Gender Pay Gap Research Paper

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Differences in pay between men and women remain pervasive in late twentieth-century labor markets, with women’s average earnings consistently below men’s even when differences in hours of work are taken into account. This ‘gender pay gap’ may result from unequal pay within jobs, but is also related to the different types of jobs occupied by men and women. Considerable debate has arisen over the extent to which it is evidence of discrimination in labor markets or simply a result of the individual attributes and choices of men and women. The size of the pay gap may also be influenced by the institutional framework of pay bargaining and regulation in different countries. The paper reviews a range of factors thought to contribute to the gender pay gap, and the strategies designed to eradicate it. It draws primarily on evidence from affluent industrialized nations.

1. The Gender Pay Gap: Trends And Comparisons

While the gap between men’s and women’s average earnings has narrowed in most countries in the late twentieth century, significant inequality remains. Moreover, substantial cross-national differences are apparent. Table 1 illustrates some of these variations in selected countries. To enhance comparison, the data are drawn as far as possible from one source (International Labour Office [ILO] Yearbook of Labour Statistics). Where available, the figures are for hourly earnings, as data for longer periods produce deflated estimates of women’s relative earnings due to the tendency for women to work fewer hours than men. Also, while the most widely available and reliable data are for manufacturing, women’s employment in industrialized nations tends to be concentrated more in service industries. Thus earnings in the ILO’s more inclusive category of ‘non-agricultural activity’ are also reported where available, although these are less satisfactory for cross-national comparison due to variations in the range of industries included. Even within countries, series breaks in data collection may limit the accuracy of comparisons over time. Some caution is therefore needed in interpreting cross-national differences and trends. Nevertheless, a number of broad observations can be made on the basis of the data presented in Table 1.

Gender Pay Gap Research Paper Table 1

Looking first at trends within countries, an increase in women’s average earnings relative to men’s since 1970 is evident in all of the countries listed except Japan. In many cases this has occurred mainly in the 1970s, although some countries (for example, Belgium, Canada, and the USA) show marked improvement since 1980. In several cases, however, closing of the gender pay gap has slowed in the 1990s.

The table also provides some indication of cross-national variation in the size of the gender pay gap. Figures for Canada and the USA are from different sources and not strictly comparable with data from the other countries. Among the others listed, the picture of cross-national variance appears broadly similar for manufacturing and ‘non-agricultural’ data. On the basis of the hourly manufacturing data, which are the most reliable for comparative purposes, Sweden stands out having the narrowest gender pay gap in the mid-1990s. The large gap in Japan reflects the use of monthly rather than hourly earnings, and thus the impact of different working hours between men and women. However, OECD approximations of hourly earnings in manufacturing in Japan still show a very large pay gap (OECD 1988, p. 212), and ILO data indicate that on this issue Japan looks more like other East Asian countries (for example, South Korea and Singapore) than the other countries listed in the table.

Overall, the data raise several questions. Why is there a gender pay gap? What accounts for its variation over time and across nations? What can, or should, be done to eradicate it? These questions are addressed in the following sections which examine possible explanations for the gender pay gap, the effect of institutional factors on its variation across countries, and the strategies most likely to assist in its elimination.

2. Explaining The Gender Pay Gap

One of the most direct ways in which sex differences in pay have arisen historically is through the establishment of different rates of pay for men and women in wage-setting processes. The assumption that men, as ‘breadwinners,’ should be entitled to higher pay than women underpinned pay determination in many countries until well into the twentieth century. In some countries this was institutionalized in the form of a ‘family wage’ for men. While early challenges to these assumptions were made in several countries, equal pay rates for men and women were usually only achieved where men’s jobs were threatened by cheaper female labor (see, for example, Ryan and Conlon 1989, pp. 99–100). In most countries it was not until the 1960s and 1970s, following the growth of second wave feminism and increasing involvement of women in paid employment, that the inequity of different rates of pay for men and women was responded to directly through policies of equal pay for equal work.

However, much of the pay difference between men and women results not from different pay rates in the same jobs, but from the location of men and women in different jobs. This sex segregation of the labor market has proved remarkably resistant to change, and in Walby’s (1988) view, accounts for the persistence of the gender pay gap since World War II in spite of the increasing human capital (i.e., education and labor market experience) of women over that time period.

Segregation is significant for pay inequality to the extent that female-dominated sectors of the labor market deliver lower pay. Female-dominated occupations, for example, may be low-skilled or involve skills that have been undervalued. They may also be less likely to provide discretionary payments such as overtime or bonuses. Empirical studies demonstrate that the proportion of women in an occupational group is negatively associated with wage levels, with typically around one-third of the gender pay gap shown to be due to occupational segregation by sex (Treiman and Hartmann 1981). Results for this type of analysis are highly dependent on the level of disaggregation of occupations applied. Finer disaggregation uncovers greater inequality, as vertical segregation exists within broad occupational groups, with men more likely to be in the higher status, higher paid, jobs.

Concentration of women in a small number of occupational groups is also significant for pay outcomes. Grimshaw and Rubery (1997), for example, demonstrate that in seven OECD countries around 60 percent of women are concentrated in just 10 occupational groups out of a total of between 50 and 80, with little change in this situation since the mid-1980s. Moreover, their analysis shows a wage penalty associated with this concentration of employment. Women within these occupations, on average, earn less than the all-occupation average.

Another form of labor market division potentially affecting pay differences is the distribution of men and women between firms. Blau (1977) has shown that in the USA women and men are differently distributed among firms, with women more likely to be employed in comparatively low-paying firms. These sorts of divisions may contribute to sex differences in earnings within occupations.

A further type of division that has become of increasing significance is that between full-time permanent and other, less regular, types of employment. Part-time work is highly female dominated in most countries, and on average tends to be less well remunerated per hour than full-time work. Waldfogel (1997, p. 215), for example, shows that part-time work carries a wage penalty for the women in her sample. Thus, although part-time positions may assist women to retain careers by facilitating the combination of work and family responsibilities, the concentration of women in this type of work may contribute to the gender pay gap.

In sum, sex differences in pay can arise from different pay rates in particular jobs or the distribution of female employment into lower paying jobs. In both cases, pay differences may be due to forms of discrimination or to non-discriminatory influences. Non-discriminatory influences include the individual attributes and choices of men and women, and although these may reflect broader social inequities, they can be distinguished from overt forms of discrimination within the labor market. Both areas are considered below.

2.1 Individual Attributes And Choices

A wide body of literature has addressed the extent to which the gender pay gap can be explained by individual attributes and choices. Human capital theory suggests that productivity related differences between men and women, such as education, skill, and labor market experience, may account for sex differences in earnings. Typically, analyses decompose earnings differences between men and women into a component that can be ‘explained’ by productivity factors, and another that represents the ‘unexplained’ elements of the gender pay gap that are ascribed to labor market discrimination (Oaxaca 1973). Whether human capital differences themselves might be evidence of social inequality (for example, reflecting differential access to training or restricted choices about labor force attachment) has not been an explicit part of this analytical approach.

Numerous studies have been conducted for different countries, and although there are difficulties of measurement and interpretation that complicate such analyses, human capital variables typically account for less than half, and often considerably smaller proportions, of the gender pay gap (Treiman and Hartmann 1981, p. 42). The studies which explain most have been those including detailed estimates of employment experience or labor force attachment (for example, Corcoran and Duncan 1979). Where women’s more intermittent labor force attachment has been captured effectively, as in longitudinal surveys or work histories, the negative effect on wages has been clearly demonstrated (Waldfogel 1997, pp. 210–11).

Alongside intermittent labor force attachment, several studies show a wage penalty for women associated with the presence of children. In a regression model utilizing data from 1968–88, Waldfogel (1997, p. 212) identifies a penalty in hourly wages associated with having a child, and a larger penalty for two or more children, even after controlling for actual employment experience and factors such as education. The effects of family and domestic labor responsibilities are thus likely to be cumulative, lowering women’s earnings through reducing employment experience and the capacity to retain career paths. While some may interpret such findings as evidence that a proportion of the gender pay gap is non-discriminatory and simply due to individual choices, others may observe that women’s disproportionate responsibility for family care affects the range of choices available.

2.2 Discrimination In Employment

There are several types of labor market discrimination with implications for sex differences in pay. For example, employers may discriminate against women when recruiting and promoting staff, preferring to hire men for higher status positions, and investing more in training and career support for men. This may be ‘statistical discrimination,’ reflecting assumptions that women will be more likely than men to leave work, or have lower levels of commitment to it, once they have family responsibilities. However, it is not clear that women leave jobs more frequently than men (see England 1992, p. 33), hence the rationality of this type of discrimination is questionable. Less direct forms of discrimination may be the result of customary practice, with long-standing procedures and organizational cultures effectively hindering the advancement of women (see Cockburn 1991).

Discrimination may also be evident in the way pay rates are established. While the overt use of different rates of pay for men and women discussed earlier is no longer widespread, female-dominated areas of employment may be relatively underpaid. England’s (1992) analysis provides some evidence for this by showing that the sex composition of an occupation explains between 5 percent and 11 percent of the gender pay gap even when factors such as different types of demands for skill and effort, and industrial and organizational characteristics are controlled for. Undervaluation could be the result of women’s comparatively low bargaining power, and could also reflect gender-biased estimations of the value of skills in female-dominated occupations. England (1992), for example, shows that ‘nurturing’ skills carry a wage penalty, thus suggesting that this type of work is devalued because of its association with typical ‘women’s work.’ Such findings indicate that policies of ‘comparable worth’ or ‘equal pay for work of equal value’—that is, comparisons of dissimilar jobs to produce estimations of job value free of gender- bias—have an important role to play.

3. The Role Of Institutions

While the factors considered thus far contribute to an understanding of the gender pay gap in a general sense, they are frequently less useful in explaining differences between countries. For example, differences between countries in the level of occupational segregation appear to be unrelated to performance on sex differences in pay. In Japan, the combination of low levels of occupational segregation and a large gender pay gap may be explained partly by women’s relative lack of access to seniority track positions in large firms (Anker 1997, p. 335)—that is, by other types of segregation. However, a different type of explanation is necessary to understand why some countries that are highly sex-segregated by occupation (such as Sweden and Australia) have comparatively narrow gender pay gaps. This anomaly suggests the importance of institutional factors in influencing the gender pay gap.

Blau and Kahn (1992), for example, point out that the effect of occupational concentration on sex differences in pay will be influenced by the overall wage distribution in any country—where wages are relatively compressed, the effect of segregation on earnings will be minimized. Wage distribution is in turn likely to be a product of the institutional framework for wage bargaining, with more centralized and regulated systems conducive to lower levels of wage dispersion, and, therefore, a narrower gender pay gap. Cross-national statistical evidence supports these links, showing association between centralized wage fixation and high levels of pay equity (Whitehouse 1992, Gunderson 1994). This relationship is likely to result not only from wage compression, but also from an enhanced capacity to implement equal pay measures in more centralized systems. Rubery (1994) notes that the degree of centralization has implications for several matters of relevance to pay equity outcomes, including the maintenance of minimum standards and the scope for equal value comparisons. Decentralized pay systems tend to provide more limited scope for comparisons to support equal pay for work of equal value cases, and results may be limited to specific enterprises, or to individuals. Overall, trends in wage bargaining arrangements may be more influential on pay equity outcomes than specific gender equity measures (Rubery 1994, Rubery et al. 1997, Whitehouse 1992). Wage bargaining systems are, however, country-specific, and embedded in national employment systems (Rubery et al. 1997). Translation of institutional structures across countries is therefore unlikely to be a viable proposition.

4. Policy Options

As the gender pay gap cannot be attributed to one type of cause, a number of strategies will be necessary to attempt its elimination. While addressing pre-market impediments to women’s advancement (such as sexrole stereotypes and their impact on educational and employment choices) is part of this agenda, the main strategies are those designed to remove barriers within the labor market. International conventions such as the ILO’s Equal Remuneration Convention (No. 100) and the United Nations’ Convention on Elimination of all forms of Discrimination Against Women have provided some impetus for action, and most countries have now implemented some form of equal pay legislation or prohibition against discrimination in employment. However, the efficacy of such measures is highly variable.

The most direct strategies are legislative provisions requiring the payment of equal pay for equal work, and equal pay for work of equal value. Equal pay for equal work provisions have been most effective where they have included a requirement to remove differential pay rates for men and women in industrial agreements. The rapid narrowing of the gender pay gap in Australia and the UK in the 1970s, for example, demonstrates the effectiveness of measures that removed direct discrimination in collective agreements (Gregory et al. 1989, Zabalza and Tzannatos 1985). Improvements in Sweden in the same decade also reflect the advantage of widespread coverage by collective agreements, and in that case predate the introduction of equal pay legislation. However, while equal pay requirements may be quite effective initially where they equalize minimum rates between men and women across a comprehensive set of collective agreements, the level of segregation in the labor market means that most provisions for equal pay for equal work apply to only a small proportion of women, as few men and women are in fact doing the same work.

Provisions for equal pay for work of equal value (comparable worth) open up a wider field for contestation, but this strategy has proved difficult to implement. Historical bias in the way ‘female’ jobs are valued has not been easy to eradicate as even quite detailed job evaluation methods retain aspects of gender bias and may in fact perpetuate existing hierarchies (Steinberg 1992). Moreover, cases have proved complex and time consuming. Comparable worth does permit reconsideration of the valuation of work, however, and is particularly important given the apparent resistance of patterns of occupational segregation to change. It will be most effective where the scope for comparison is wide, and results apply collectively to types of jobs rather than to individuals.

Apart from strategies that deal directly with pay, provisions to prohibit discrimination in employment have been adopted in most countries. Anti-discrimination legislation and equal employment opportunity or affirmative action measures aim to prevent sex discrimination in hiring and placement, and in some cases seek to correct for past sex discrimination by requiring attention to the unequal distribution of men and women within organizations. While it is difficult to estimate the impact of such measures on the gender pay gap, they have no doubt restricted the scope for overt discrimination and contributed to a gradual change in customs and attitudes.

Given the impact of family responsibilities on women’s earnings noted earlier, erosion of the gender pay gap will also require the use of strategies to assist in the combination of work and family responsibilities. Ultimately this also requires a more even division of domestic labor between men and women to assist women to retain career progression and employment experience. Paid parental and family leave, and measures to deliver flexibility with job security while combining employment and caring responsibilities will be part of this agenda, although experience thus far suggests that encouragement to fathers to share these types of provisions will also be necessary.

Finally, it must be emphasized that the gender pay gap is dependent on a wide range of policy and institutional factors, most of which are not designed with gender equity goals in mind. In particular, wage bargaining arrangements and employment policies may affect the size of the gender pay gap by affecting outcomes such as wage dispersion. Trends away from centralized and regulated forms of pay bargaining are therefore of some concern as they may increase dispersion, which in turn may erode gains made through equal pay or comparable worth strategies. In short, the pursuit of pay equity cannot be limited to a single agenda, but requires multiple policy measures, and—like most endeavors attempting significant social change—will require a long period of time to achieve.

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