Microeconomic Decision-makers - Workers

Reasons for Differences in Wages: Discrimination (Male/Female)

Wages are determined by the interaction of supply and demand for labour. However, in reality, wage differences between men and women persist even when they have similar qualifications, experience, and job performance. This suggests that factors beyond individual productivity are at play, and discrimination is a significant contributor.

Discrimination occurs when individuals are treated unfairly based on characteristics other than their productivity. In the context of wages, gender discrimination refers to the unequal treatment of men and women in the labour market, leading to lower pay for women compared to men for doing the same or similar work.

Types of Discrimination

There are three main types of discrimination:

• Direct Discrimination: This occurs when employers explicitly state a preference for one gender over another. This is illegal in many countries.
• Indirect Discrimination: This happens when seemingly neutral policies or practices disproportionately disadvantage one gender. For example, requiring a certain height or physical strength might indirectly discriminate against a gender where those characteristics are less prevalent.
• Statistical Discrimination: This occurs when employers make hiring or pay decisions based on statistical generalizations about a group, even if those generalizations are not accurate for the individual. For example, an employer might assume women are more likely to take time off for childcare and therefore offer them lower starting salaries.

Evidence of Wage Discrimination

Numerous studies have shown a persistent gender wage gap in many economies. This gap can be measured in different ways:

• Unadjusted Wage Gap: This is the difference in the average gross pay of all men and women.
• Adjusted Wage Gap: This attempts to account for differences in factors like occupation, experience, education, and hours worked. Even after accounting for these factors, a wage gap often remains.

Economic Explanations for the Gender Wage Gap (Discrimination)

Economists offer several explanations for the gender wage gap stemming from discrimination:

1. Employer Bias: Employers may consciously or unconsciously undervalue the work of women. This can be due to stereotypes about women's abilities or their commitment to their careers.
2. Occupational Segregation: Women are often concentrated in lower-paying occupations (e.g., care work, teaching) while men dominate higher-paying occupations (e.g., engineering, finance). This segregation can be a result of societal expectations and discriminatory hiring practices.
3. Negotiation Differences: Some research suggests that women may be less likely to negotiate their salaries as aggressively as men, contributing to the wage gap. This can be influenced by societal expectations and perceived social norms.
4. Work-Life Balance and Career Interruptions: Women are often more likely to take time off work for childcare or other family responsibilities, which can impact their career progression and earning potential. While this is not always discrimination, it can be exacerbated by a lack of supportive workplace policies.

Type of Discrimination	Description	Example
Direct Discrimination	Explicitly stating a preference for one gender over another.	Refusing to hire a qualified female candidate because the employer believes women are not suited for the job.
Indirect Discrimination	Policies or practices that disproportionately disadvantage one gender.	Requiring a certain height for a job that disproportionately excludes women.
Statistical Discrimination	Making decisions based on statistical generalizations about a group.	Assuming women are less likely to be committed to their careers and offering them lower starting salaries.

Addressing the gender wage gap requires a multi-faceted approach, including legislation against discrimination, promoting equal opportunities in education and training, and implementing policies that support work-life balance for all workers.