Question

1. Suppose that a pay equity plan has just been put in place in your organization. The pay equity consulting firm did a job evaluation and assigned points to each of the male-dominated and female-dominated jobs. It then estimated the following male and female pay lines by regression, where Y denotes annual earnings, P denotes job evaluation points, and the subscripts m and f denote male and female respectively: Ym = 5000 + 100Pm Yf = 4000 + 80Pf Assume that you were an employee in a female-dominated job and that your job evaluation score was 200. a) What would your pay be before pay equity? b) What would it be after pay equity? What is the magnitude of your pay equity award? Show your answer with steps.

2. In the above example, assume the job evaluation score was 300 in the male-dominated jobs and 200 in the female dominated jobs.

a) what is the average pay in male-dominated and female-dominated jobs?

b) use a Oaxaca decomposition to decompose the average pay differential between male and female-dominated jobs into two components: a portion attributable to the differences in job evaluation points (valued according to male pay for such points) and a portion attributable to differences in pay for the same job evaluation points.

c) use that same decomposition method but this time evaluate the differences in job evaluation points according to the female pay for such points.

Answer 1

1)

Ym = 5000 + 100 Pm

Yf = 4000 + 80 Pf

a) given that Pf = 200, for a female dominated job, the income will be

Yf = 4000 + 80 *200

Yf = 4000 + 16000

Yf = 20000

b) After pay equity, the gender gap is zero, i.e. Ym = Yf. This means that the difference is in the job evaluation score.

5000 + 100 Pm = 4000 + 80 Pf

1000 = 80 Pf - 100 Pm

given Pf = 200

1000 = 16000 - 100 Pm

100 Pm = 15000

Pm = 150

Hence job fro female oriented job to be same as that of male dominated job for 200 evalaution points, male job evaluation points has to 150. Then the pay after equity will be 20000

The magnitude of gender gap would then be zero.

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2.

a) Average pay of male and female domianted jobs-

Ym = 5000 + 100 Pm

Yf = 4000 + 80 Pf

where

Pm = 300 and Pf = 200

Ym = 5000 + 100 *300 = 35000

Yf = 4000 + 80 *200 = 20000

The gender gap = 15000

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b) If male job evaluation score is 200, then their average pay would be

Ym = 5000 + 100 *200 = 25000

difference= 35000 - 25000 = 10000 is due to difference in job evaluation score

and remaining 5000 is gender pay gap because of discrimination in pay due to same evaluation score.

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c)

If female job evaluation score is 300, then their average pay would be

Yf = 4000 + 80 *300

Yf = 4000 + 24000

Yf = 28000

difference = 20000 - 28000 = -8000

This increased pay of 8000 is because of the increase in job evaluation score only.

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