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The Economics of Pay Differences Wendy A. Stock, Ph.D. Professor and Department Head Department of Agricultural Economics and Economics Why Do Men Earn.

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Presentation on theme: "The Economics of Pay Differences Wendy A. Stock, Ph.D. Professor and Department Head Department of Agricultural Economics and Economics Why Do Men Earn."— Presentation transcript:

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

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

3 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy 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, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy 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, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy 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 Pay Gaps & Earnings Ratios Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy 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 Latino wage gap larger in Texas than rest of U.S. Houston Chronicle June 2009

7 Pay Gaps & Earnings Ratios Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy An earnings ratio measures the earnings of one group as a fraction of the earnings of another group A pay gap is the percent difference in earnings between two groups

8 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Pay Gaps & Earnings Ratios

9 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Pay Gaps & Earnings Ratios

10 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Why Are There Pay Gaps? Productivity-related Characteristics Job Differences Other Factors

11 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy 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 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Productivity-related Characteristics

13 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Important to control for observable job and productivity-related differences between groups when interpreting pay gap data. Pay Gaps

14 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Other Sources of Pay Gaps

15 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy differential treatment based on arbitrary characteristic Discrimination

16 Race, Gender, & Ethnicity Pay GapsDiscrimination 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

17 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Education Discrimination Plessy v. Ferguson 1896 Brown v. Board of Education 1954 Elizabeth Eckford attempting to enter Little Rock High Central School through a crowd of angry white students, 1957 Persistent School Quality Differences School quality Resources: Eric Hanushek at Stanford’s Hoover Institution: Boozer, Krueger, Wolkon (1992) “Race and School Quality Since Brown vs. Board of Education,” NBER working Paper 4109:

18 Housing Discrimination Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy 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 Bridgeport housing discrimination suit settled Chicago Tribune June Boston: Disabled housing discrimination:

19 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Lending Discrimination Pope, Devin G., and Justin R. Sydnor “What’s in a Picture? Evidence of Discrimination from Prosper.com.” Journal of Human Resources 46(1): 53–92. Mortgage 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.

20 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy equally productive workers treated differently workers not equally productive treated the same Labor Market Discrimination

21 Race, Gender, & Ethnicity Pay GapsDiscrimination 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): Presents an overview of the economic research on race and gender discrimination in the labor market

22 Race, Gender, & Ethnicity Pay GapsDiscrimination 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

23 Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Statistical Discrimination using information about the average characteristics of a group to judge an individual member of that group

24 Antidiscrimination Policy Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy 1964 Civil Rights Act first federal legislation to prohibit employment discrimination

25 Antidiscrimination Policy Race, Gender, & Ethnicity Pay GapsDiscrimination 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.

26 Antidiscrimination Policy Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Americans with Disabilities Act Age Discrimination in Employment Act

27 Antidiscrimination Policy Effects Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy

28 Antidiscrimination Policy Effects Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy

29 Antidiscrimination Policy Effects Race, Gender, & Ethnicity Pay GapsDiscrimination Antidiscrimination Policy Research: age discrimination laws are associated with increased employment of older workers Research: ADA is associated with lower levels of employment of disabled workers.

30 Discussion Questions In their research paper, “Beauty, Productivity, and Discrimination: Lawyers’ Looks and Lucre,” [Journal of Labor Economics, 16(1) (January 1998): ] 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?

31 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? Discussion Questions

32 Other Sources for Discussion

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


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