South-Western College Publishing - Economics  
Guess What? Women Earn Less Than Men Do
Topic Labor Markets
Key Words gender discrimination, salary differential, compensating differentials
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Reference ID: A150913339

News Story Economic theory has long held that people may be paid different wages for different reasons without those differences necessarily relating to gender discrimination. Referred to as compensating differentials, these differences may include willingness to take on risk, need to travel, willingness to work beyond the scope of the job description, etc, and account for a significant difference in pay of similarly trained workers. The balance is then accounted for by looking at discrimination based on age, gender, etc.

A British economic researcher has found that, based on a survey of over 7,000 scientists in the U.K., the average difference in pay between males and females in science, engineering and technology is about $3,000 annually. Based on this difference, she whittled away at the number based on compensating differentials, but that only accounted for about 77% of the difference. The remaining 23% she attributed to gender discrimination.

The residual difference can be explained by alternative theories. Perhaps women researchers make less because, since women may take time off to have children, they rise up the academic ladder more slowly. The problem with this argument is that women earn less than men at any level of hierarchy, so length of time on the ladder doesn't seem to matter. Perhaps men take on more work than do women, allowing the men to move up the hierarchy more quickly. This doesn't work, either, though, because the researcher found that female/male pay differential is much smaller outside academia than inside.

In the end, the British researcher seems to have documented what women the world over have long felt: that they are not compensated for their value-added.

Discussion Questions:
1. Do the results in the article suggest that female scientists are being openly discriminated against? Why or why not?
2. Suppose a woman begins her career earning $5,000 less than her male counterpart...say, her $45,000 to his $50,000. Each year, they each earn 4% cost of living increases in salary. After 10 years, how much has that salary difference become? Is this a problem?
3. Are there ways that this problem could be overcome - without significantly increasing costs of production for an individual firm/university that employs both men and women?
Multiple Choice/True False Questions:
1. An example of a compensating wage differential would be:
  1. Desire to take on a risky activity.
  2. Traveling as part of the job.
  3. Being female.
  4. A and B
2. True/False. An economics professor's salary has been reduced because it is only over 9 months of the year, and summers are off. This is an example of a compensating wage differential.

3. Based on this researcher's calculations, if a male scientist earned $52,000 this year, a comparable female scientist could expect to earn about :

  1. $40,000
  2. $47,000
  3. $52,000
  4. $67,500
Source "Science pay gap: gender discrimination?" UPI NewsTrack. 5 September 2006.
"Mind the Gap." The Economist. 7 September 2006.
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