Question

Some studies have suggested that, on average, women earn less than men with the same productive characteristics, not because of labor market discrimination, but because they do not have as many occupational choices. Why would occupational choices matter in terms of earnings or employment differences between men and women? Similar, the U.S. used to have laws preventing women from working in certain occupations. Analyze the consequences of this law for male and female workers.

Answer 1

For some occupations, women are not considered fit especially the ones which required more use of muscular strength such as construction jobs. For these types of jobs companies hiring workers face a limited supply in terms of workforce and since supply curve for labor turns inelastic, the market determined wage rate is relatively higher. This implies that occupations for which women are not allowed to work, must have a higher wage rate, resulting in increasing the overall wage inequality between men and women.

For male workers, laws that prevent the entry of women in the workforce, this is expected to increase their bargaining power and so they are likely to enjoy a greater wage rate. For women, this restricts the number of companies / fields in which they can work. In this way, this decrease their bargaining power and they are likely to face companies that offer them a lower wage rate. This becomes a reason for wage differentials.