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The Economics of Pay Differences

Why Do Men Earn More than Women?. The Economics of Pay Differences. Wendy A. Stock, Ph.D. Professor and Department Head Department of Agricultural Economics and Economics. Race, Gender, & Ethnicity in the Work Force Pay Gaps Among People Discrimination Antidiscrimination Policy. Outline.

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The Economics of Pay Differences

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  1. Why Do Men Earn More than Women? The Economics of Pay Differences Wendy A. Stock, Ph.D. Professor and Department HeadDepartment of Agricultural Economics and Economics

  2. Race, Gender, & Ethnicity in the Work Force Pay Gaps Among People Discrimination Antidiscrimination Policy Outline

  3. Race, Gender, and Ethnicity in the Work Force 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.

  4. Race, Gender, and Ethnicity in the Work Force 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.

  5. Race, Gender, and Ethnicity in the Work Force 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.

  6. Latino wage gap larger in Texas than rest of U.S. • Houston Chronicle • June 2009 Pay Gaps & Earnings Ratios • Women earn 77.4 cents for every dollar men earn • National Committee on Pay Equity • June 2012 • Pay gap persists for African-Americans • CNN Money • July 2010

  7. A pay gap is the percent difference in earnings between two groups Pay Gaps & Earnings Ratios An earnings ratio measures the earnings of one group as a fraction of the earnings of another group

  8. Pay Gaps & Earnings Ratios

  9. Pay Gaps & Earnings Ratios

  10. Job Differences Why Are There Pay Gaps? Productivity-related Characteristics Other Factors

  11. Job Differences Source: Author’s chart based on U.S. Department of Labor, “Labor Force Characteristics by Race and Ethnicity, 2010” Report 1032, August 2011.

  12. Productivity-related Characteristics

  13. Pay Gaps Important to control for observable job and productivity-related differences between groups when interpreting pay gap data.

  14. Other Sources of Pay Gaps

  15. Discrimination differential treatment based on arbitrary characteristic

  16. 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

  17. 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

  18. Housing discrimination’s new main target? The disabled Medill Reports Chicago (Northwestern University) May 2012 Pacifist Boston Landlady Refuses Apartment to National Guardsman Digital Journal June 2012 Housing Discrimination Bridgeport housing discrimination suit settled Chicago Tribune June 2012 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

  19. Lending Discrimination Racial Disparities in Peer-to-Peer Lending Loan listings with blacks in the attached picture are 25 to 35 percent less likely to receive funding than those of whites with similar credit profiles. 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

  20. Labor Market Discrimination • equally productive workers treated differently • workers not equally productive treated the same

  21. 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

  22. Customer Discrimination when customers have base their purchasing decisions on the race, sex, or other demographic characteristics of the workers with whom they interact

  23. Statistical Discrimination using information about the average characteristics of a group to judge an individual member of that group

  24. Antidiscrimination Policy 1964 Civil Rights Act first federal legislation to prohibit employment discrimination

  25. 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

  26. Antidiscrimination Policy Americans with Disabilities Act Age Discrimination in Employment Act

  27. Antidiscrimination Policy Effects

  28. Antidiscrimination Policy Effects

  29. Research: age discrimination laws are associated with increased employment of older workers Research: ADA is associated with lower levels of employment of disabled workers. Antidiscrimination Policy Effects

  30. 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

  31. 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?

  32. Other Sources for Discussion

  33. Why Do Men Earn More than Women? The Economics of Pay Differences Wendy A. Stock, Ph.D. Professor and Department HeadDepartment of Agricultural Economics and Economics

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