Pay Gaps - Montana Council on Economic Education
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The Economics of Pay Differences Why Do Men Earn More than Women?
Wendy A. Stock, Ph.D. Professor and Department Head Department of Agricultural Economics and Economics
Outline Race, Gender, & Ethnicity in the Work Force Pay Gaps Among People Discrimination Antidiscrimination Policy
Race, Gender, & Ethnicity
Pay Gaps
Antidiscrimination Policy
Discrimination
Race, Gender, and Ethnicity in the Work Force 1962
2012 Asian 5%
Other 10%
Other 2%
Black 12%
White 90%
2050 Other 5%
Asian 8% Black 14%
White 81%
White 73%
Sources: U.S. Department of Labor, “Labor Force Characteristics by Race and Ethnicity, 2010” August 2011; Toossi, M. “A new look at long-term labor force projections to 2050,” Monthly Labor Review, November 2006; Pew Hispanic Center, “Hispanics: People in Motion,” 2005.
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Race, Gender, and Ethnicity in the Work Force 1962
Females 36%
2012
Females 47% Males 64%
2050
Males 53%
Females 47%
Males 53%
Sources: U.S. Department of Labor, “Labor Force Characteristics by Race and Ethnicity, 2010” August 2011; Toossi, M. “A new look at long-term labor force projections to 2050,” Monthly Labor Review, November 2006; Pew Hispanic Center, “Hispanics: People in Motion,” 2005.
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Race, Gender, and Ethnicity in the Work Force 1980 Hispanic 6%
2012 Hispanic 14%
NonHispanic 94%
2050 Hispanic 24%
NonHispanic 86%
NonHispanic 76%
Sources: U.S. Department of Labor, “Labor Force Characteristics by Race and Ethnicity, 2010” August 2011; Toossi, M. “A new look at long-term labor force projections to 2050,” Monthly Labor Review, November 2006; Pew Hispanic Center, “Hispanics: People in Motion,” 2005.
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Pay Gaps & Earnings Ratios
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Pay Gaps & Earnings Ratios A pay gap is the percent difference in earnings between two groups An earnings ratio measures the earnings of one group as a fraction of the earnings of another group
Race, Gender, & Ethnicity
Pay Gaps
Antidiscrimination Policy
Discrimination
Pay Gaps & Earnings Ratios Pay Gaps Relative to White Males, 2011 Asian Female
-22
Asian Male
7
Black Female
-54
Black Male Hispanic Female
-35 -73
Hispanic Male
-55
White Female
-24
-80
-70
-60
-50
-40
-30
-20
-10
0
10
Percent Difference from White Male Earnings Source: BLS Current Population Survey Data. Includes ages 16+ employed full-time wage and salary workers across all industries and all occupations., excluding incorporated self-employed. Hispanic male and female values are computed for any race. White, Black, and Asian values are computed for any ethnicity.
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Pay Gaps & Earnings Ratios Earnings Ratios Relative to White Males, 2011 Asian Female Asian Male Black Female Black Male Hispanic Female Hispanic Male White Female White Male
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 Proportion of White Male Earnings Source: BLS Current Population Survey Data. Includes ages 16+ employed full-time wage and salary workers across all industries and all occupations., excluding incorporated self-employed. Hispanic male and female values are computed for any race. White, Black, and Asian values are computed for any ethnicity.
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Why Are There Pay Gaps? Job Differences
Productivity-related Characteristics
Other Factors
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Job Differences Management & Professional
Service
Sales & Office
Construction & Maintenance
Production & Transportation
Hispanic Asian Black White Women Men
0%
20% 40% 60% 80% Percent of Group in Each Occupation
Source: Author’s chart based on U.S. Department of Labor, “Labor Force Characteristics by Race and Ethnicity, 2010” Report 1032, August 2011.
100%
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Productivity-related Characteristics Hispanic
Asian
Black
White
Bachelor's Degree or higher Some College or Associate Degree High School Graduate, no college Less than High School Diploma 0
10
20
30 40 50 60 70 Percent of Demographic Group
Educational attainment differs among various race and ethnic groups. Over 60 % of Asians over age 25 who are in the labor force hold a Bachelor's degree or higher; less than 20% of Hispanics with the same characteristics hold a Bachelor's degree or higher. Source: Author's calculations based on 2011 BLS data for people age 25 or older in the civilian labor force .
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Pay Gaps Important to control for observable job and productivity-related differences between groups when interpreting pay gap data.
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Other Sources of Pay Gaps Percent of Pay Gap
Percent of Pay Gap Due to Observable and Unobservable Factors
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Due to Observable Differences
Female-Male
Black-White
Due to Other Factors
Hispanic-non-Hispanic
Observable differences include age, education, marital status (for Hispanic comparison only), and region and occupation (for gender and race comparisons only) Sources: Altonji and Blank (1999) “Race and Gender in the Labor Market,” in Ashenfelter and Card, eds. Handbook of Labor Economics, vol. 3C for race and sex comparisons. Kerr, Orrenius, and Zavodly (2010) “Texas’ Latino Pay Gaps: Taking a Closer Look” SouthwestEconomy, Federal Reserve Bank of Dallas. Data for Hispanic-non-Hispanic gap are calculated within Texas only.
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Discrimination differential treatment based on arbitrary characteristic
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Types of Discrimination Taste-based discrimination when people have preferences not to work with, hire, or buy from the discriminated group Statistical discrimination when people use information about the average characteristics of a group to make decisions about an individual member of that group
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Education Discrimination Plessy v. Ferguson 1896
Brown v. Board of Education 1954 Persistent School Quality Differences Elizabeth Eckford attempting to enter Little Rock High Central School through a crowd of angry white students, 1957 School quality Resources: Eric Hanushek at Stanford’s Hoover Institution: http://hanushek.stanford.edu/publications/economics-school-quality-0 Boozer, Krueger, Wolkon (1992) “Race and School Quality Since Brown vs. Board of Education,” NBER working Paper 4109: http://www.nber.org/papers/w4109
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Housing Discrimination
Disabled housing discrimination: http://news.medill.northwestern.edu/chicago/news.aspx?id=206162 Boston: http://www.digitaljournal.com/article/326074#ixzz1wvwhFjlA http://articles.chicagotribune.com/2012-06-01/business/chi-bridgeport-discrimination-suit-20120601_1_prudential-rubloff-properties-daniel-and-adrienne-sabbia-willborns
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Lending Discrimination
Pope, Devin G., and Justin R. Sydnor. 2011. “What’s in a Picture? Evidence of Discrimination from Prosper.com.” Journal of Human Resources 46(1): 53–92. Mortgage Lending Discrimination: http://www.dollarsandsense.org/archives/2010/1110campen.html
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Labor Market Discrimination • equally productive workers treated differently • workers not equally productive treated the same
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Employer Discrimination
when employers base their employment decisions on prejudice against certain workers
Darity, W. A., and Mason, P. L. (1998) “Evidence on Discrimination in Employment: Codes of Color, Codes of Gender,” Journal of Economic Perspectives, 12(2):63-90. Presents an overview of the economic research on race and gender discrimination in the labor market
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Customer Discrimination when customers have base their purchasing decisions on the race, sex, or other demographic characteristics of the workers with whom they interact
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Statistical Discrimination using information about the average characteristics of a group to judge an individual member of that group
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Antidiscrimination Policy 1964 Civil Rights Act first federal legislation to prohibit employment discrimination
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Antidiscrimination Policy Affirmative action policies that mandate taking action to ensure the equal treatment of people regardless of their race, creed, color, or national origin.
http://www.balancedpolitics.org/affirmative_action.htm
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Antidiscrimination Policy
Americans with Disabilities Act Age Discrimination in Employment Act
Race, Gender, & Ethnicity
Pay Gaps
Antidiscrimination Policy
Discrimination
Antidiscrimination Policy Effects Black/White Earnings Ratios 1.00
Black/White Median Earnings
Black Females/White Females 0.90
0.80
0.70
0.60 1967
Black Males/White Males
1972
1977
1982
1987 Year
1992
1997
2002
2007
If laws prohibiting race discrimination are effective, black/white earnings ratios should increase after the laws are passed, ceteris paribus. The black/white earnings ratios increased after the mid-1960s, particularly for women. The black/white earnings ratios for men have remained fairly steady since the mid-1990s, but they declined slightly for women after the 1970s. Source: Author's computations based on U.S. Census Data. Includes median earnings of full-time year round workers 15 years old and over beginning in 1980, and 14 years old and over for previous years. Before 1989 earnings are for civilian workers only.
Race, Gender, & Ethnicity
Pay Gaps
Antidiscrimination Policy
Discrimination
Antidiscrimination Policy Effects Female/Male Earnings Ratios Female/Male Median Earnings
1.00 Black Females/Black Males
0.90 0.80 0.70
White Females/White Males
0.60 0.50 1967
1972
1977
1982
1987
1992
1997
2002
2007
Year If laws prohibiting sex discrimination are effective, the female/male earnings ratios should increase after the laws are passed, ceteris paribus. The female/male earnings ratios for blacks increased after the mid-1960s, but have flattened or declined since the early 1990s. The female/male earnings ratios for whites have risen fairly steadily since the mid-1980s. Source: Author's computations based on U.S. Census Data. Includes median earnings of full-time year round workers 15 years old and over beginning in 1980 and 14 years old and over for previous years. Before 1989 earnings are for civilian workers only.
Race, Gender, & Ethnicity
Pay Gaps
Discrimination
Antidiscrimination Policy
Antidiscrimination Policy Effects Research: age discrimination laws are associated with increased employment of older workers
Research: ADA is associated with lower levels of employment of disabled workers.
Discussion Questions In their research paper, “Beauty, Productivity, and Discrimination: Lawyers’ Looks and Lucre,” [Journal of Labor Economics, 16(1) (January 1998):172-201] economists Jeff Biddle and Daniel Hamermesh examined the earnings and job placement of a large sample of lawyers. Their research data included objective ratings of the lawyers’ looks. The research found that better looking attorneys earned more than other lawyers. Why might better looking attorneys earn more?
Discussion Questions In the early 1900s, many states passed legislation designed to “protect” women workers. In California, for example, a 1916 law prohibits women from employment in jobs that involve lifting “any excessive burden”, cleaning moving machinery, employment in work environments that are not sufficiently lighted, ventilated, or sanitary, messenger service, bell boy, trucking, gas/electric meter reader, taxi cab driver, elevator operator, guard on streets or subways, work in pool hall/bowling alley, delivery service, or “employing women under any conditions detrimental to their health or welfare.” How would these protective laws affect the employment and wages of women and men workers?
Other Sources for Discussion
The Economics of Pay Differences Why Do Men Earn More than Women?
Wendy A. Stock, Ph.D. Professor and Department Head Department of Agricultural Economics and Economics
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