SPEAKER 1: Work I've done with professor Larry Kahn here at Cornell, which builds on research by some economists at the University of Chicago-- Shinwe June, Kevin Murphy, and Brooks Pierce-- suggest that the traditional factors employed by economists to explain the gender pay gap may be incomplete. And those factors that I'm talking about are the ones that we were discussing earlier-- differences in qualifications and labor market discrimination.
Kahn and I believe that it is important to also consider something we call wage structure. And we define wage structure as being the market returns to skills and the rewards for employment in particular sectors of the economy. Market returns to skills denote the premiums the market determines for being, say, more experienced, or more highly educated, or more qualified in some sense. Rewards for employment in particular sectors of the economy refer to the fact that, for example, unionized workers tend to earn more than non-union workers, or workers in some industries. Durable goods manufacturing is a good example. They earn more than workers in other industries, say services.
In addition, it's been shown in a large body of work that even controlling for the qualifications of the individual, jobs that tend to be predominantly female in industries that tend to be predominantly staffed by women tend to pay less. We distinguish wage structure from gender specific factors because the idea is that these are returns to skills or rewards for working in particular industries or occupations that you would get regardless of whether you're male or female.
Now why should wage structure affect the gender pay gap? To see this, let's think a bit more about the two factors we were discussing earlier, gender differences in qualifications and labor market discrimination. Suppose women do have less experience on average than men do. Then the higher the returns to experience, the larger the gender pay gap is going to be. Suppose that jobs staffed primarily by women do pay less than predominantly male jobs. Then the higher the premium for being in a male occupation, the larger the gender pay gap is going to be.
Now this is interesting because these market returns have, in fact, varied over time. In the last 25 years or so, the market returns to skills, like experience, have increased. So this would be a factor that, taken alone, would work to actually increase the gender pay gap. And Kahn and I have found that the rewards to being in male occupations and industries have also increased. And that factor, again taken alone, would have raised the gender pay gap.
So one question that Professor Kahn and I have raised in our research is how have women been able to successfully swim against the tide of rising returns to skills and rising rewards to particular industries and occupations. That is how have they managed to narrow the pay differential with men in the face of these adverse trends in wage structure that have been working against them?
Before I go specifically into the results of this research, I would like to address the question of why the returns to skills have been increasing. What do economists know about that? I think there's a pretty broad consensus in economics that, within countries like the United States, one of the main reasons that the returns to skills have been rising is that the demand by employers for skilled workers has been increasing relative to the demand for unskilled workers.
Of course, this just raises another question. Why has this occurred? There are at least two reasons. The one that I would put the most weight on is technological change. The information and telecommunications revolution has worked to put more of a premium on skill, at least thus far. There are other scenarios possible. But thus far, it has increased the demand for skilled workers compared to less skilled workers.
The other reason for the increase in demand for skilled workers, and I would put less weight on this, although it's also played a role, is international trade. Today, in some sense, less skilled workers in the United States are competing against less skilled workers from around the world. Many of them are available at much lower wages.
Two additional factors that have also played a role, and which I'd like to mention, are the decline in the union movement, since unions tend to push for more egalitarian pay structures, and the falling value of the minimum wage. And what I mean here is actually the falling real value of the minimum wage. That is the minimum wage adjusted for inflation. In fact, the minimum wage adjusted for inflation is actually lower today than it was in the 1970s.
OK. Now we're ready to use the concepts we've developed-- gender differences and qualifications, labor market discrimination, and wage structure-- to analyze the trends in the gender pay gap.
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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 5 of 8 in The Gender Pay Gap series.