Transcript Topic 2 - Estimating the changing extent of gender discrimination Professor Christine Greenhalgh P Cahuc and A Zylberberg (2004) Labor Economics, Chapter 5 Compensating.

Topic 2 - Estimating the changing
extent of gender discrimination
Professor Christine Greenhalgh
P 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 Europe
Source 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. 2002
Share 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 wage
x is vector of personal characteristics
e is vector of characteristics of job
ε is random error
β vector of coefficients on personal variables
α 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 UK
Source 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 1975
Married 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 work
Source Fortin in OXREP 2005
Gender
Women
Birth date 1936-45
Scarce jobs
0.32
Women
Men
Post 1965 1936-45
0.15
0.32
Men
Post 1965
0.21
men first
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 Penalty
Manning 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 Options
Minimum 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 refusals
Employer 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