3. Gender

why does the gender pay gap matter

normative reasons

talent gap - girls outperform boys along the educational track therefore low job market participation lead to lower productivity

what should salaries depend on

supply and demand for labour

production function for a firm producing Y units of a product

AL^(1-alpha)

A - productivity

L - total labour input

1-alpha - output elasticity of labour

sketch the production function

Marginal product of labour

dY/dL = (1-apha)

firms profit earn wage rate is w and product price is 2

2Y - wL = 2AL^(1-alpha) - wL

maximising profit of 1Y - wL = 2AL^(1-alpha) - wL

dprofit/dL = (1-alpha)AL^(-alpha) - w

share of labour in income Lw/Y =

1 - alpha

find be differentiating and substituting in Y for A

how to calculate Labour supply elasticity for Ls = f(w)

calculate dL/dw by differentiating f(w)

then plug into dL/dw x w/L

causes of gender pay gap

women are more risk averse - role of social norms (nurture)

women are more highly educated but less likely to choose paths with higher potential future earnings

combined impact of higher labour supply elasticity for women and high elasticity of earnings to hours for high paying jobs

child penalty ()social norms

impact of high elasticity of earnings to hours

reducing workload slightly → larger reduction in pay → workers are pushed toward long, inflexible hours

→ more common in higher payed jobs → women have a much stronger preference to flexible hours

→ women in rich countries have a higher labour supply elasticity → changes in earnings don’t cause significant changes in hours worked

impact of high labour supply elasticity

women in rich countries have a higher labour supply elasticity → changes in earnings don’t cause significant changes in hours worked → due to females having more time constraints eg childcare

combined impact of labour supply elasticity and elasticity of earnings to hours

earnings highly elastic to hours for high paying jobs

→ small reduction in hours = significant reduction in pay

→ but women experience a higher labour supply of elasticity

→ constraints on time eg childcare

→ women more effected on average

→ gender pay gap at the top

remedy policies

family friendly policies

gender neutralising childcare

positive discrimination

changing social norms

statistical discrimination

when employers use group averages (e.g. gender, ethnicity) as a proxy for unobserved individual characteristics such as productivity, attachment, or turnover risk

preference-based discrimination

discrimination driven by prejudice, where employers behave as if hiring a disliked group entails an extra cost beyond the actual wage.