimination was initiated by Becker’s (1957) examination of race discrimination. Becker conceptualized discrimination as a taste or personal prejudice against members of a particular group. Models of statistical discrimination were later developed, in part to explain the persistence of discrimination in the long run in the face of competitive labor markets (e.g., Phelps 1972; Aigner and Cain 1977; Lundberg and Startz 1983). Such models assume a world of uncertainty and imperfect information and focus on differences between groups in the expected value of productivity or in the reliability with which productivity may be predicted. Since the real or perceived average gender differences that underlie statistical discrimination against women in the labor market tend to stem from the traditional division of labor in the family, this constitutes another route by which traditional gender roles within the family adversely affect women’s labor market outcomes. Another aspect of interest is the relationship between occupational segregation and a discriminatory wage gap formulated in Bergmanns (1974) overcrowding model. Discriminatory exclusion of women from “male” jobs results in an excess supply of labor in “female” occupations, depressing wages there for otherwise equally productive workers.

These two explanations, gender differences in qualifications and differences in treatment of otherwise similar men and women, do not necessarily constitute mutually exclusive sources of gender wage differentials. Both may play a role and empirical studies based on cross-sectional data within countries provide considerable empirical support for each. One problem here is that evidence for discrimination relies on the existence of a residual gender pay gap which cannot be explained by gender differences in measured qualifications. This accords well with the definition of labor market discrimination, i.e., pay differences between groups that are not explained by productivity differences, but may also reflect group differences in unmeasured qualifications or compensating differentials. If men are more highly endowed with respect to these omitted variables then we would overestimate discrimination. Alternatively, if some of the factors controlled for (e.g., occupation, tenure with the employer) themselves reflect the impact of discrimination, then discrimination will be underestimated.

Another challenge to empirically decomposing the gender pay gap into its constituent parts is the existence of feedback effects. The traditional division of labor in the family may influence women’s market outcomes through its effects on their acquisition of human capital and on rationales for employer discrimination against them. But it is also the case that by lowering the market rewards to women’s human capital investments and labor force attachment, discrimination may reinforce the traditional division of labor in the family (e.g., Blau 1984; Blau and Ferber 1992; Weiss and Gronau 1981; Lundberg and Startz 1983). Even small initial discriminatory differences in wages may cumulate to large ones as men and women make human capital investment and time allocation decisions on the basis of them. Another nineteenth-century observer, John Stuart Mill, touched on this very relationship over one hundred years ago when he advocated women’s “admissibility to all the functions and occupations hitherto retained as the monopoly of the stronger sex,” claiming that “their disabilities elsewhere are only clung to in order to maintain their subordination in domestic life” (1878: 94).

Determinants of the Gender Pay Gap: The Role of Wage Structure

Thus, we see that the clear determination of the impact of qualifications versus discrimination in the gender pay gap is difficult for both empirical and conceptual reasons. However, both explanations share a common focus of being gender specific explanations of the pay gap. Analyses of trends over time in the gender differential within countries as well as intercountry comparisons of gender earnings ratios have traditionally tended to emphasize these types of gender-specific factors. The last fifteen to twenty years have been a time of ferment in the labor market with rapid changes in skill differentials and thus wage inequality in much of the industrialized world. Nowhere have these changes been more dramatic than in the USA. It has been a natural extension of the study of these types of realignments to examine their consequences for various demographic groups. Moreover, upon further reflection it is clear that the traditional gender specific factors imply an important role for wage structure.

The human capital model suggests that men and women tend to have different levels of labor market skills (especially work experience) and to be employed in different occupations and perhaps in different industries. Discrimination models too suggest that women may be segregated in different sectors of the labor market. This implies a potentially important role for wage structure in determining the pay gap. All else equal, the larger the returns to skills and the larger the rents received by individuals in favored sectors, the larger will be the gender gap. Similarly, labor market discrimination and/or actual female defici...

Table of contents

• Cover Page
• Half Title page
• Series
• Title Page
• Copyright Page
• Contents
• Figures
• Tables
• List of Contributors
• Preface
• Introduction
• Where are we in the Economics of Gender?
• The Gender Pay Gap
• Occupational Segregation by Sex and Changeover Time
• Alternative Approaches to Occupational Exclusion
• Gender Roles, Time Allocation and Wages
• Patterns of Time Use in France and Sweden
• Cohort Effects on the Gender Wage Gap in Denmark
• Gender Differences in Pay Among Young Professionals in Sweden
• Gender and Pay Structures
• Wage Differentials and Gender in Norway
• The Gender Wage Gap in Finnish Industry 1980–94
• Fringe Benefits and Gender Gaps: The Finnish Case
• Gender, Wages and Discrimination in the USSR
• Index