Question

Briefly describe Goldin's analysis of whether wage discrimination existed in the manufacturing sector around 1900. What was her methodology and findings? How about for the Clerical Sector in 1940?

Answer 1

Claudia Goldin's claim that wage discrimination emerged around 1900. Even if there is no wage discrimination, other forms of discrimination may exist. Barbara Bergmann’s crowding model provides a model of discrimination that implies no wage discrimination. In the crowding model, women are allowed to enter occupation B, but not occupation A. Women are then “crowded” into occupation B, where the supply of workers is large relative to the demand. Because the marginal product of labor is declining, the large supply of worker in occupation B leads to a low marginal product of labor and thus a low wage. In occupation A, where the supply of worker is small relative to the demand, marginal product and wage are both high. In this model wages are equal to marginal product, so there is no wage discrimination, but women workers have a low marginal product because they are crowded into “female” jobs.

When Claudia Goldin found that wage discrimination increased between the nineteenth and twentieth centuries, she attributed this change the rise of internal labor markets. She described the nineteenth century as characterized by spot markets: “Manufacturing jobs and many others in the nineteenth century were part of what I shall terms the ‘spot market.’ Workers were generally paid their value to the firm at each instant, or what economists call the value of labor’s marginal product.”8 This changed in the twentieth century as internal labor markets replaced spot markets, and women in occupations such as clerical work found their wages limited by the lack of opportunity for advancement. This hypothesis nicely connects the emergence of wage discrimination to changes in the economy that seem to have resulted from the increased importance of firm-specific human capital.