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Chapter 9 The Gender Gap in Earnings: Explanations Part II

Chapter 9 The Gender Gap in Earnings: Explanations Part II. Discrimination Models Other Explanations. An economist’s definition. two people with same productivity preferences but different group (race, sex, age) receive different outcomes in labor market wages, hiring, promotion.

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Chapter 9 The Gender Gap in Earnings: Explanations Part II

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  1. Chapter 9 The Gender Gap in Earnings: ExplanationsPart II • Discrimination Models • Other Explanations

  2. An economist’s definition • two people with same • productivity • preferences • but different group (race, sex, age) • receive different outcomes in labor market • wages, hiring, promotion

  3. NOT the same as prejudice • prejudice is a cause of discrimination • but discrimination can happen without it

  4. sex vs. race discrimination • w/ race there is segregation & a total unwillingness to associate with that group • but men and women share households

  5. Theories of Discrimination • With competitive, free markets with rational firms, consumers • no discrimination should exist

  6. why? • firms that discrimination will be driven out of business by firms that do not • consumer that discriminate may end up paying more • employees that discriminate may end up with lower wages

  7. So, if discrimination exists then • firms, consumers, employees have a preference for it • markets are not competitive • imperfect information about prospective workers

  8. Any theory of discrimination should explain • lower wages for women • occupational segregation • long run persistence

  9. A Taste for Discrimination • Gary Becker • Discrimination can occur due to preferences of • employer • employees • customers

  10. Employer Discrimination • employer wants to • maximize profits AND • engage in discrimination due to his/her prejudice • willing to accept lower profits in order to discriminate

  11. what happens? • pays “desired” employees more to attract them and avoid hiring the undesired group • lower wages for undesired group

  12. long run? • non discriminating employers have lower costs, • drive discriminating employers out of business • UNLESS there is not a lot of competition

  13. Employee Discrimination • employees dislike working with a certain group so • demand higher wages to work in an integrated work site OR • less productive in an integrated work site

  14. Note: employers responding to employee prejudice, not their own • trying to avoid paying higher wages • wanting to maximize productivity

  15. employee discrimination would cause segregation • lower wages for women? • if they appear to be less productive • (but really the prejudiced workers are less productive)

  16. long run? • this would persist as employee attitudes change slowly over time • and if attitudes are widespread

  17. Customer Discrimination • customers willing to pay higher price to be serviced by desired group • so firms avoid hiring undesired group (to get a higher price) OR • firms pay undesired workers less to make up for price cut

  18. segregation • women waiters in cheaper restaurants, • male waiters in fancy restaurants • High % male representation in car sales, repair • long run? • yes, since attitudes change slowly

  19. Statistical discrimination • a.k.a. imperfect information model • employers have imperfect information on potential hires • do not know for certain their individual productivity

  20. so increase their odds of a “good” hire by • taking average characteristics of group (sex, race, etc.) • applying it to individual

  21. example • women have higher turnover rates on average • it is expensive to train new workers • employers end up preferring men, who are less likely to quit, ON AVERAGE

  22. who is hurt? • women who are highly attached to the labor force • who benefits? • men who are not

  23. Differences in average characteristics • may be perceived or actual • some actual differences • women have more absences (especially married women) • men more likely to have substance abuse problem

  24. discrimination here is not due to dislike of certain group • but desire to max. profits given the uncertainty about hiring • if employer had perfect info, then he/she would not do this

  25. Indirect vs. direct discrimination • direct • discriminating among individuals with same skills, preferences • indirect • certain groups have fewer skills because of discrimination

  26. Why occupational segregation? Difference in tastes/abilities across gender • women less willing/able to do certain jobs • men less willing/able to do certain jobs

  27. possible examples • firefighter, combat soldier • do women lack the strength? • kindergarten teacher • do men lack the patience?

  28. Human capital and occupation • choice of type/amount of human capital will affect occupation choices • if women expect to be less attached to LF: • choose HC w/ lower rates of depreciation

  29. consider teaching & nursing • small promotion ladder • small penalty for lost years of experience • consider gender differences in • medical specialties

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