Question

Congratulations! You have just been appointed to a commission studying wage discrimination against women. Again, you have been pushed from the frying pan into the fire, as this is a sensitive topic. It is your role to give the background report to the commission, who will subsequently make some recommendations for anti-discrimination policy.

1) There are several theoretical models of labour market discrimination that seek to explain why men and women with equal productivity levels may not be paid the same. Briefly describe in intuitive terms the demand-side approach, the supply-side approach (the crowding hypothesis), and the non-competitive approach involving barriers to mobility.

2) It is true that, on average, women spend less time in the labour market gaining experience, on-the-job training, and other forms of human capital than men do, which is often tied to childbearing responsibilities. Some apologists claim that lower pay for women might be justified, as employers have less of an incentive to invest in workers with higher turnover. On the other hand, this line of reasoning has been countered by some analysts. What is the nature of the critique of those who disagree with the apologists? (An apologist would say that the pay differentials are justifiable based on productivity and that there is no direct discrimination against women.)

3) Empirical research on male-female earnings differentials is required to assess the validity of the models. The extent of the wage discrimination is typically measured by the so-called Oaxaca decomposition effect. Without getting into the technical details of this equation, explain the general idea of the procedure. You should describe the major elements. No graph is necessary.

Answer 1