the gender pay gap and discrimination

two components of Oaxaca-Blinder

• differences due to characteristics

• differences due to discrimination

borjas (2012)

¾ of the wage difference for men and women is discrimination

½ for black-white discrimination

taste based discrimination

employer → when the employer discriminates towards an minority employee

employee → discrimination towards type of employee

customer → discrimination against where to buy from

government → discrimination towards population

Becker (1957) employer discrimination assumptions

• there are two groups m and f

• m and f are equally productive, f may have to compensate for discrimination

• value of the marginal product is identical for both

• employers have a taste for discrimination against f

what does employer discrimination cause in the LR

overtime, employers with a taste for discrimination will pay the price in terms of profit loss. they will fail to hire overly productive workers.

determining the size of the wage gap

where the line is straight, there are very few female workers, S1 marks where employers being to hire more f as f wage is lower

wage ratio dependents

• the supply of f → very few f would mean that f would go to non prejudice

• the number of non prejudice employers → longer horizontal section

• the degree of prejudice → sloped part would be flatter

impacts for all firms in the LR

less prejudice firms earn higher profits as others pay for expensive m wage. these firms then grow and now demand more f and m demand falls. a long run equilibrium is reached, prejudice will still be there but these is no discrimination

statistical discrimination

imperfect information causes people to judge individuals by group characteristics eg. women taking maternity leave and employers not wanting to hire any based of the trend

solutions for statistical discrimination

• strict antidiscrimination laws

• affirmative action → policy requiring a certain number of women to be hired

occupational crowding (statistical)

self selection into a sector based on personal beliefs eg. construction sector and beauty

why is self selection in occupational crowding

rational choice that skills depreciate and women choose to maximise lifetime earnings, women take jobs with skills that are less likely to de

human capital example

due to many women taking time off they have less labour market experience and they may naturally depreciate

what can be come to help women depreciate less

• parental leave

• child care provisions

• income support and tax incentives