SPEAKER: OK, why are wages important? You might be thinking, do I even need to ask this question? Obviously, how much money people earn is important to them.
This impression is supported by the slogans of the Women's Liberation Movement of the late 1960s and early 1970s. Two of the most popular and prevalent slogans were related to wages. One was "equal pay for equal work," and what that meant was that men and women should receive the same pay if they do the same job.
Actually, by the way, this was probably not a very well-phrased demand. Those of us who've studied gender differences in the labor market have observed that, especially in the late 1960s when this slogan was formulated, and still to a considerable extent even now, women generally do not work in the same occupations as men. The tendency of men and women to work in different jobs is called occupational segregation, and the extent of occupational segregation remains considerable.
Moreover, the research that I did for my doctoral dissertation showed that even when men and women are in the same occupations, they generally don't work in the same firms. So the pay difference between men and women doesn't arise so much for men and women who work side by side but get paid different amounts; rather, it arises because that doesn't happen as often as we might like. That is, men and women aren't working side by side as often as we'd like.
But equal pay for equal work was a catchy slogan, and it's probably still heard to some extent today. And it does point to the importance people attach to the gender pay gap. Of course, I'm not saying that I'm against equal pay for equal work. I'm very much in favor of it. I'm just trying to make the point that even if we could impose it, it might not make too much of a difference to the overall gender pay gap.
The other interesting slogan I wanted to mention was actually a button, and it said $0.59-- that is the number 59 followed by the cents sign. What that reflected was that in the late 1960s and early 1970s, the pay ratio-- and by pay ratio, I mean the amount that women earned divided by the amount that men earned-- the pay ratio was very stable at around 59%. So on average, women earned about 59% of what men earned, or as the button implied, $0.59 for each dollar that a man earned.
And the 59% figure was so stable that it was possible to make buttons and wear them year after year. You didn't have to keep updating them. Well, let's see. Maybe it's 61% or 62% this year. Let's change it-- didn't have to do that.
Both these slogans suggests that money was important to those advocating equal rights for women, and the second slogan suggests that the money part wasn't changing very much for quite a period of time. In fact, there's one economist, Victor Fuchs, who actually found a biblical reference in Leviticus where it is decreed that a woman is worth 30 shekels of silver and a man 50 shekels, a ratio of 60%. This suggests that the gender pay ratio may have been constant for an extremely long time, maybe some 5,000 years.
Actually, I'm joking here. We have some more recent evidence from Cornell alumn Claudia Goldin, who's a professor of economics at Harvard. She found that the pay ratio in the United States was even lower than 60% in the late 19-- excuse me, the late 1800s. It was 46% in 1890 and increased to 56% by 1930. As we've seen, though, it didn't change very much after that for a considerable period of time.
Now, let's consider the wage issue a little more closely. Why do people in general, and economists in particular, think that wages are important? First, wages are important because they affect people's well-being.
Now, there's not necessarily a one-to-one correlation. A low-wage person could be part of a family in which there are many high wage earners. And, indeed, when I first started to get interested in this area, the prevalent view was, sure, women do earn less than men, but no big deal.
Women are married, at least most women are married, and their husbands are making plenty of money. Their husband is the breadwinner. We do not care that there is a gender pay differential. Well, of course, if this view were accurate then, which it was not completely true, it's certainly not accurate today. The majority of married couples have two earners, both of whom contribute significantly to family well-being, and we have a growing number of families that are headed by women who are fully dependent either on their own wages or whatever other sources of income they may have.
A second reason I've always been interested in wages is because I think it's a matter of fairness and equity. In fact, there was a government publication that was titled-- that I think put this very well, and it was titled "A Matter of Simple Justice." And what I mean is that if I'm just as productive as a man, and I'm doing similar work, I don't want to get paid less.
More generally, you can say, rightly or wrongly, that in a market economy worth is often measured by money. Again, it might not be something that you agree with. It might be something you'd like to change, but I think there is a truth to it. So if women are regarded-- if women earn less, in some ways they're regarded as in some sense having less worth.
Third, wages tend to be correlated with other favorable job characteristics. That is, on average, high wage earners also are more likely to have higher benefits, better working conditions, more status, and more career opportunities. Now, that's a broad statement, and there are situations where I want to qualify it. For example, economists talk about something called "compensating differentials," and that refers to the fact that when equally skilled workers are in jobs that differ in terms of how pleasant or unpleasant they are, the one doing the unpleasant work may receive some kind of a wage premium. And sociologists pointed out, interestingly, that since women are disproportionately represented in white collar occupations, traditionally female jobs don't always actually come out on average as having lower status than male jobs. Nonetheless, wages are interesting and important because they tend, broadly speaking, to capture a lot of positive job attributes.
Finally, as an economist, I see wages as important because they are inputs into people's decision-making. So for example, there are some very interesting economic models that look at how people determine their labor force participation. And by labor force participation, I mean whether or not to work in the labor market or not.
People are believed to make this decision based in part on the wages available to them in the labor market. People are also believed to determine their fertility-- that is the number of children they have-- based, in part at least, on the wages they could earn. If you're a low wage earner, the, what we call in economics, opportunity cost of having a child and perhaps dropping out of the labor force for a while is lower.
There has historically been a traditional division of labor between men and women where there was this notion that the man in the family would be the breadwinner and the woman would be the homemaker, or if they both worked, that the woman's career would be somehow secondary to the man's career. This traditional division of labor is reinforced by lower wages for women in the labor market. Because, again, if the family has a child, and they would like someone to drop out of the labor force for a while, it makes sense to have the low wage partner do it. Or if the family needs to decide where to locate, whether to live in New York City or Ithaca, for example, the opportunities of the high-wage partner might be the thing that would determine the family's decision. So wages are also important because they affect a lot of decisions that people make.
Now that we have a feel for why the gender pay gap is important, let's turn to a more detailed examination of the recent trends.
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Francine Blau, the Frances Perkins Professor of Industrial and Labor Relations and Labor Economics at Cornell ILR School, describes trends in the gender pay gap, considers fundamental explanations for the gender pay gap and uses these explanations to understand the trends.
This video is part 2 of 8 in The Gender Pay Gap series.