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Gender wage discrimination occurs when employers pay women lower wages than identically qualified male workers. Whether such employers are acting on their own preferences or those of their firm’s owners, managers, employees, or customers, the unequal treatment of women violates norms of equity and considerations of market efficiency and is the subject of policy research and debate in most industrial countries.
Theorists populate the demand side of labor markets with employers who must choose whom to hire and how much to pay them relative to the value of their productivity. Assuming that firm owners and their agents are economically rational and that they must accommodate the wishes of all firm constituents, paying qualified women a wage that is less than their productivity’s worth while paying men the value of their productivity must optimize profits. Thus Gary Becker (1971) argues that an employer’s choice to discriminate against a particular group can be economically rational but can persist only under noncompetitive product market conditions.
The larger the number of firms competing with a discriminatory employer for male workers, the higher the premium in pay men can garner. However, the larger the number of firms competing with an employer for customers in its product market, the more difficult it is for an individual employer to maintain its discriminatory behavior: competitors who are more willing to hire women (and pay them better than the discriminatory firm) will have lower labor costs and the ability to charge lower prices in the product market. Though the theory is compelling to many, the notion that product market competition (as opposed to antidiscrimination labor market policy) reduces wage discrimination has not been proven empirically and fails to explain the persistence of wage discrimination by gender.
As pointed out by Becker (1998), economists view the supply side of labor markets as populated by workers who choose to equip themselves in specific ways for the jobs available to them. Because average worker characteristics differ by gender, women’s choices about education, training, working hours, and number and length of job interruptions (along with socialization by teachers and parents) are often blamed in part for women’s overrepresentation in some fields and scarcity in others. The larger the share of women among the unemployed in a particular market, the greater the need for women to compete for scarcer opportunities—offering their services for lower wages and benefits than would otherwise be necessary.
Barbara Bergmann (1986) has shown that if the discriminatory barriers were removed, women’s wages would rise relative to the wages of men. Scholars debate the extent to which discriminatory employer practices versus women’s own choices bar women’s access to jobs in some markets and crowd them into others. This is not a particularly productive policy debate, however. It sidesteps the most relevant policy questions: How do we reduce the ability of gender norms, employers, and markets individually and collectively to limit women’s participation in specific occupations? How do we prevent employers from paying qualified women less than their male counterparts when they do choose the same industries, occupations, hours, and other labor market characteristics (a problem convincingly documented in Blau et al. 2001).
Gender wage discrimination persists as women are systematically denied access to jobs in particular markets. Scholars such as Kenneth Arrow (1973) attribute persistent labor market discrimination to statistical discrimination—employers ranking and paying individual applicants according to average gender group attributes rather than individual ability and productivity. Statistical discrimination is sometimes deemed economically rational because information about individual worker productivity is costly and difficult to attain. Such discrimination persists because gender norms and stereotypes are powerful and because firms’ discriminatory practices are difficult to detect and prove. As explained by Lisa Saunders and William Darity Jr. (2003), wage discrimination by gender is further complicated by the fact that the degree of gender wage gaps differs according to the race, age, sexual orientation, and other identity markers of the female or male groups under consideration. The maintenance of social stratification on the basis of multiple identities insures lower wages for a significant share of workers than would otherwise attain more (see Darity et al. 2006). This is especially problematic for workers in competitive firms and more onerous under conditions of globalization. It is also problematic for families that increasingly depend upon women’s earnings for their immediate and intergenerational economic security. It could be argued that a more effective policy approach to wage discrimination by gender would assert a definition of discrimination that acknowledges the complex ways it actually manifests in labor markets, a perspective on the roles played by structural changes in the global economy, and a rigorous analysis of wage inequality’s effects on inequality in wealth.
- Arrow, Kenneth. 1973. The Theory of Discrimination. In Discrimination in Labor Markets, eds. Orley Ashenfelter and Albert Rees, 3–33. Princeton, NJ: Princeton University Press.
- Becker, Gary S. 1971. The Economics of Discrimination. 2nd ed. Chicago: University of Chicago Press.
- Becker, Gary S. 1993. Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. 3rd ed. Chicago: University of Chicago Press.
- Bergmann, Barbara. 1986. The Economic Emergence of Women. New York: Basic Books.
- Blau, Francine D., Marianne A. Ferber, and Anne E. Winkler. The Economics of Women, Men, and Work. 4th ed. Upper Saddle River, NJ: Prentice Hall.
- Darity, William, Jr., James Stewart, and Patrick L. Mason. 2006. The Economics of Identity: The Origin and Persistence of Discrimination, Wage, by Occupation
- Racial Norms. Journal of Economic Behavior and Organizations 60 (3): 283–305.
- Saunders, Lisa, and William Darity Jr. 2003. Feminist Theory and Racial Inequality. In Feminist Economics Today: Beyond Economic Man, eds. Marianne A. Ferber and Julie A. Nelson, 101–114. Chicago: University of Chicago Press.
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