Reference no: EM131191735

Examine the table below.

Contribution to the Wage Differential between Men and Women of Differences in Measured Characteristics, 1998

Source: The Gender Pay Gap, Have Women Gone As Far as They Can? Francine Blau and Lawrence Kahn,https://web.stanford.edu/group/scspi/_media/pdf/key_issues/gender_research.pdf

Using the data above, the gender wage ratio is 80%; that is, women's wages are, on average, 80% of men's wages. If women had the same human capital characteristics (education and experience), racial composition, industry and occupation distribution, and union coverage as men, the "adjusted" gender wage ratio would rise to 91% of men's wages. The proportion of the wage differential that is not explained by the productivity-related characteristics identified above includes the impact of labor market discrimination and perhaps other unmeasured differences in non-wage aspects of the job.

Looking at the characteristics in the table above, education and experience don't shift the gap very much, because women generally have at least as much and usually more education than men, and since the 1980s they have been gaining the experience. The fact that men are more likely to be in unions and have their salaries protected accounts for about 4 percent of the gap. The big differences are in occupation and industry. Men are more likely to be in blue-collar jobs and to work in mining, construction, or durable manufacturing. Men are also more likely to be in unionized employment. Women are more likely to be in clerical or professional jobs and to work in the service industry. Women congregate in different professions than men do, and the largely male professions tend to be higher-paying. If you account for those differences, and then compare a woman and a man doing the same job, the pay gap narrows to 91 percent.

But the 91 percent statistic suggests a much more complicated set of problems. Is it that women are choosing lower-paying professions or that our country values women's professions less? And why do women work fewer hours? Is this all discrimination or, as economist Claudia Goldin likes to say, also a result of "rational choices" women make about how they want to conduct their lives.

Now the part for you to respond to. (a) Explain the role and importance of ceteris paribus in explaining differences in wages between men and women? (b) Is this analysis normative or positive? Explain.