Employment Discrimination and Gender Wage Differentials

Ge Yuhao

Renmin University, China

Framework

• Motivation.

• Data managements and some facts.

• Employment discrimination and gender differences in labor participation.

• Employment discrimination and gender differences in wage.

• Conclusion and discussion.

Motivation

• Wage ratio is widely used in the literature of gender discrimination in the labor market.

• Generally, it means less discrimination if the wage ratio increases.

f

m

wagerwage

Wage Ratio in the Labor Market1988-2001

• Focusing on the years after 1996.

.9.85

.8.75

.7emsample_ratio

1985 1990 1995 2000year

What Has Happened in China after 1996?

• Radical SOE reforms– Mass layoffs

• Asian financial crisis– Bankruptcy and layoffs

• Could female workers benefit from these negative shocks?– The hunch is no;– Then the above figure is contradictory to our

hunch. There is something worthy digging out.

Wage Ratio of the Whole Sample of Working Age

• If a person doesn’t work, set his/her wage to be 0. .9

.85

.8.75

.7whlsample_ratio

1985 1990 1995 2000year

Diverging trends of wage ratio in the employed sample and whole sample

• .65

.7.75

.8.85

.9

1985 1990 1995 2000year

whlsample_ratio emsample_ratio

What We Want To Do

• Explaining the diverging trends;

• Comparing the employment discrimination and wage discrimination;

Data Managements

• Urban Household Survey in China.– Beijing, Liaoning, Sichuan, Shanxi,

Guangdong, Zhejiang;– 1988-2001;

• Sample selection criteria.– Male 16<age<60, Female 16<age<55.– Age<50 when enter into labor market.– Delete self-employed and students.

Gender Differences in Labor Participation

• Thinking about the possible reasons for the diverging trends of wage ratio.– Different patterns of labor participation may

explain.• Female workers with low wage quit the labor

market next year. However, all the male workers stay in the labor market.

• Could this story be true?

• Switching our attention to gender differences in labor market.

Gender Differences in Labor Participation

• Both male and female, the labor participation rate is dropping . For female, it is dropping faster.

.6.7

.8.9

1

1985 1990 1995 2000year

f_lpr m_lpr

• Next question is what cause gender differences in labor participation.– Female workers have lower education, lower

experience?– Employment discrimination?

• Female workers are fired first when negative shocks hit the economy such as the Asian Financial Crisis.

Employment Discrimination and Gender Differences in Labor Participation

• Use counter-factual analysis method.– Ideas from Oaxaca (1973).– Will unemployed female workers take part in

the labor market if she is treated like male?

• The difficulty lies in the fact that labor participation behavior is discrete.

• The method we use is BFL simulation method.

Simulation of Labor Participation Behavior of Worker

• First, using logit model to estimate worker’s labor participation equation.

•

• Second, specify the conditional distribution. When we observe the participation, we should use conditional distribution.

1 if q 0

0 otherwisei i iy

Continued• We can prove that:

• When we get all the parameters needed, we can predict the labor participation behavior of the worker.

( | 1)1

i i

i

g

i i

e eF C

e

1

( | 0)1

i i

i

g

i i

e eF C

e

ˆi ig q

Simulation of Labor Participation Rates of Male and Female

• After we get the predicted labor participation behaviors of all males and females, we can also get the simulated labor participation rates of male and female.

• Labor participation rates of male and female can be expressed as:

ˆ( , , )m m mmp q ˆ( , , )f f f

fp q

• The labor participation rate difference between

male and female:

• It can be expressed as:

• The first part denotes the difference of labor participation rate caused by characteristics. And the second part denotes the difference caused by coefficients (discrimination). The second part can be analyzed further.

ˆ ˆ( , , ) ( , , )m m m f f fm fp q p q

1

ˆ ˆ( , , ) ( , , )m m m m f fm fp q p q

2

ˆ ˆ( , , ) ( , , )m f f f f ff fp q p q

Results

• Green line is female’s labor participation if treated like male.

.6.7

.8.9

1

1990 1995 2000year

Results

• Red line is the gender differences in labor participation if no employment discrimination.

0.05

.1.15

1990 1995 2000year

difratio diffirst

Summary 1

• Employment discrimination is the main reason for the gender differences in labor participation.

• The degree of discrimination increases over the period.

Employment Discrimination and Gender Differences in Wage

• We want to examine what gender differences in wage will be if there is no employment discrimination.

• Two steps:– Will an unemployed female workers take part

in the labor market if no discrimination?• YES

– How much will her wage be if in the labor market?

• No

Predicting the Wage

• Using Heckman two-step method to predict the wage.

• Predict the mean wage of male and female in the whole sample and employed sample.

Results

• The brown line is the wage ratio in the employed sample if no discrimination;

• The green line is the wage ration in the whole sample if no discrimination.

.75

.8.85

.9.95

1990 1995 2000year

Summary 2

• Employment discrimination could explain the diverging trend in the first figure.

Employment Discrimination and Wage Discrimination

• If there is no wage discrimination, what the wage ratio will be.

• If there is no employment discrimination and no wage discrimination, what the wage ratio will be.

No wage discrimination

• .7

.75

.8.85

.9.95

1990 1995 2000year

Conclusion• There is serious employment discrimination

against women in the labor market in China. The discrimination is responsible for the larger gender differences in the labor participation.

• The diverging trends of wage ratio is mainly explained by employment discrimination rather than wage discrimination.

• Some results only focusing on the employed sample may be misleading.

Discussions• How about the situation after the debt crisis in

2008? Do female workers still be discriminated?– Data Availability.

• This paper is talking about the story of quitting the labor market of female workers with lower education. How about the story of entering the labor market of female college graduate? Are they also discriminated?