Working Paper 8708
THE STRUCTURE OF THE FEMALEIMALE WAGE DIFFERENTIAL: I S I T WHO YOU ARE, WHAT YOU DO, OR WHERE YOU WORK?
by E r i c a L. Groshen
E r i c a L. Groshen i s an economist a t t h e Federal Reserve Bank o f Cleveland. The author thanks p r o f e s s o r s Richard B. Freeman and John T. Dunlop f o r h e l p i n o b t a i n i n g these data, and t h e Bureau o f Labor S t a t i s t i c s f o r p r o v i d i n g access t o them. Paula Loboda p r o v i d e d
i n v a l u a b l e research a s s i s t a n c e . Comments f r o m Paul Bauer, P a t t y Beeson, F r a n c i n e Blau, John Bound, Charles Brown, S h i r l e y Cassing, Mary Dei l y , Randal 1 Eberts, and Joe Stone a r e g r a t e f u l l y acknowledged.
Working papers o f t h e Federal Reserve Bank o f Cleveland a r e p r e l i m i n a r y m a t e r i a l s c i r c u l a t e d
t o s t i m u l a t e d i s c u s s i o n and c r i t i c a l comment. The views expressed h e r e i n a r e those o f t h e a u t h o r and n o t n e c e s s a r i l y those o f t h e Federal Reserve Bank o f Cleveland o r o f t h e Board o f
Governors o f t h e Federal Reserve System.
ABSTRACT
T h i s paper decomposes t h e observed wage d i f f e r e n c e between male and female workers i n t o t h e p o r t i o n s a s s o c i a t e d w i t h t h r e e t y p e s o f s e g r e g a t i o n and w i t h t h e i n d i v i d u a l ' s sex. The c o n t r i b u t i o n o f each t y p e o f s e g r e g a t i o n i s t h e p r o d u c t o f two f a c t o r s : t h e e x t e n t o f s e g r e g a t i o n and t h e wage p e n a l t y ( e s t i m a t e d c o e f f i c i e n t ) a s s o c i a t e d w i t h w o r k i n g i n a female- dominated
c o n s t i t u e n t .
I n f i v e Bureau o f Labor S t a t i s t i c s I n d u s t r y Wage Surveys, t h e e a r n i n g s o f men and women i n t h e same o c c u p a t i o n a t t h e same e s t a b l i s h m e n t d i f f e r b y o n l y 1%. Much o f t h e d i f f e r e n c e i n pay between men and women i s a s s o c i a t e d w i t h s e g r e g a t i o n by o c c u p a t i o n ( t h i s reduces women's wages by 11% t o 28%). B u t s e g r e g a t i o n by e s t a b l i s h m e n t and work g r o u p a l s o l o w e r s t h e wages o f women by a t o t a l o f 12%.
Comparisons a r e a l s o made between t h e u n i o n and nonunion s e c t o r s o f t w o i n d u s t r i e s . Union e s t a b l i s h m e n t s a r e c h a r a c t e r i z e d by l e s s v a r i a t i o n based o n o c c u p a t i o n a l and i n d i v i d u a l wage p e n a l t i e s , b u t more v a r i a t i o n based on
THE STRUCTURE OF THE FEMALEIMALE WAGE DIFFERENTIAL: I S I T WHO YOU ARE, WHAT YOU DO, OR WHERE YOU WORK?
I. I n t r o d u c t i o n
A v a r i e t y o f p o l i c i e s have been enacted and proposed t o reduce wage d i f f e r e n c e s between men and women. Each addresses c e r t a i n components o f t h e t o t a l d i f f e r e n t i a l . For example, equal pay p r o v i s i o n s focus on i n d i v i d u a l d i f f e r e n c e s w i t h i n work group;
'
comparable worth t a r g e t s i nequal i t y based on p r o p o r t i o n female i n occupation o r work group; equal o p p o r t u n i t y l e g i s l a t i o n attempts t o reduce i n t e r e m p l o y e r and work group segregation. The p o t e n t i a l e f f i c a c y o f each p o l i c y depends on t h e r e l a t i v e magnitude o f the component(s) addressed. For example, equal pay l e g i s l a t i o n may be f u l l y e f f e c t i v e , b u t i t w i l l n o t reduce t h e femalelmale wage d i f f e r e n t i a l s i g n i f i c a n t l y i f v e r y l i t t l e i n e q u a l i t y i s due t o wage d i f f e r e n c e s between the sexes w i t h i n work group.Thus, one step toward comparing t h e p o l i c i e s i s t o consider which a r e aimed a t t h e l a r g e s t source(s). This paper addresses t h e q u e s t i o n by e s t i m a t i n g t h e c o n t r i b u t i o n o f each of t h e f o l l o w i n g t o the wage d i s p a r i t y between men and women: d i f f e r e n c e s between i n d i v i d u a l s i n the same o c c u p a t i o n and e s t a b l i shment, o r sex segregation by occupation, by e s t a b l i shment, o r by work group.
The r o l e o f t h e workplace ( i . e . , e s t a b l i s h m e n t and work group) has been r e l a t i v e l y neglected i n p r e v i o u s s t u d i e s o f t h e e f f e c t of segregation on wages. The composition o f the femalelmale wage d i f f e r e n t i a l i s s t u d i e d i n f i v e i n d u s t r i e s , u s i n g Bureau o f Labor S t a t i s t i c s (BLS) I n d u s t r y Wage Surveys.
A l t h o u g h most s t u d i e s a s c r i b e observed wage d i f f e r e n t i a l s t o d i f f e r e n c e s i n human c a p i t a l , many observed d i f f e r e n t i a l s ( e s p e c i a l l y those l i n k e d t o demographic c h a r a c t e r i s t i c s such as sex and r a c e ) d e f y a t t e m p t s t o a t t r i b u t e them s o l e l y t o human c a p i t a l . The s i z e o f e s t i m a t e d i n d u s t r y , employer, and work g r o u p wage d i f f e r e n t i a l s suggests t h a t t h e y c o u l d be a l a r g e p a r t o f t h e wage d i f f e r e n c e s observed among r a c e s o r between men and women.' Thus,
i n v e s t i g a t i o n o f t h e workplace as a source o f wage d i f f e r e n t i a l s seems p a r t i c u l a r l y r e l e v a n t .
Models o f t h e f e m a l e l m a l e wage d i f f e r e n t i a l f a l l i n t o t h r e e b a s i c groups: human c a p i t a l , compensating d i f f e r e n t i a l s , and d i s c r i m i n a t i o n . The f i r s t t y p e e x p l a i n s d i f f e r e n c e s i n e a r n i n g s by d e f i c i e n c i e s i n a c q u i r e d human c a p i t a l ( e d u c a t i o n , o n - t h e - j o b - t r a i n i n g , e t c . ) . I n t h e s t r i c t v e r s i o n , women i n v e s t i n l e s s human c a p i t a l because t h e y e x p e c t t o work o u t s i d e t h e home f o r l e s s o f t h e i r a d u l t l i v e s (Polachek C19811). A l t e r n a t i v e l y , d i f f e r e n t i a l r e t u r n s o r c o s t s t o i n v e s t m e n t caused by d i s c r i m i n a t i o n c o u l d a l s o l i n k p r o p o r t i o n female w i t h l o w wages among o c c u p a t i o n s . I n e i t h e r case, t h e r o l e o f t h e w o r k p l a c e i n t h i s model i s n o t o b v i o u s . Most wage d i f f e r e n c e s should be a s s o c i a t e d w i t h o c c u p a t i o n and w i t h t h e i n d i v i d u a l w i t h i n t h e work group, u n l e s s
e s t a b l i s h m e n t s o r work groups a r e s o r t e d by q u a l i t y .
The second e x p l a n a t i o n assumes t h a t women have a g r e a t e r t a s t e f o r nonwage compensation (perhaps because o f uneven a l l o c a t i o n o f homemaking
r e s p o n s i b i l i t i e s ) and t h a t employers g e n e r a l l y o f f e r t h e same b e n e f i t package t o groups of employees. Or, w o r k i n g c o n d i t i o n s a r e a s s o c i a t e d p r i m a r i l y w i t h o c c u p a t i o n o r i n d u s t r y , and women have s t r o n g e r p r e f e r e n c e s f o r c l e a n , q u i e t , f l e x i b l e , o r a t t r a c t i v e environments ( F i l e r C19831). I n e i t h e r v e r s i o n , women a r e s o r t e d i n t o t h e h i g h - b e n e f i t l l o w - w a g e j o b s .
- 3 -
Compensating d i f f e r e n t i a l s s h o u l d g e n e r a t e an a s s o c i a t i o n between
s e g r e g a t i o n and wages i n e s t a b l i s h m e n t s and o c c u p a t i o n s . Work group e f f e c t s should be m i n i m a l , and l i m i t e d t o cases where work c o n d i t i o n s v a r y b y
e s t a b l i s h m e n t w i t h i n o c c u p a t i o n o r where b e n e f i t packages change s i g n i f i c a n t l y among d i f f e r e n t o c c u p a t i o n s i n an e s t a b l i s h m e n t (e.g., between exempt and nonexempt p o s i t i o n s ) . A l s o , i n d i v i d u a l e f f e c t s should be p o s i t i v e , t o compensate women f o r t h e i n f e r i o r package o f b e n e f i t s o f f e r e d .
F i n a l l y , t h e t h e o r e t i c a l l i t e r a t u r e o f f e r s v a r i o u s models of
d i s c r i m i n a t i o n i n t h e ~ o r k p l a c e . ~ The p r o b l e m w i t h t h e s i m p l e s t models i s . t h a t employer d i s c r i m i n a t i o n should l o w e r p r o f i t s ( u n l e s s i t i s due t o t a s t e s o f coworkers o r customers). Thus, owners o f c a p i t a l w i l l p r e f e r t o i n v e s t i n f i r m s t h a t do n o t d i s c r i m i n a t e , t h e r e b y r e d u c i n g t h e p r e v a l e n c e of
d i s c r i m i n a t i o n .
Agency c o s t s , however, i n t r o d u c e s l a c k i n t o t h e system, which l o o s e n s t h e d i s c i p l i n e imposed by t h e m a r k e t p l a c e . Suppose t h a t , i n each e s t a b l i s h m e n t , managers e x e r c i s e t h e i r t a s t e f o r d i s c r i m i n a t i o n i n o n l y a few o f t h e
o c c u p a t i o n s t h e y oversee, o r t h a t o n l y a subset o f each e s t a b l i s h m e n t ' s s u p e r v i s o r s d i s c r i m i n a t e . Then, a f i r m ' s expected g a i n s f r o m e l i m i n a t i n g d i s c r i m i n a t i o n may be small o r n e g a t i v e , when coupled w i t h t h e c o s t of i n t e r n a l m o n i t o r i n g . Furthermore, i f a l l f i r m s have a random amount o f
d i s c r i m i n a t o r y a c t i v i t y among t h e i r s u p e r v i s o r s o r managers, most v a r i a t i o n i n d i s c r i m i n a t i o n o c c u r s w i t h i n f i r m s , r a t h e r t h a n between them.
T h i s v e r s i o n suggests t h a t s e g r e g a t i o n b y e s t a b l i s h m e n t w i l l have a
s m a l l e r i m p a c t t h a n s e g r e g a t i o n by work group. But e s t a b l i s h m e n t , work group, and i n d i v i d u a l sex w i l l a l l c o n t r i b u t e t o t h e f e m a l e l m a l e wage d i f f e r e n t i a l .
L i t t l e e m p i r i c a l work has been o f f e r e d o n t h e workplace e f f e c t s o n wage d i f f e r e n t i a l s , i n p a r t because o f d a t a l i m i t a t i o n s . I n a m a j o r e x c e p t i o n ,
B l a u (1977) proposes and t e s t s a model i n which employers s e t wages a c c o r d i n g t o e x t e r n a l wage c o n t o u r s and i n t e r n a l l a b o r markets, r a t h e r t h a n s o l e l y a c c o r d i n g t o l o c a l l a b o r - m a r k e t c o n d i t i o n s . Thus, f i r m s w i t h h i g h wages
choose f r o m a queue o f a p p l i c a n t s , i n t r o d u c i n g l a t i t u d e f o r d i s c r i m i n a t i o n i n h i r i n g . I n BLS Area Wage Surveys, B l a u f i n d s t h a t wages and t h e percentage o f females i n o n e ' s work group were n e g a t i v e l y c o r r e l a t e d w i t h i n o c c u p a t i o n ,
c o n t r o l l i n g f o r sex o f t h e i n d i v i d u a l .
Another e x c e p t i o n i s B i e l b y and Baron (1984), who f i n d t h a t f i r m s a r e h i g h l y and permanently segregated by work group: i n d i v i d u a l s a r e employed i n work groups composed a l m o s t e n t i r e l y o f members o f t h e i r own sex.
T h i s s t u d y expands B l a u ' s work by comparing t h e s i z e o f f o u r components o f t h e f e m a l e l m a l e wage d i f f e r e n t i a l w i t h i n i n d u s t r y - - t h e i n d i v i d u a l , o c c u p a t i o n , e s t a b l i s h m e n t , and work group- - to e s t i m a t e how much each c o n t r i b u t e s t o t h e t o t a l observed d i f f e r e n t i a l
.
The observed femal elmal e wage d i f f e r e n t i a l i s d i v i d e d i n t o s e v e r a l components t h a t each r e f l e c t t h e e x t e n t t o which sex s e g r e g a t i o n a s s o c i a t e d w i t h a l a b o r - m a r k e t s t r u c t u r e c o n t r i b u t e s t o t h e t o t a l d i f f e r e n t i a l i n a w o r k i n g p o p u l a t i o n . I t w i l l be shown t h a t t h e s i z e o f a component depends on two f a c t o r s : t h e e x t e n t o f s e g r e g a t i o n by sex among c o n s t i t u e n t s o f t h e component, and t h e magnitude o f t h e p e n a l t y a s s o c i a t e d w i t h w o r k i n g i n a female- dominated c o n s t i t u e n t .The method uses o r d i n a r y l e a s t squares r e g r e s s i o n t o decompose an observed wage d i f f e r e n t i a l , w i t h o u t assuming any p a r t i c u l a r t h e o r y o f wage
d e t e r m i n a t i o n o r d i s c r i m i n a t i o n . I t p r o v i d e s a way t o examine t h e e x t e n t t o w h i c h segregation- based models have an e m p i r i c a l f o u n d a t i o n . The method o f d e c o m p o s i t i o n i s a v a r i a n t o f t h a t i n t r o d u c e d i n Oaxaca (1973) and B l i n d e r ( 1 973).
11. Method
For ease o f e x p o s i t i o n , t h e method i s p r e s e n t e d i n terms o f o n l y two components ( i n d i v i d u a l and o c c u p a t i o n ) , a l t h o u g h two more ( e s t a b l i s h m e n t and work group) a r e c o n s i d e r e d i n t h e a c t u a l e s t i m a t i o n . C a n s i d e r t h e case o f i n d i v i d u a l i i n o c c u p a t i o n j, w i t h l o g wage W i j .
L e t f i , = female dummy v a r i a b l e f o r i n d i v i d u a l i i n o c c u p a t i o n j, n = number o f i n d i v i d u a l s i n t h e w o r k i n g p o p u l a t i o n ,
n j = number o f i n d i v i d u a l s i n o c c u p a t i o n j,
r =
c
c f i j l n , t h e p r o p o r t i o n o f t h e work f o r c e t h a t i s female, and j ir j = c f i j / n j , t h e p r o p o r t i o n o f o c c u p a t i o n j t h a t i s f e m a l e . I
The f o l l o w i n g wage e q u a t i o n i s e s t i m a t e d : ( 1 ) w i , = A
+
G e f i j+
B a r j+
e i j ,where A i s t h e work- force mean wage and G i s t h e e s t i m a t e d wage e f f e c t o f b e i n g female, c o n t r o l l i n g f o r t h e p r o p o r t i o n female o f o n e ' s o c c u p a t i o n . B i s t h e e s t i m a t e d wage e f f e c t o f w o r k i n g i n a female- dominated o c c u p a t i o n ,
c o n t r o l l i n g f o r t h e sex o f t h e i n d i v i d u a l . A person who s w i t c h e d f r o m an a l l - m a l e o c c u p a t i o n t o an a l l - f e m a l e o c c u p a t i o n would s u f f e r an average wage l o s s o f B. L a s t , e , j i s t h e e s t i m a t e d e r r o r term.
F o l l o w i n g Oaxaca (1973) and B l i n d e r (19731, t h e observed f e m a l e l m a l e wage d i f f e r e n t i a l i n a w o r k i n g p o p u l a t i o n i s s i m p l y t h e d i f f e r e n c e between t h e average wage o f women and t h e average wage o f men:
-
( 2 ) D = W f e m a l e - - W m a i e = G
+
B( ~ f
-F?),
where-
r; = c
c
f , r j 1 r n , t h e mean p r o p o r t i o n female i n o c c u p a t i o n among females, andj i -
r y
= cc
( 1 - f i , ) r j / ( l - r > n , t h e mean p r o p o r t i o n female i n o c c u p a t i o n among males. j iAs D becomes more n e g a t i v e , t h e wage d i f f e r e n c e between men and women i n c r e a s e s . The observed d i f f e r e n c e between t h e wages o f men and women i n t h e work f o r c e i s t h e sum o f G ( t h e e s t i m a t e d w i t h i n - o c c u p a t i o n wage d i f f e r e n t i a l between men and women) and a t e r m f o r t h e e s t i m a t e d i m p a c t o f s e g r e g a t i o n among o c c u p a t i o n s . The i m p a c t o f s e g r e g a t i o n i s t h e p r o d u c t o f two t e r m s : B ( t h e wage change a s s o c i a t e d w i t h an i n c r e a s i n g c o n c e n t r a t i o n o f women i n an o c c u p a t i o n ) and t h e e x t e n t o f s e g r e g a t i o n among o c c u p a t i o n s ( t h e d i f f e r e n c e i n t h e average p r o p o r t i o n o f women i n t h e o c c u p a t i o n s h e l d by women compared t o t h a t o f t h e average o c c u p a t i o n h e l d by men).
A c c o r d i n g l y , d e f i n e S as t h e e x t e n t o f s e g r e g a t i o n :
S measures t h e e x t e n t o f s e g r e g a t i o n on a s c a l e from 0 t o 1 ( i n c r e a s i n g as o c c u p a t i o n s become more segregated) and can be a s s o c i a t e d w i t h a commonly used measure o f s e g r e g a t i o n . Another a l g e b r a i c r e p r e s e n t a t i o n f o r S i s as f o l l o w s :
where p j = n,/n, t h e p r o p o r t i o n o f t h e work f o r c e i n o c c u p a t i o n j, and
s: = c C p j r g l - r2
, t h e sample v a r i a n c e o f r j . j j
T h i s form i s i n t u i t i v e l y a p p e a l i n g if one n o t e s t h e range o f t h e v a r i a n c e of
r j .
A t t h e lower extreme, i f t h e work f o r c e were t o t a l l y i n t e g r a t e d , t h e n r, = r f o r a l l j, so t h e v a r i a n c e o f r j would be z e r o . On t h e o t h e r hand, t o t a l s e g r e g a t i o n o f t h e work f o r c e maximizes t h e v a r i a n c e o fr j :
2
(5)
max s, = r ( 1 - r ) '+
( 1 - r > ( 0 - r ) 2 = r ( 1 - r ) . j- 7
-
t h e a c t u a l v a r i a n c e t o t h e maximum p o s s i b l e v a r i a n c e . Most o t h e r
i n v e s t i g a t i o n s o f t h e i m p a c t o f s e g r e g a t i o n ( e . g . , B e l l e r [19841) use a n o t h e r measure, t h e d i s p l a c e m e n t i n d e x , t o measure s e g r e g a t i o n . The p r o p e r t i e s o f
t h e d i s p l a c e m e n t index (SD) a r e q u i t e s i m i l a r t o t h o s e o f S.' The most f a m i l i a r v e r s i o n o f t h e f o r m u l a f o r SD i s as f o l l o w s :
where M j = p r o p o r t i o n o f male work f o r c e i n o c c u p a t i o n j, and
F j = . p r o p o r t i o n o f female work f o r c e i n o c c u p a t i o n j.
I n t h e n o t a t i o n used i n t h i s paper, SD reduces t o t h e f o l l o w i n g :
Comparing e x p r e s s i o n
(7)
t o e x p r e s s i o n ( 4 ) , i t i s c l e a r t h a t S and SD a r e b o t h r a t i o s o f a measure o f d e v i a t i o n t o t h e maximum p o s s i b l e v a r i a n c e . S and SD share common bounds(0
= p e r f e c t l y i n t e g r a t e d , t o 1 = c o m p l e t e l ysegregated), and a r e composed o f t h e same terms. The d i f f e r e n c e between them i s t h a t SD measures d e v i a t i o n by t h e mean a b s o l u t e d e v i a t i o n o f p r o p o r t i o n female, w h i l e S t a k e s t h e mean squared d e v i a t i o n . SD and S w i l l be most
s i m i l a r c l o s e t o t h e bounds o r i f r i s c l o s e t o 112. The advantages o f t h e SD measure a r e i n s e n s i t i v i t y t o o u t l i e r s , and easy i n t e r p r e t a t i o n o f t h e
p r o p o r t i o n o f women who would have t o be r e d i s t r i b u t e d among o c c u p a t i o n s i n o r d e r t o a c h i e v e p e r f e c t i n t e g r a t i o n .
The p a r t i c u l a r advantage o f S i s i t s use i n t h e s i m p l e decomposition o f t h e femalefmale wage d i f f e r e n t i a l shown i n e q u a t i o n ( 2 ) . T h i s t r e a t m e n t may be e a s i l y g e n e r a l i z e d t o i n c l u d e s e g r e g a t i o n among e s t a b l i s h m e n t s and o t h e r l a b o r market i n s t i t u t i o n s , s i m p l y by a d d i n g terms t h a t a r e t h e p r o d u c t o f t h e p e n a l t y and t h e e x t e n t o f s e g r e g a t i o n :
where k = l a b o r m a r k e t s t r u c t u r e k ( o c c u p a t i o n , e s t a b l i s h m e n t , o r work g r o u p ) , Bk = e s t i m a t e d c o e f f i c i e n t on p r o p o r t i o n f e m a l e i n i n s t i t u t i o n k , and - Sk = r:
-
= e x t e n t o f s e g r e g a t i o n among c o n s t i t u e n t s o f k . E x p r e s s i o n (8) i s a decomposition o f t h e t y p e i n t r o d u c e d by Oaxaca (1973) and B l i n d e r (1973>, where t h e male and female c o e f f i c i e n t s a r e c o n s t r a i n e d t o e q ~ a l i t y . ~ Table 1 summarizes t h e a p p l i c a t i o n o f t h i s t e c h n i q u e . Thecomponents and t h e i r f a c t o r s a r e l i s t e d w i t h d e f i n i t i o n s and i n t e r p r e t a t i o n s . The sum o f t h e f o u r components i s t h e t o t a l observed wage d i f f e r e n t i a l .
111. D e s c r i p t i o n o f t h e Data
T h i s s t u d y p r e s e n t s decompositions o f t h e femalelmale wage d i f f e r e n t i a l i n t h e m i s c e l l a n e o u s p l a s t i c s p r o d u c t s , l i f e i n s u r a n c e , n o n e l e c t r i c a l machinery, banking, and computer and d a t a p r o c e s s i n g i n d u s t r i e s . These i n d u s t r i e s were chosen as examples because t h e y employ s i g n i f i c a n t numbers o f b o t h men and women, r e p r e s e n t b o t h m a n u f a c t u r i n g and s e r v i c e i n d u s t r i e s , and have a l o w i n c i d e n c e o f i n c e n t i v e - b a s e d compensation.
A n a l y s i s o f i n d u s t r i e s separat;ly a1 lows o c c u p a t i o n s t o be d e f i n e d n a r r o w l y , w h i l e a l a r g e p r o p o r t i o n o f each e m p l o y e r ' s work f o r c e i s covered. I n c r o s s - i n d u s t r y s u r v e y s , e i t h e r o c c u p a t i o n s must be v e r y b r o a d l y d e f i n e d o r t h e v a s t m a j o r i t y o f t h e employees o f each e s t a b l i s h m e n t must be e x c l u d e d f r o m a n a l y s i s , because o n l y s u p p o r t o c c u p a t i o n s a r e employed i n common a c r o s s
employers. S i n c e i n d u s t r i e s a r e themselves somewhat segregated by sex, b u t do n o t ( i n g e n e r a l ) o v e r l a p much i n o c c u p a t i o n s , a n a l y s i s w i t h i n i n d u s t r y t e n d s
- 9
-t o u n d e r e s -t i m a -t e -t h e c o n -t r i b u -t i o n o f e s -t a b l i s h m e n -t and work group s e g r e g a -t i o n . The a n a l y s i s uses f i v e Bureau o f Labor S t a t i s t i c s I n d u s t r y O c c u p a t i o n a l Wage Surveys ( I N S ) . Table 2 p r e s e n t s means o f t h e r e l e v a n t c h a r a c t e r i s t i c s . The d a t a c o n s i s t o f t h e wages, sex, o c c u p a t i o n , and e s t a b l i s h m e n t i d e n t i f i e r o f i n d i v i d u a l p r o d u c t i o n and maintenance workers i n t h e m a n u f a c t u r i n g
i n d u s t r i e s , and o f i n d i v i d u a l n o n s u p e r v i s o r y workers i n t h e s e r v i c e
i n d u s t r i e s . The j o b s covered a r e d e s c r i b e d i n g r e a t d e t a i 1, a r e p a r t i c u l a r t o t h e i n d u s t r y i n q u e s t i o n , and g e n e r a l l y c o v e r a p p r o x i m a t e l y 60% o f
e s t a b l i s h m e n t employment. Wages r e p o r t e d a r e s t r a i g h t - t i m e h o u r l y e a r n i n g s ( n o o v e r t i m e o r s h i f t premiums i n c l u d e d ) f o r h o u r l y workers, and average h o u r l y e a r n i n g s f o r i n c e n t i v e workers. '
The surveys a r e e x t e n s i v e , c o v e r i n g 15,000 t o 76,000 workers i n 221 t o 876 e s t a b l i s h m e n t s . I n g e n e r a l , e s t a b l i s h m e n t s surveyed f o r an INS a r e a random sample o f those e m p l o y i n g 25 o r more workers i n t h e i n d u s t r y , though t h e c u t o f f v a r i e s somewhat by i n d u s t r y . A u n i q u e e s t a b l i s h m e n t i d e n t i f i e r i s p r o v i d e d f o r each p l a c e o f employment, b u t a c t u a l i d e n t i t y o f employers i s w i t h h e l d .
An i m p o r t a n t f e a t u r e o f t h e s e d a t a i s t h e d e t a i l o f t h e o c c u p a t i o n d e f i n i t i o n s . The appendix c o n s i s t s o f l i s t i n g s o f t h e j o b c l a s s i f i c a t i o n s surveyed i n t h e f i v e samples. For example, i n t h e p l a s t i c s sample, codes d i s t i n g u i s h among t h r e e o c c u p a t i o n s w o r k i n g on a blow- molding machine: " o p e r a t e , " " s e t up," and " s e t up and o p e r a t e . " T h i s l e v e l o f
i n d u s t r y - s p e c i f i c d e t a i l c o n t r o l s more c o m p l e t e l y f o r d i f f e r e n c e s i n j o b c o n t e n t and worker t r a i n i n g t h a n do t h e b r o a d e r o c c u p a t i o n a l codes used i n o t h e r surveys; f o r example, f o u r - d i g i t D i c t i o n a r y o f Occupation T i t l e s o r t h r e e - d i g i t Census codes. F o l l o w i n g BLS p r a c t i c e , f o r b r e v i t y i n t h e
d i s c u s s i o n t h a t f o l l o w s ( e x c e p t where n o t e d ) , t h e t e r m " o c c u p a t i o n " w i l l be used as a synonym f o r IWS j o b c l a s s i f i c a t i o n , w h i c h i s t h e more a c c u r a t e term.
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I V . Decomposition o f t h e FemaleIMale Wage D i f f e r e n t i a l i n F i v e I n d u s t r i e s
1 . Decomposition o f t h e D i f f e r e n t i a l i n Two M a n u f a c t u r i n g I n d u s t r i e s
Table 3 r e p o r t s t h e decomposition o f t h e f e m a l e l m a l e wage d i f f e r e n t i a l i n t h e m i s c e l l a n e o u s p l a s t i c s p r o d u c t s and n o n e l e c t r i c a l machinery m a n u f a c t u r i n g i n d u s t r i e s . The t o t a l d i f f e r e n t i a l between t h e wages o f men and women i n t h e two samples (-.240 and -.298> i s s u b s t a n t i a l l y l o w e r t h a n t h e d i f f e r e n t i a l observed i n b r o a d e r samples. For example, t h e C u r r e n t P o p u l a t i o n Survey u s u a l l y r e c o r d s a d i f f e r e n t i a l o f a b o u t 40% because o f t h e i n c l u s i o n o f w h i t e - c o l l a r workers and o t h e r i n d u s t r i e s . Thus, t h e r e s u l t s f o r t h e
o c c u p a t i o n and e s t a b l i s h m e n t components below would a l m o s t c e r t a i n l y be l a r g e r i n a b r o a d e r sample--because more d i v e r s e o c c u p a t i o n s and e s t a b l i s h m e n t s would be r e p r e s e n t e d . The e f f e c t s on t h e i n d i v i d u a l and work group components a r e d i f f i c u l t t o p r e d i c t .
F i r s t , l o g wages o f i n d i v i d u a l s a r e r e g r e s s e d o n a c o n s t a n t t e r m and f o u r r e g r e s s o r s : a female dummy, and t h e p r o p o r t i o n female i n t h e i n d i v i d u a l ' s o c c u p a t i o n , e s t a b l i shment, and work group. The c o e f f i c i e n t s and s t a n d a r d e r r o r s f r o m t h i s r e g r e s s i o n a r e r e p o r t e d i n t h e f i r s t column o f Table 3. A l l e s t i m a t e d c o e f f i c i e n t s a r e n e g a t i v e and s i g n i f i c a n t , e x c e p t f o r t h e i n d i v i d u a l t e r m i n machinery. The c o e f f i c i e n t s on t h e i n d i v i d u a l dummy i n b o t h
i n d u s t r i e s a r e v e r y s m a l l , s u g g e s t i n g t h a t males and females i n t h e same
o c c u p a t i o n and e s t a b l i s h m e n t ( i . e . , work g r o u p ) a r e n o t p a i d v e r y d i f f e r e n t l y . The f a c t t h a t i n c l u s i o n o f s i m p l e l i n e a r measures o f " femaleness" o f o c c u p a t i o n , e s t a b l i s h m e n t , and work group reduces t h e c o e f f i c i e n t on t h e f e m a l e dummy t o 1% o r l e s s suggests t h a t t h e s p e c i f i c a t i o n used i s
a p p r o p r i a t e . There i s no a l g e b r a i c reason t h a t t h e i n d i v i d u a l term should be reduced so d r a m a t i c a l l y . Although more complex measures and n o n l i n e a r i t i e s c o u l d be introduced, t h e maximum a d d i t i o n a l impact o f such terms i s l i m i t e d t o l e s s than 2%, the s i z e o f the i n d i v i d u a l component i n Table 3.
I n b o t h i n d u s t r i e s , the t h r e e c o e f f i c i e n t s on the p r o p o r t i o n female a r e a l l l a r g e , and occupation has t h e l a r g e s t c o e f f i c i e n t . Converting f r o m l o g d i f f e r e n c e s t o percentage d i f f e r e n c e s , a s w i t c h f r o m an a l l - m a l e t o an a l l - f e m a l e occupation would mean a wage l o s s o f about 22% f o r a worker i n p l a s t i c s and a l o s s o f 36% f o r a worker i n machinery, r e g a r d l e s s o f t h e p e r s o n ' s sex. The wage impact o f such a s w i t c h may simply r e f l e c t l a r g e d i f f e r e n c e s i n t h e average human c a p i t a l between t h e sexes.
The r e s u l t s f o r work group and establishment a r e l e s s c o n s i s t e n t across i n d u s t r y . A s w i t c h e i t h e r t o an establishment o r t o a work group dominated by
t h e o t h e r sex e n t a i l s a wage change of about 9% i n p l a s t i c s . I n machinery, t h e c o e f f i c i e n t on a s w i t c h i n t h e sex composition o f o n e ' s e s t a b l i s h m e n t i s much l a r g e r (.330) than the e f f e c t o f a sex-of-work-group s w i t c h (.058).
The second column o f Table 3 shows t h e e x t e n t o f segregation among occupations, establishments, and work groups; t h a t i s , the l i k e l i h o o d o f switches such as those mentioned above. C o n s i s t e n t w i t h B i e l b y and Baron (19841, work groups a r e h i g h l y segregated by sex. I t i s very unusual f o r a worker t o have a j o b i n a work group dominated by t h e o p p o s i t e sex--more
unusual than f o r t h e worker t o work i n an i n t e g r a t e d occupation. The v a r i a n c e o f p r o p o r t i o n female i n work groups i s 65% t o 75% o f what i t would be i n a t o t a l l y segregated s o c i e t y ( i . e . , where men and women always worked i n single- sex work groups). I n p l a s t i c s , occupations a r e more segregated t h a n establishments, w h i l e t h e o p p o s i t e i s t r u e i n machinery.
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The t h i r d column f o r each i n d u s t r y r e p o r t s t h e p r o d u c t of columns 1 and 2 f o r each l a b o r market s t r u c t u r e . I n each case, t h i s number i s t h e s i z e o f t h e wage d i f f e r e n t i a l t h a t would be observed i n t h e p o p u l a t i o n i f t h i s were t h e o n l y source o f f e m a l e l m a l e wage d i f f e r e n c e s . I t i s a l s o t h e amount by which t h e observed wage d i f f e r e n t i a l would decrease, were t h i s source o f t h e
d i f f e r e n t i a l t o be e l i m i n a t e d .
C o n s i s t e n t w i t h B l a u (19771, B u c k l e y (1971), McNulty (1967) and B i e l b y and Baron (19841, t h e r e s u l t s f r o m t h e two i n d u s t r i e s agree t h a t t h e s m a l l e s t source o f t h e d i f f e r e n t i a l i s i n d i v i d u a l sex w i t h i n work group. I n p l a s t i c s , e l i m i n a t i o n o f t h i s source would n a r r o w t h e wage gap between men and women b y o n l y a b o u t 1.6%, w h i l e i n machinery i t would l e a v e t h e gap unchanged.
I n p l a s t i c s , a l t h o u g h t h e c o e f f i c i e n t s on p r o p o r t i o n female i n
e s t a b l i s h m e n t and work group a r e s i m i l a r , t h e g r e a t e r amount of s e g r e g a t i o n by work g r o u p causes a l a r g e r d i f f e r e n t i a l component. E s t a b l i s h m e n t c o n t r i b u t e s o n l y -.029 l o g p o i n t s , w h i l e work group i s t h e source o f -.078 l o g p o i n t s o f t h e t o t a l -.240 d i f f e r e n c e . I n machinery, e s t a b l i s h m e n t s a r e more h i g h l y s e g r e g a t e d t h a n o c c u p a t i o n s , and more t h a n compensate f o r a l o w e r wage p e n a l t y .
Occupation, by v i r t u e o f t h e l a r g e wage p e n a l t y ( i . e . , c o e f f i c i e n t ) on p r o p o r t i o n female and t h e amount o f s e g r e g a t i o n among i t s c o n s t i t u e n t s , i s a s s o c i a t e d w i t h h a l f o f t h e observed d i f f e r e n c e i n wages between men and women. T h i s i s c o n s i s t e n t w i t h much o f t h e l i t e r a t u r e on o c c u p a t i o n a l s e g r e g a t i o n (e.g., B e l l e r C19841 and Johnson and S o l o n C19861). I n b o t h i n d u s t r i e s , however, even i f o c c u p a t i o n s were e v e n l y i n t e g r a t e d , wages of men would s t i l l be 12% h i g h e r t h a n t h o s e o f women.
A n o t h e r way t o l o o k a t t h e r e s u l t s i s t o n o t e t h a t i n p l a s t i c s , f o r example, a woman i n a 50% female o c c u p a t i o n earns a b o u t .14 l o g wage p o i n t s l e s s (-.016 p l u s one h a l f o f -.242) t h a n t h e average man i n t h e same
- 13 -
e s t a b l i s h m e n t . But i f she worked i n an a l l - f e m a l e work group, h e r wages would be as l o w as i f she worked i n an a l l - f e m a l e o c c u p a t i o n . And i f she worked a t an a l l - f e m a l e e s t a b l i s h m e n t , h e r wages would be .34 l o g wage p o i n t s l o w e r t h a n those o f a man w o r k i n g i n an a l l - m a l e e s t a b l i s h m e n t i n t h e same o c c u p a t i o n .
B u t how l i k e l y a r e t h e s e s c e n a r i o s ? The amount o f s e g r e g a t i o n by each of these s t r u c t u r e s suggests t h a t s i n g l e - s e x work groups a r e q u i t e common.
A p p a r e n t l y , i t i s unusual f o r a woman t o be employed i n an i n t e g r a t e d o r , p a r t i c u l a r l y , p r e d o m i n a n t l y male o c c u p a t i o n o r work group. For whatever reason (human c a p i t a l , p r e f e r e n c e s , o r d i s c r i m i n a t i o n ) , people work i n work groups composed p r e d o m i n a n t l y o f members o f t h e i r own sex.
2. Decomposition o f t h e D i f f e r e n t i a l i n Three S e r v i c e I n d u s t r i e s
Table 4 r e p o r t s t h e d e c o m p o s i t i o n o f t h e f e m a l e l m a l e wage d i f f e r e n t i a l i n t h r e e s e r v i c e i n d u s t r i e s . The t o t a l d i f f e r e n t i a l between t h e wages o f men and women i n t h e samples i s a b o u t
-.45
l o g wage p o i n t s . T h i s d i f f e r e n t i a l i s s i m i l a r t o t h a t o f t h e U.S. and i s s u b s t a n t i a l l y more t h a n t h e d i f f e r e n t i a l i n t h e two m a n u f a c t u r i ng i n d u s t r i es, where t h e o c c u p a t i o n s were n o t as v a r i e d . N e v e r t h e l e s s , t h e s e r v i c e i n d u s t r y r e s u l t s a r e f a i r l y c o n s i s t e n t w i t h t h e m a n u f a c t u r i n g r e s u l t s .Most c o n s i s t e n t i s t h e s i z e o f t h e i n d i v i d u a l c o e f f i c i e n t . I t i s a g a i n v e r y small (-.013 t o -.017> and v i r t u a l l y t h e same as t h e -.016 e s t i m a t e i n p l a s t i c s . Most o f t h e f e m a l e l m a l e d i f f e r e n t i a l a r i s e s f r o m r a t e s a p p l i e d t o a l l i n d i v i d u a l s i n a c a t e g o r y , r a t h e r t h a n f r o m d i f f e r e n c e s i n t h e t r e a t m e n t o f i n d i v i d u a l s .
Occupations i n t h e s e r v i c e s a r e about as segregated as those i n p l a s t i c s and machinery. However, b a n k i n g and l i f e i n s u r a n c e e s t a b l i s h m e n t s a r e f a r l e s s segregated t h a n t h o s e i n computers and t h e m a n u f a c t u r i n g i n d u s t r i e s . Work groups appear t o be somewhat l e s s segregated i n t h e s e r v i c e s .
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14 -C o u n t e r a c t i n g l o w e r s e g r e g a t i o n , e s t i m a t e d c o e f f i c i e n t s on p r o p o r t i o n female a r e g e n e r a l l y l a r g e r ( i n a b s o l u t e v a l u e ) i n t h e s e r v i c e samples.
P r a c t i c a l l y t h e e n t i r e e x t r a d i f f e r e n t i a l i n t h e s e r v i c e samples ( r e l a t i v e t o t h o s e i n m a n u f a c t u r i n g ) can a t t r i b u t e d t o t h e magnitude o f t h e o c c u p a t i o n c o e f f i c i e n t i n t h e s e r v i c e i n d u s t r i e s . A l t h o u g h i n s e r v i c e s men and women a r e i n t h e same work group more o f t e n , wages a r e so s t r o n g l y l i n k e d t o p r o p o r t i o n male i n s e r v i c e o c c u p a t i o n s t h a t women e a r n s i g n i f i c a n t l y l e s s t h a n men i n
t h e s e t h r e e i n d u s t r i e s . T h i s c o u l d r e f l e c t h i g h e r v a r i a t i o n i n t h e human c a p i t a l r e q u i r e m e n t s (perhaps, t e c h n i c a l t r a i n i n g ) o f n o n s u p e r v i s o r y j o b s i n t h e s e r v i c e i n d u s t r i e s .
The c o e f f i c i e n t s on p r o p o r t i o n female i n e s t a b l i s h m e n t a r e t i g h t l y
c l u s t e r e d (-.256 t o -.375> and l a r g e r ( i n a b s o l u t e v a l u e ) t h a n those f o r work g r o u p (+.023 t o -.283). E x t e n s i v e s e g r e g a t i o n among work groups m a g n i f i e s t h e impact o f t h e r e l a t i v e l y s m a l l c o e f f i c i e n t s on p r o p o r t i o n female i n work g r o u p . Thus, t h e sum o f t h e c o n t r i b u t i o n s o f e s t a b l i s h m e n t and work group i s q u i t e t i g h t l y c l u s t e r e d among i n d u s t r i e s , r a n g i n g f r o m a l o w o f .08 l o g p o i n t s (computers) t o a h i g h o f .18 l o g p o i n t s (machinery).
3. Unionism and t h e S t r u c t u r e o f t h e FemaleIMale Wage D i f f e r e n t i a l
Tables 5 and 6 p e r f o r m t h e same d e c o m p o s i t i o n as i n Table 3, f o r t h e u n i o n and nonunion e s t a b l i s h m e n t s i n t h e p l a s t i c s and machinery i n d u s t r i e s
s e p a r a t e l y . The r e s u l t s a r e i n t r i g u i n g and suggest some m a j o r d i f f e r e n c e s between t h e u n i o n and nonunion s e c t o r s . W h i l e t h e t o t a l d i f f e r e n t i a l s and t h e p a t t e r n s o f e x t e n t o f s e g r e g a t i o n a r e about t h e same s i z e i n t h e u n i o n and n o n u n i o n s e c t o r s , t h e d i s t r i b u t i o n among components changes c o n s i d e r a b l y .
A t t h e t o p o f t h e t a b l e s , t h e i n d i v i d u a l p o r t i o n o f t h e d i f f e r e n t i a l i n p l a s t i c s i s about 2% i n nonunion j o b s and i s n o n e x i s t e n t i n u n i o n j o b s , w h i c h
- 15 -
i s c o n s i s t e n t w i t h t h e i m p a c t o f u n i o n s t a n d a r d - r a t e p o l i c i e s (Freeman
C19821). I n machinery, v i r t u a l l y no d i f f e r e n c e e x i s t s w i t h i n work group i n e i t h e r t h e u n i o n o r nonunion s e c t o r .
Moving t o t h e f o u r t h row, t h e s i z e o f t h e work group component i s a b o u t t h e same i n t h e u n i o n and nonunion s e c t o r s f o r p l a s t i c s , b u t i s worse f o r u n i o n women i n t h e machinery sample (due t o d i f f e r e n c e s i n c o e f f i c i e n t s ) .
Two r e s u l t s stand o u t . Among o c c u p a t i o n s , u n i o n s t a n d a r d - r a t e p o l i c i e s s u b s t a n t i a l l y d i m i n i s h t h e c o n t r i b u t i o n o f o c c u p a t i o n a l s e g r e g a t i o n t o t h e wage d i f f e r e n t i a l i n b o t h i n d u s t r i e s . I n e f f e c t , u n i o n s i n s t i t u t e some
moderate amount o f comparable worth. That i s , w h i l e o c c u p a t i o n s a r e e q u a l l y segregated i n t h e u n i o n and nonunion s e c t o r s , t h e c o e f f i c i e n t on p e r c e n t female i n o c c u p a t i o n i s o n e - t h i r d t o f o u r - s e v e n t h s l o w e r i n t h e u n i o n s e c t o r . U n i o n i z a t i o n may n o t d i m i n i s h o c c u p a t i o n a l s e g r e g a t i o n , b u t i t a p p a r e n t l y s u b s t a n t i a l l y reduces t h e wage p e n a l t y a s s o c i a t e d w i t h such s e g r e g a t i o n .
The most unexpected d i f f e r e n c e between t h e s e c t o r s i s i n t h e e s t a b l i s h m e n t component. I n p l a s t i c s , t h e e s t i m a t e d c o e f f i c i e n t on p e r c e n t female i n t h e nonunion s e c t o r i s zero, compared t o - . I 5 6 under u n i o n i z a t i o n . I n machinery, t h e nonunion c o e f f i c i e n t i s -.152, which r i s e s t o -.406 under u n i o n i z a t i o n . T h i s e f f e c t has a number o f p o t e n t i a l e x p l a n a t i o n s t h a t cannot be
d i s t i n g u i s h e d here:
1. Unions w i t h more male workers a r e more s u c c e s s f u l a t e x t r a c t i n g r e n t s from employers;
2. Union employers f o r c e d t o pay above- market wages t o workers s e l e c t p r o p o r t i o n a l l y more males f r o m t h e queue o f a p p l i c a n t s a t t r a c t e d by t h e h i g h wages ;
3. E s t a b l i s h m e n t s e m p l o y i n g more men a r e more p r o d u c t i v e , b u t o n l y i n a u n i o n i z e d s e t t i n g can w o r k e r s c l a i m some o f these r e n t s ; o r
- 1 6 -
4. Women have a g r e a t e r t a s t e f o r nonwage compensation and can v o i c e t h e i r p r e f e r e n c e s i n a u n i o n i z e d s e t t i n g .
A f i n a l e f f e c t i n t h e s e i n d u s t r i e s i s t h a t u n i o n employers i n b o t h i n d u s t r i e s employ f e w e r women t h a n t h e i r nonunion c o u n t e r p a r t s , c o n s i s t e n t w i t h B l a u ( 1 9 7 7 ) . I n s h o r t , t h e s e r e s u l t s i n v i t e more i n v e s t i g a t i o n i n t o t h e r e l a t i o n s h i p between u n i o n i z a t i o n and t h e s t r u c t u r e o f t h e f e m a l e l m a l e wage d i f f e r e n t i a l .
V . C o n c l u s i o n
1 . F i n d i n q s
T h i s paper a p p l i e s a decomposition o f t h e f e m a l e l m a l e wage d i f f e r e n t i a l t h a t c l a r i f i e s t h e c o n n e c t i o n between s e g r e g a t i o n and wage d i s p a r i t i e s . F o r a l a b o r market i n s t i t u t i o n t o be a s s o c i a t e d w i t h i n e q u a l i t y , two c o n d i t i o n s a r e necessary: i t s c o n s t i t u e n t s must be segregated, and wages must d e c l i n e w i t h i n c r e a s i n g p r o p o r t i o n s o f female workers. The v a r i a n c e o f p r o p o r t i o n f e m a l e among c o n s t i t u e n t s must be s i z a b l e , and t h e c o e f f i c i e n t on p r o p o r t i o n f e m a l e i n t h e combined wage r e g r e s s i o n must be s i g n i f i c a n t and n e g a t i v e , o r
s e g r e g a t i o n a s s o c i a t e d w i t h t h a t i n s t i t u t i o n i s n o t a l a r g e source o f t h e f e m a l e l m a l e wage d i f f e r e n t i a l .
T h i s decomposition suggests t h a t p o l i c y a t t e m p t s t o reduce i n e q u a l i t y may be e v a l u a t e d on t h e b a s i s o f t h e p o t e n t i a l impact o f t h e p r o p o s a l on t h e d i f f e r e n t i a l . Furthermore, t h e r e a r e two p o t e n t i a l t a r g e t s i n t h e r e d u c t i o n o f segregation- based sources o f i n e q u a l i t y : t h e e x t e n t o f s e g r e g a t i o n and t h e s i z e o f t h e wage p e n a l t y . E l i m i n a t i o n o f e i t h e r i s s u f f i c i e n t t o e l i m i n a t e a source o f i n e q u a l i t y , b u t one may be e a s i e r t o implement t h a n t h e o t h e r .
- 17 -
The e m p i r i c a l f i n d i n g s r e p o r t e d i n t h i s paper a r e r e m a r k a b l y c o n s i s t e n t across t h e f i v e i n d u s t r i e s s t u d i e d :
1. Wages o f males and females i n t h e same o c c u p a t i o n and e s t a b l i s h m e n t d i f f e r by a b o u t 1%.
2. The l a r g e s t source o f t h e f e m a l e l m a l e wage d i f f e r e n t i a l i s t h e a s s o c i a t i o n between wage r a t e s and p r o p o r t i o n female i n o c c u p a t i o n s , which accounts f o r h a l f t o t h r e e - q u a r t e r s o f t h e d i f f e r e n t i a l observed, o r a
d i f f e r e n c e i n wages o f 11% ( m a n u f a c t u r i n g ) t o 26% ( s e r v i c e s ) when c o n v e r t e d t o percentages. The wage l o s s a s s o c i a t e d w i t h a s w i t c h f r o m an a l l - m a l e t o an a l l - f e m a l e o c c u p a t i o n ranges f r o m 21% t o 57% i n t h e f i v e i n d u s t r i e s s t u d i e d .
3. S e g r e g a t i o n by e s t a b l i s h m e n t w i t h i n i n d u s t r y and by work group ( i . e . , t h e s t r u c t u r e s most under c o n t r o l o f employers) a l s o c o n t r i b u t e s s i g n i f i c a n t l y t o wage i n e q u a l i t ~ Work groups a r e f a r more segregated t h a n . ~
e s t a b l i s h m e n t s , b u t t h e wage p e n a l t y a s s o c i a t e d w i t h an i n c r e a s i n g p r o p o r t i o n female i s l a r g e r f o r e s t a b l i s h m e n t s t h a n f o r work groups. These o f f s e t t i n g f a c t o r s cause v a r i a t i o n i n t h e r e l a t i v e i m p a c t o f e s t a b l i s h m e n t and work g r o u p s e g r e g a t i o n among i n d u s t r i e s ; s e g r e g a t i o n b y each o f these two s t r u c t u r e s reduces women's wages by 6% t o 7%, f o r a t o t a l l o s s o f 8% t o 16% ( o r from o n e - q u a r t e r t o o n e - h a l f o f t h e t o t a l d i f f e r e n t i a1 1.
4 . I n two m a n u f a c t u r i n g i n d u s t r i e s , u n i o n i s m has a pronounced e f f e c t o n
t h e c o m p o s i t i o n o f t h e femalelmale wage d i f f e r e n t i a l w i t h o u t a f f e c t i n g
p a t t e r n s o f s e g r e g a t i o n . Any wage d i s p a r i t y t h a t e x i s t s between men and women i n t h e same work group disappears under u n i o n i s m . Unionism i s a l s o a s s o c i a t e d w i t h two o t h e r i n t e r e s t i n g e f f e c t s : wages a r e l e s s c l o s e l y t i e d t o t h e
p e r c e n t female i n o n e ' s o c c u p a t i o n , b u t a r e more c l o s e l y t i e d t o t h e p r o p o r t i o n f e m a l e i n o n e ' s e s t a b l i s h m e n t .
- 18 -
These figures suggest that men and women who work in the same occupation
and establishment earn about the same amount. However, occupations are either
mostly male or mostly female, and within establishments, occupations are
almost completely segregated. Furthermore, establishments as a whole tend to
employ either more men or more women than average in the work force for the
industry.
Thus, the role of high-wage employers in segregation takes one of two
forms. If their wages for all occupations are higher than average, they tend
to concentrate on hiring men for all occupations. Just as important
empirically, when they pay a subset of occupations more than their
occupational average (adjusting for overall establishment differential), they
hire a disproportionate number of men for those work groups.
So, even a worker who has chosen an integrated occupation will probably be
hired to work primarily with members of hislher own sex. If he is male, this
will tend to raise his wages. If she is female, it will lower them.
2.
Relevance to Theory
In order to fully evaluate policy to reduce the femalelmale wage
differential, it is necessary to know the source(s> of the differential.
Although this decomposition cannot fully distinguish among the three major
models of the source o f the femalelmale wage differential, it throws some
light on which versions of each model are most consistent with observed
patterns. In particular, any version invoked must predict no sex differential
within work group, and wide segregation by sex, especially among work groups.
Omission of human capital or worker quality variables that are negatively
correlated with proportion female would bias downward the estimated
- 19 -
s o r t e d by human c a p i t a l . No doubt, a s i g n i f i c a n t p o r t i o n o f t h e o c c u p a t i o n component i s due t o d i f f e r e n c e s i n t h e human c a p i t a l o f men and women. As a c o r o l l a r y , t h e r e a r e no s i z a b l e d i f f e r e n c e s i n human c a p i t a l between men and women w i t h i n t h e work group. That makes p r o b l e m a t i c t h e importance o f t h e work group and e s t a b l i s h m e n t components ( c o n t r o l l i n g f o r p r o p o r t i o n female i n o c c u p a t i o n ) w i t h i n a p u r e human c a p i t a l framework. Research i s needed on t h e q u e s t i o n o f whether f i r m s e f f e c t i v e l y s o r t among a p p l i c a n t s on t h e b a s i s o f q u a l i t y w i t h i n o c c u p a t i o n . I f such s o r t i n g does n o t t a k e p l a c e , o n e - t h i r d t o o n e - h a l f o f t h e d i f f e r e n t i a l ( t h e work g r o u p and e s t a b l i s h m e n t components) i s n o t due t o d i f f e r e n t i a l p r o d u c t i v i t y .
P r e v i o u s e m p i r i c a l evidence f o r t h e e x i s t e n c e o f s u b s t a n t i a l compensating d i f f e r e n t i a l s i s weak, b o t h f o r w o r k i n g c o n d i t i o n s (Brown C19801, S m i t h
C19791, somewhat c o u n t e r e d by F i l e r C19831) and f o r f r i n g e b e n e f i t s (Freeman C19811>, Smith and Ehrenberg C19811, and A t r o s t i c C19831). I n t h i s s t u d y , t h e i n d i v i d u a l component i s n o t p o s i t i v e , and t h e work group component i s
s i z a b l e . Combined w i t h weak evidence on t h e impact of compensating
d i f f e r e n t i a l s i n g e n e r a l , t h e s e r e s u l t s argue a g a i n s t e q u a l i z i n g d i f f e r e n c e s , except, perhaps, among o c c u p a t i o n s .
A s i n o t h e r s t u d i e s , evidence o f d i s c r i m i n a t i o n i n t h i s case c o n s i s t s p a r t l y o f p r o v i d i n g d i r e c t evidence t o e l i m i n a t e competing t h e o r i e s . "
However, t h e p a t t e r n uncovered here ( p r i m a r i l y t h e s i z e o f t h e work g r o u p and e s t a b l i s h m e n t components) i s c o n s i s t e n t w i t h t h e e x i s t e n c e o f d i s c r i m i n a t i o n by employers. To t h e e x t e n t t h a t t h i s p a t t e r n a r i s e s f r o m d i s c r i m i n a t o r y b e h a v i o r , t h e d i r e c t i o n o f c a u s a l i t y i s o f g r e a t i n t e r e s t , b u t these r e s u l t s cannot d i s t i n g u i s h whether (exogenously) high- wage employers t e n d t o
d i s c r i m i n a t e , or whether d i s c r i m i n a t o r s a r e f o r c e d t o pay h i g h wages. The d e c o m p o s i t i o n performed here suggests some i m p o r t a n t t o p i c s f o r f u r t h e r r e s e a r c h . I n p a r t i c u l a r , t o what e x t e n t do employers s o r t among j o b
- 20 -
a p p l i c a n t s by p r o d u c t i v i t y - r e l a t e d c h a r a c t e r i s t i c s ? Are d i s c r i m i n a t o r s f o r c e d t o pay h i g h wages, o r do high-wage employers t e n d t o d i s c r i m i n a t e ? What
determines t h e sex c o m p o s i t i o n o f a work group? What i s t h e reason f o r t h e h i g h e r a s s o c i a t i o n between p r o p o r t i o n female and wages i n u n i o n e s t a b l i s h m e n t s ?
3. Relevance t o P o l i c y
These f i n d i n g s a r e b e s t i n t e r p r e t e d i n l i g h t o f e x t a n t and proposed
p o l i c i e s t o reduce wage i n e q u a l i t y between men and women. Table 7 p r e s e n t s a summary o f f i v e such p o l i c i e s : f o u r f e d e r a l a c t s o r o r d e r s , and comparable w o r t h ( w h i c h has been proposed, n o t e n a c t e d ) . Table 8 r e l a t e s t h e p r o v i s i o n s d e s c r i b e d i n Table 7 t o t h e d e c o m p o s i t i o n performed i n t h i s paper. Each component's f a c t o r s and t h e i r mean v a l u e s (as e s t i m a t e d h e r e ) a r e l i s t e d w i t h t h e p r o v i s i o n s i n t e n d e d t o reduce them, d i s t i n g u i s h i n g between p r o v i s i o n s aimed a t human c a p i t a l and employer d i s c r i m i n a t i o n models.
The compensating d i f f e r e n t i a l model i s n o t i n c l u d e d because a l l b e h a v i o r i s e f f i c i e n t under t h i s model, so t o t h e e x t e n t t h a t t h e sex d i f f e r e n t i a l i s a compensating d i f f e r e n t i a l , no c o r r e c t i v e p o l i c i e s a r e necessary. Under a human c a p i t a l model, equal access t o e d u c a t i o n may i n c r e a s e t h e p r o d u c t i v i t y o f women, r e d u c i n g t h e i n d i v i d u a l and o c c u p a t i o n a l components. 1 1
I n c o n t r a s t , d i s c r i m i n a t i o n e x p l a n a t i o n s g e n e r a t e two p o t e n t i a l p o l i c y i n s t r u m e n t s f o r t h e t h r e e components o f t h e d i f f e r e n t i a l a s s o c i a t e d w i t h s e g r e g a t i o n . The i n d i v i d u a l component ( w h i c h i s n o t a s s o c i a t e d w i t h
s e g r e g a t i o n ) has o n l y one p o t e n t i a l i n s t r u m e n t : l o w e r i n g t h e wage p e n a l t y a s s o c i a t e d w i t h an i n d i v i d u a l ' s sex w i t h i n work group- - via equal pay and perhaps EEO t r a i n i n g . For t h e o t h e r t h r e e components, t h e two p o t e n t i a l i n s t r u m e n t s a r e r e d u c t i o n o f s e g r e g a t i o n ( t h r o u g h EEO p r o v i s i o n s and a f f i r m a t i v e a c t i o n ) and r e d u c t i o n o f t h e wage p e n a l t y ( t h r o u g h comparable w o r t h ) .
- 21 -
How e f f e c t i v e c o u l d each o f t h e s e p o l i c i e s be? T a k i n g t h e f o u r components i n d i v i d u a l l y , wages o f women a r e o n l y 1% below those o f men i n t h e i r work group. T h i s , then, i s t h e maximum p o s s i b l e e f f e c t o f t h e p r o v i s i o n s t a r g e t e d a t t h i s component: i n p a r t i c u l a r , equal pay, b u t a l s o p a r t s o f equal
e d u c a t i o n and EEO t r a i n i n g . E i t h e r these p r o v i s i o n s have a l r e a d y been q u i t e s u c c e s s f u l , o r t h i s component was never t h e main source o f t h e
d i f f e r e n t i a l .
' *
I n c o n t r a s t , p o l i c i e s t h a t reduce t h e o c c u p a t i o n component c o u l d c u t t h e femalelmale wage d i f f e r e n t i a l by o n e - h a l f ( m a n u f a c t u r i n g ) t o t h r e e - q u a r t e r s ( s e r v i c e s ) i n o u r samples.
The n e x t l a r g e s t components a r e work group and e s t a b l i s h m e n t , which
t o g e t h e r account f o r about a 13% r e d u c t i o n i n women's r e l a t i v e wages. Unless e s t a b l i s h m e n t s and work groups a r e s o r t e d by human c a p i t a l t h a t i s u n e q u a l l y d i s t r i b u t e d between men and women, t h e p r o v i s i o n s based on models o f
d i s c r i m i n a t i o n o f f e r t h e o n l y s o l u t i o n s .
EEO, a f f i r m a t i v e a c t i o n , and equal e d u c a t i o n have been on t h e books f o r more t h a n a decade, w h i l e t h e f e m a l e l m a l e wage d i f f e r e n t i a l remains l a r g e . These p o l i c i e s aim t o reduce wage i n e q u a l i t y by r e d u c i n g a1 1 t h r e e t y p e s of s e g r e g a t i o n , i . e . , So, Se, and Sw. I f people have judged them
i n e f f e c t i v e , i t i s no s u r p r i s e t h a t t h o s e i n t e r e s t e d i n r e d u c i n g t h e d i f f e r e n t i a l would s u p p o r t comparable worth- - because i t s t a r g e t s a r e BO
and Bw, t h e o t h e r w i s e u n r e g u l a t e d f a c t o r s o f t h e two l a r g e s t components of t h e wage d i f f e r e n t i a l .
Footnotes
I n t h i s paper, t h e t e r m "work group" r e f e r s t o t h e o c c u p a t i o n - e s t a b l i s h m e n t i n t e r a c t i o n ; t h a t i s , t o a l l employees w i t h t h e same o c c u p a t i o n ( j o b c l a s s i f i c a t i o n ) i n a p a r t i c u l a r e s t a b l i s h m e n t .
I n d u s t r y wage d i f f e r e n t i a l s p e r s i s t i n t h e f a c e o f a t t e m p t s t o a t t r i b u t e them t o human c a p i t a l . See Dickens and K a t z (1986) and Krueger and Summers (1986) f o r r e c e n t summaries o f these i n v e s t i g a t i o n s . A l s o ,
Groshen (1986) shows t h a t even w i t h i n i n d u s t r i e s , s u b s t a n t i a l s t a b l e wage d i f f e r e n t i a l s e x i s t among employers and work groups, c o n t r o l l i n g f o r v e r y d e t a i l e d o c c u p a t i o n , whereas wage v a r i a t i o n among i n d i v i d u a l s w i t h i n a work group i s m i n i m a l .
See B l a u and Ferber (1986) and Reskin and Hartmann (1986) f o r summaries. W i l l i a m s and R e g i s t e r (1986) p e r f o r m a s i m i l a r a n a l y s i s on U.S. Census d a t a f o r 50 c i t i e s and e i g h t o c c u p a t i o n s and f i n d t h a t wages a r e
n e g a t i v e l y c o r r e l a t e d w i t h p r o p o r t i o n male w i t h i n o c c u p a t i o n i n a c i t y , c o n t r o l l i n g f o r v a r i o u s c h a r a c t e r i s t i c s o f t h e c i t y .
The p r o p e r t i e s o f t h e d i s p l a c e m e n t index a r e e x p l o r e d i n Duncan and Duncan
( 1 955).
' h i s c o n s t r a i n t i s a p p r o p r i a t e because e s t a b l i s h m e n t wage p o l i c i e s a r e ( b y aw) designed t o be s e x - b l i n d i n t h e i r a p p l i c a t i o n . What d i f f e r s between ,he sexes i s t h e i r access t o p o s i t i o n s . Oaxaca (1973) e s t i m a t e s s e p a r a t e e q u a t i o n s f o r men and women, d i v i d i n g t h e d i f f e r e n t i a l s between t h e
p o r t i o n s due t o d i f f e r e n c e s i n s l o p e s f r o m t h o s e due t o d i f f e r e n c e s i n mean v a l u e s o f independent v a r i a b l e s .
A p o s i t i v e c o e f f i c i e n t suggests t h a t wages i n c r e a s e w i t h t h e p r o p o r t i o n female, c o u n t e r a c t i n g t h e e f f e c t o f t h e n e g a t i v e c o e f f i c i e n t s t o some e x t e n t .
Work group s e g r e g a t i o n i s c o n t r o l l e d by employers i n t h e sense t h a t t h e y a p p a r e n t l y have a s t r o n g tendency n o t t o employ b o t h men and women i n t h e same o c c u p a t i o n . Even i n h e a v i l y female o c c u p a t i o n s , t h e few males i n t h e o c c u p a t i o n a r e c l u s t e r e d i n j u s t a few e s t a b l i s h m e n t s .
Note t h a t i f s e g r e g a t i o n by i n d u s t r y were added t o t h e e s t a b l i s h m e n t e f f e c t (as i n B l a u C19771), t h e e s t a b l i s h m e n t component would c l e a r l y dominate t h e work group component.
T h i s phenomenon i s n o t unexpected when t h e t y p e o f d i s c r i m i n a t i o n under i n v e s t i g a t i o n i s i l l e g a l .
11. P o l i c y p r e s c r i p t i o n s w i l l be i n e f f e c t i v e o r i n e f f i c i e n t i f t h e y i n t e r f e r e w i t h u n c o n s t r a i n e d o p t i m i z a t i o n on t h e p a r t o f m a r k e t p a r t i c i p a n t s . Thus, equal access t o e d u c a t i o n f o r women w i l l reduce t h e d i f f e r e n t i a l o n l y t o t h e e x t e n t t h a t p r e v i o u s i n e q u a l i t i e s i n access l e d t o d i f f e r e n t i a l
a c q u i s i t i o n o f human c a p i t a l . An equal d i s t r i b u t i o n o f human c a p i t a l would e l i m i n a t e t h e c o r r e l a t i o n between p r o p o r t i o n female and t h e human c a p i t a l r e q u i r e m e n t s o f a j o b , so t h e e s t i m a t e d c o e f f i c i e n t would be
z e r o . The r e a l reason f o r d e c l i n e i n i n e q u a l i t y would be t h e r e d u c t i o n i n s e g r e g a t i o n by sex. A l l c o r r e c t l y measured wage d i f f e r e n t i a l s would
remain t h e same, because t h e y a r e based on p r o d u c t i v i t y d i f f e r e n c e s , b u t women would h o l d more o f t h e high-wage j o b s . The p o t e n t i a l e f f i c a c y o f equal e d u c a t i o n on t h e e s t a b l i s h m e n t and work group components depends on whether some e s t a b l i s h m e n t s r e q u i r e more human c a p i t a l i n a l l o r some o c c u p a t i o n s t h a n do o t h e r s .
12. A t h i r d p o s s i b i l i t y i s t h a t employers adapted t o t h e i n t r u s i o n o f equal pay l e g i s l a t i o n by r e d e f i n i n g j o b t i t l e s . Workers o f d i f f e r e n t sex were g i v e n s l i g h t l y d i f f e r e n t r e s p o n s i b i l i t i e s i n o r d e r t o p r e s e r v e t r a d i t i o n a l wage d i s p a r i t i e s between women and men w i t h i n work group and t o j u s t i f y t h e i r d i f f e r e n t pay schedules. The s i z e o f t h e work group component w i l l i n c r e a s e w i t h t h e e x t e n t t o which j o b s were r e d e f i n e d a r b i t r a r i l y f o r t h i s purpose by independent e s t a b l i s h m e n t s .
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