Page 422 - The Principle of Economics

430 PART SIX THE ECONOMICS OF LABOR MARKETS
IN THE NEWS
Men, Women, and Wages
WHY DOES THE AVERAGE FEMALE WORKER earn less than the average male worker? In the following article, econo- mist June O’Neill offers some answers to this question.
The Shrinking Pay Gap
BY JUNE ELLENOFF O’NEILL “Fifty-nine cents,” the popular button said, a symbol of the stubborn fact that throughout the post–World War II period, women’s wages hovered at around 60 percent of men’s, despite an increasing proportion of women working outside the home. This gender gap did not de- cline through the 1960s and the 1970s
despite the rise of the feminist move- ment, equal pay and employment legisla- tion, and affirmative action.
But starting in the Reagan years, the gender gap in wages began to decline dramatically. By some measures the ratio of women’s earnings to men’s rose to nearly 80 percent; and even this number, I believe, overstates the gender gap be- tween men and women with similar skills and training. Why did this dramatic nar- rowing in relative wages happen?
The answer has less to do with poli- tics or protests than with the realities of the labor market. Although basic skills are acquired in school, it is in the labor market where specialized skills are de- veloped that bring higher wages. During the three decades following World War II women entered the labor market in record numbers. But many of the new entrants had been out of the labor force for considerable periods of time, raising their children. These women diluted the skill level of the rapidly expanding group of employed women. This was the main reason why the gender gap in pay did not narrow during the postwar years.
Today’s working women, particularly those younger than forty, are much more nearly equal to men in work experience than were their mothers. Through delayed marriage, low fertility, and an increasing tendency for mothers of young children to work, women have acquired many more years of continuous work experience than was true in the past. (Close to 60 percent of married women with children under age six are now in the labor force; in 1960, the proportion was only 19 percent.)
And the work experience gained by these younger women is likely to have an even greater impact on their future earn- ings because their work experience has been more correctly anticipated. Many in- vestment choices affecting careers are made at younger ages: years of school- ing, subjects in school, other professional training. In the past, women were much less likely than men to invest in lengthy training because they assumed they would not be working enough years to justify it.
In fact, the National Longitudinal Surveys found that even in the late 1960s less than 30 percent of young
CASE STUDY DISCRIMINATION IN SPORTS
As we have seen, measuring discrimination is often difficult. To determine whether one group of workers is discriminated against, a researcher must cor- rect for differences in the productivity between that group and other workers in the economy. Yet, in most firms, it is difficult to measure a particular worker’s contribution to the production of goods and services.
One type of firm in which such corrections are easier is the sports team. Pro- fessional teams have many objective measures of productivity. In baseball, for instance, we can measure a player’s batting average, the frequency of home runs, the number of stolen bases, and so on.
Studies of sports teams suggest that racial discrimination is, in fact, common and that much of the blame lies with customers. One study, published in the Jour- nal of Labor Economics in 1988, examined the salaries of basketball players. It found that black players earned 20 percent less than white players of comparable ability. The study also found that attendance at basketball games was larger for teams