Political Economy of Discrimination

As women increasingly enter the labor market in the US, equity and anti-discrimination issues between genders are addressed great importance, especially the earning gap. The earning difference between women and men is narrowing down, however, the ratio of the wage gained by women to that by men still triggers discussion about the cause of this gap. The ratio in 1955 was 64 percent, and by 2007 the gap had closed to the degree where the ratio was 78 percent. While traditional social explanation ascribed this gap mainly to discrimination from employers and male employees, many scholars apply economic theories to tackle the issue. This essay aims to explain the lower wage of women compared with men by leveraging the human capital model. Institutional influences on female’s choice of human capital assimilation in this period will also be outlined to further analyze the earning gap. At last, a policy to improve women earnings relative to their male counterparts will be recommended and analyzed.

Developed in the Neoclassical school of economics, the human capital model concentrates on choices an individual makes to invest in education and training to enhance his or her skills. According to the model, an individual makes decisions based on the comparison between costs -- the costs of acquiring additional human capital, and benefits -- expected future earnings from additional human capital minus expected future earnings from current level of human capital. They choose to acquire the additional education or training only when benefits exceed costs. To effectively use this model, several assumptions are necessary: competitive labor markets, equal access to human capital investments, and rational workers who seek to maximize economic gains.

Therefore, in human capital theory, the lower payment of female employees relative to male employees is the result of women choices to invest in human capital. Most females cannot work as long and continuous as males. The biological and physical differences determine that women have shorter working time in all life. Besides, children-bearing and children-caring responsibilities of women shorten their working time, and in most cases, stop their career for several years. When females expect their working time to be short with less economic returns, they would choose to invest less in their education and on-job training. For instance, they may refuse the further study in a graduate school, or they may make less effort to gain professional skills through training (Blau & Kahn, 2000, 80). The lack of education and training will lead to lower productivity of this employee, who is usually a female, hence lower wages when other factors are same according to marginal productivity theory of wages (Marshall & Paulin, 1985, 30). Not only the amount of, but what kind of investment in human capital is influenced. Since a female employee’ career has to be interrupted, she would choose majors and trainings that are easily accessible, and when she comes back to the labor market after her children are old enough, she would choose occupations that require less professional skills, because she would has missed trainings of unique and sophisticated skills while her male counterparts get the training. Women themselves “choose to segregate themselves in a select group of occupations that are limited in number” (Marshall & Paulin, 1985, 31). In such occupations, wages rarely rise greatly along with experience. What’s worse, the supply of workers would exceed the demand for such occupations, depressing wages.

Institutions in this time period affected the choices of women workers greatly. In terms of education, many universities in the US did not accept women until the 20th century. Women began to choose to invest in their study, however, before 1970s, barriers for women to fully participate an occupation was remained, and their purpose for higher education was to find a good spouse rather than to pursue their own value. In addition, even though the door to higher education opened for women, their choices to get educated were still confined by the limited access to primary education. As for marriage and children-bearing, things began to change between 1930s and 1950s. During this period, institutions of marriage which forced women stay at home after marriage were eliminated, so women can choose to work. However, their incomes were far lower than their husbands’, so many females were reluctant to invest on their own trainings since they counted on men to feed the family. In the 1960s, when the feminist movement started, women began to flood into the labor markets. During the WWII, more women worked to replace male soldiers. Although the return of male workforce after the war dropped many women out of work, the social structure and minds of women have changed. Laws were passed to protect women benefits. For example, gender discrimination in employment, pay, and promotion has become unlawful by the passage of the Civil Rights Act in1964; and ILO adopted the Home Work Convention in 2000, protecting the rights of women workers doing paid work out of their home.