1. Pay Gaps

Question 1

How is the gender pay gap calculated?

Answer 1

The difference in average hourly earnings of men and women as a proportion of men’s average hourly earnings

Question 2

Why is the wage gap for all workers higher than full time and part time employees?

Answer 2

Because there are more women in part time jobs than men and they earn less than full time workers

Question 3

Equal pay act 1970

Answer 3

It is unlawful to pay people unequally simply because they are a man or a woman

Question 4

Reasons for gender pay gap?

Answer 4

•caring responsibilities
•divided labour market
•discrimination
•men take up majority of senior roles

Question 5

What is the order of median hourly pay by ethnicity in the UK?

Answer 5

•Chinese
•Indian
•White
•Black
•Pakistani
•Bangladeshi

Question 6

Physical disutility

Answer 6

Individuals may prefer to incur costs than come into contact with members from a certain group. A value can be assigned to this prejudice

Question 7

Employer discrimination

Answer 7

When employers discriminate against certain workers

Question 8

In theory what happens to firms that discriminate in perfect competition?

Answer 8

They fail since they are hiring the wrong type of workers and/or the wrong number of workers. They don’t make profits

Question 9

In reality why aren’t discriminatory employers and their firms kicked out the market?

Answer 9

•Firms may have monopsony power and so they can reduce wages
•pre market discrimination may mean the two groups aren’t equally productive

Question 10

Effects of employee discrimination

Answer 10

Firms hire only one type of worker

Question 11

Consequences of customer discrimination

Answer 11

•employer segregates workforce
•adverse impact when firm can’t easily hide its type 2 workers from view

Question 12

Statistical discrimination

Answer 12

Where people use aggregate characteristics of a group as an indicator of a worker’s productivity.

Question 13

Why is statistical discrimination potentially damaging?

Answer 13

•the UK has laws on using race, gender and other characteristics in payment decisions
•Info about groups may be incorrect or outdated
•can be vicious cycle as the atypical individuals from the discriminated group are discouraged

Question 14

What question does OAXACA pose?

Answer 14

How much of the gender wage gap can be explained by differences in human capital and occupational choice? The unexplained part must be discrimination

Question 15

How can we decompose the raw wage differential into schooling and discrimination?

Answer 15

By adding and subtracting BmXf

Question 16

What is the composition effect?

Answer 16

It is the explained part of the raw wage differential which reflects the differences in the distribution of characteristics between the groups

Question 17

What is the index number problem?

Answer 17

We assume in the absence of discrimination that men and women would be paid according to the same earning function when this isn’t necessarily the case

Question 18

Problems with OAXACA technique

Answer 18

•index number problem
•returns to education aren’t linear in reality
•experience is actually potential experience
•selection bias- participation rates in labour market aren’t same for mean and women

Question 19

Audit studies

Answer 19

Where paired individuals are given a task to complete with identical personas so they only differ by observable demographic attributes

Question 20

In group bias

Answer 20

Where people favour others from the same group as them