Income disparity

Income disparity

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Encyclopedia
The gender pay gap is the difference between male and female earnings expressed as a percentage of male earnings, according to the OECD. The European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....

 defines it as the average difference between men’s and women’s hourly earnings. There is a debate to what extent this is the result of gender differences
Gender differences
A sex difference is a distinction of biological and/or physiological characteristics associated with either males or females of a species. These can be of several types, including direct and indirect. Direct being the direct result of differences prescribed by the Y-chromosome, and indirect being...

, lifestyle choices (e.g., number of hours worked), or because of discrimination
Discrimination
Discrimination is the prejudicial treatment of an individual based on their membership in a certain group or category. It involves the actual behaviors towards groups such as excluding or restricting members of one group from opportunities that are available to another group. The term began to be...

.

Adjusted and unadjusted gender pay gap


It is important to differentiate between the unadjusted (also known as raw) wage gap and the adjusted (also known as discriminatory or unexplained) wage gap. The unadjusted or raw pay gap does not take into account differences in personal (e.g., age, education, the number of children, job tenure and occupation) and workplace characteristics (e.g., the economic sector and place of employment) between men and women. Parts of the raw pay gap can be attributed to the fact that women, for instance, tend to engage more often in part-time work and tend to work in lower paid industries. The remaining part of the raw wage gap that cannot be explained by variables that are thought to influence pay is then referred to as the adjusted gender pay gap and is interpreted as being discriminatory.

However, a 2010 report by the European Foundation for the Improvement of Living and Working Conditions
European Foundation for the Improvement of Living and Working Conditions
The European Foundation for the Improvement of Living and Working Conditions' is a agency of the European Union, with offices located in Dublin, Ireland. It was set up by in May 1975 by the European Council to help improve living and working conditions across Europe.The Foundation focuses on...

, for example, pointed out that "interpreting the adjusted gap as being the only discriminatory component falls short of the reality.” The report found that the part of the pay gap which is attributed to observed differences in characteristics (such as age, education, hours worked etc.) may still reflect the outcome of discriminatory social processes. Eurofond found that "the major reasons for this gap are very often related to both horizontal and vertical segregation – or the fact that women tend to choose lower-paid professions, reach a ‘glass ceiling
Glass ceiling
In economics, the term glass ceiling refers to "the unseen, yet unbreachable barrier that keeps minorities and women from rising to the upper rungs of the corporate ladder, regardless of their qualifications or achievements." Initially, the metaphor applied to barriers in the careers of women but...

’ in their careers, or have their jobs valued less favourably. The origins of these factors could be judged as being discriminatory in themselves – that is, when they are rooted in gender stereotypes of male and female occupations.”

OECD


The 2008 edition of the Employment Outlook report by the Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...

 (OECD) found that while female employment rates have expanded considerably and the gender employment and wage gaps have narrowed virtually everywhere, women still have 20% less chance to have a job than men, on average, and they are paid 17% less than their male counterparts. Moreover, the report stated:
"[In] many countries, labour market discrimination
Discrimination
Discrimination is the prejudicial treatment of an individual based on their membership in a certain group or category. It involves the actual behaviors towards groups such as excluding or restricting members of one group from opportunities that are available to another group. The term began to be...

 – i.e. the unequal treatment of equally productive individuals only because they belong to a specific group – is still a crucial factor inflating disparities in employment and the quality of job opportunities [...] Evidence presented in this edition of the Employment Outlook suggests that about [...] 30% of the variation in gender wage gaps across OECD countries can be explained by discriminatory practices in the labour market."


European Union


At EU
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

 level, the gender pay gap is defined as the relative difference in the average gross hourly earnings of women and men within the economy as a whole.

Eurostat
Eurostat
Eurostat is a Directorate-General of the European Commission located in Luxembourg. Its main responsibilities are to provide the European Union with statistical information at European level and to promote the integration of statistical methods across the Member States of the European Union,...

 found a persisting gender pay gap of 17.5 % on average in the 27 EU Member States
Member State of the European Union
A member state of the European Union is a state that is party to treaties of the European Union and has thereby undertaken the privileges and obligations that EU membership entails. Unlike membership of an international organisation, being an EU member state places a country under binding laws in...

 in 2008. There were considerable differences between the Member States, with the pay gap ranging from less than 10% in Italy, Malta, Poland, Slovenia and Belgium to more than 20% in Slovakia, the Netherlands, Czech Republic, Cyprus, Germany, United Kingdom and Greece and more than 25% in Estonia and Austria.

Gender pay gap over time


Looking at the gender pay gap over time, the United States Congress Joint Economic Committee
United States Congress Joint Economic Committee
The Joint Economic Committee is one of four standing joint committees of the U.S. Congress. The committee was established as a part of the Employment Act of 1946, which deemed the committee responsible for reporting the current economic condition of the United States and for making suggestions...

 showed that as explained inequities decrease, the unexplained pay gap remains unchanged. Similarly, according to economists Francine Blau
Francine D. Blau
Francine Dee Blau is an American economist and professor of economics at Cornell University. Blau was the first woman to receive the prestigious IZA Prize in Labor Economics for her "seminal contributions to the economic analysis of labor market inequality."-Education:Blau graduated from Forest...

 and Lawrence Kahn and their research into the gender pay gap in the United States, a steady convergence between the wages of women and men is not automatic. They argue that after a considerable rise in women's wages during the 1980s, the gain decreased in the 1990s. The 2000s are characterised by a mixed picture of increase and decline. Thus Blau and Kahn assume:
“With the evidence suggesting that convergence has slowed in recent years, the possibility arises that the narrowing of the gender pay gap will not continue into the future. Moreover, there is evidence that although discrimination against women in the labour market has declined, some discrimination does still continue to exist.”


A wide ranging meta-analysis by Doris Weichselbaumer and Rudolf Winter-Ebmer (2005) of more than 260 published adjusted pay gap studies for over 60 countries has found that, from the 1960s to the 1990s, raw wage differentials worldwide have fallen substantially from around 65 to 30%. The bulk of this decline, however, was due to better labor market endowments of women. The 260 published estimates show that the unexplained or discriminatory component of the gap has not declined over time. Using their own specifications, Weichselbaumer and Winter-Ebmer found that the yearly overall decline of the gender pay gap would amount to a slow 0.17 log points, implying a slow level of convergence between the wages of men and women.

According to economist Alan Manning of the London School of Economics
London School of Economics
The London School of Economics and Political Science is a public research university specialised in the social sciences located in London, United Kingdom, and a constituent college of the federal University of London...

, the process of closing the gender pay gap has slowed substantially and women could earn less than men for the next 150 years because of discrimination and ineffective government policies. A 2011 study by the British CMI
Chartered Management Institute
The Chartered Management Institute is a professional institution for managers, based in the United Kingdom.In addition to supporting its members, the organisation encourages management development, carries out research, produces a wide variety of publications on management interests, and publishes...

 revealed that if pay growth continues for female executives at current rates, the gap between the earnings of female and male executives would not be closed until 2109.

United States


In the United States, the gender pay gap is measured as the ratio of female to male median yearly earnings among full-time, year-round (FTYR) workers. The female-to-male earnings ratio was 0.77 in 2009, meaning that, in 2009, female FTYR workers earned 77% as much as male FTYR workers. Women's median yearly earnings relative to men's rose rapidly from 1980 to 1990 (from 60.2% to 71.6%), and less rapidly from 1990 to 2000 (from 71.6% to 73.7%) and from 2000 to 2009 (from 73.7% to 77.0%).

The gender pay gap has been attributed to differences in personal and workplace characteristics between women and men (education, hours worked, occupation etc.) as well as direct and indirect discrimination in the labor market (gender stereotypes, customer and employer bias etc.). The estimates for the discriminatory component of the gender pay gap vary widely although studies always find that some portion of the gender pay gap remains unexplained even after controlling for factors that are assumed to influence earnings.

Australia



In Australia, the gender pay gap is calculated on the average weekly ordinary time earnings for full time employees published by the Australian Bureau of Statistics
Australian Bureau of Statistics
The Australian Bureau of Statistics is Australia's national statistical agency. It was created as the Commonwealth Bureau of Census and Statistics on 8 December 1905, when the Census and Statistics Act 1905 was given Royal assent. It had its beginnings in section 51 of the Constitution of Australia...

. The gender pay gap excludes part time, casual earnings and overtime payments.

Australia has a persistent gender pay gap. Between 1990 and 2009, the gender pay gap remained within a narrow range of between 15 and 17 %. In August 2010, the Australian gender pay gap was 16.9%.

Ian Watson of Macquarie University
Macquarie University
Macquarie University is an Australian public teaching and research university located in Sydney, with its main campus situated in Macquarie Park. Founded in 1964 by the New South Wales Government, it was the third university to be established in the metropolitan area of Sydney...

 examined the gender pay gap among full-time managers in Australia over the period 2001-2008, and found that between 65 and 90 % of this earnings differential could not be explained by a large range of demographic and labor market variables. In fact, a "major part of the earnings gap is simply due to women managers being female." Watson also notes that despite the "characteristics of male and female managers being remarkably similar, their earnings are very different, suggesting that discrimination plays an important role in this outcome." A 2009 report to the Department of Families, Housing, Community Services and Indigenous Affairs also found that "simply being a woman is the major contributing factor to the gap in Australia, accounting for 60 per cent of the difference between women’s and men’s earnings, a finding which reflects other Australian research in this area." The second most important factor in explaining the pay gap was industrial segregation.

Pensions


The European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....

 argues that the gender pay gap has far-reaching effects, especially in regard to pensions. Since women's earnings over a lifetime are on average 17.5% (as of 2008) lower than men's, these lower earnings result in lower pensions. As a result, elderly women are more likely to face poverty: 22% of women aged 65 and over are at risk of poverty compared to 16% of men.

Economy


A 2009 report for the Australian Department of Families, Housing, Community Services and Indigenous Affairs argued that in addition to fairness and equity there are also strong economic imperatives for addressing the gender wage gap. The report found that the gender pay gap has a substantial effect on Australia’s economic performance, measured in terms of GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 per capita, and that the value of reducing the gap is substantial. For example, the researchers estimated that a decrease in the gender wage gap of 1 percentage point from 17 % to 16 % would increase GDP per capita by approximately $260. This equates to around $5,497 million or 0.5 per cent of total GDP, assuming that the Australian population is held constant. The results also indicate that eliminating the whole gender wage gap from 17 % (in February 2009) to zero, could be worth around $93 billion or 8.5 % of GDP. The researchers also estimate that removing the negative effects associated with the prime determinant of the gap, that is being a woman, could add around $56 billion or 5.1 % to total annual GDP.

Anti-discrimination legislation


According to the 2008 edition of the Employment Outlook report by the OECD, almost all OECD countries have established laws to combat discrimination on grounds of gender. Legal prohibition of discriminatory behavior, however, can only be effective if it is enforced. The OECD points out that
"herein lies a major problem: in all OECD countries, enforcement essentially relies on the victims’ willingness to assert their claims. But many people are not even aware of their legal rights regarding discrimination in the workplace. And even if they are, proving a discrimination claim is intrinsically difficult for the claimant and legal action in courts is a costly process, whose benefits down the road are often small and uncertain. All this discourages victims from lodging complaints."


Moreover, although many OECD countries have put in place specialized anti-discrimination agencies, only in a few of them are these agencies effectively empowered, in the absence of individual complaints, to investigate companies, take actions against employers suspected of operating discriminatory practices, and sanction them when they find evidence of discrimination.

In 2003, the U.S. Government Accountability Office
Government Accountability Office
The Government Accountability Office is the audit, evaluation, and investigative arm of the United States Congress. It is located in the legislative branch of the United States government.-History:...

 (GAO) found that women in the United States, on average, earned 80 % of what men earned in 2000 and workplace discrimination may be one contributing factor. In light of these findings, GAO examined the enforcement of anti-discrimination laws in the private and public sectors. In a 2008 report, GAO focused on the enforcement and outreach efforts of the Equal Employment Opportunity Commission
Equal Employment Opportunity Commission
The U.S. Equal Employment Opportunity Commission is an independent federal law enforcement agency that enforces laws against workplace discrimination. The EEOC investigates discrimination complaints based on an individual's race, color, national origin, religion, sex, age, perceived intelligence,...

 (EEOC) and the Department of Labor
United States Department of Labor
The United States Department of Labor is a Cabinet department of the United States government responsible for occupational safety, wage and hour standards, unemployment insurance benefits, re-employment services, and some economic statistics. Many U.S. states also have such departments. The...

 (Labor). GAO found that EEOC does not fully monitor gender pay enforcement efforts and that Labor does not monitor enforcement trends and performance outcomes regarding gender pay or other specific areas of discrimination. GAO came to the conclusion that "federal agencies should better monitor their performance in enforcing anti-discrimination laws."

See also

  • Occupational gender segregation
  • Glass ceiling
    Glass ceiling
    In economics, the term glass ceiling refers to "the unseen, yet unbreachable barrier that keeps minorities and women from rising to the upper rungs of the corporate ladder, regardless of their qualifications or achievements." Initially, the metaphor applied to barriers in the careers of women but...

  • Discrimination
    Discrimination
    Discrimination is the prejudicial treatment of an individual based on their membership in a certain group or category. It involves the actual behaviors towards groups such as excluding or restricting members of one group from opportunities that are available to another group. The term began to be...

  • Economic inequality
    Economic inequality
    Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...

  • Gender gap
    Gender gap
    Gender gap may refer to:*Gender differences in a general psycho-social context*Gender pay gap*Income disparity by gender in a purely economic context*The Global Gender Gap Report*Father's rights in child custody determinations of family courts...

  • Income inequality metrics
    Income inequality metrics
    The concept of inequality is distinct from that of poverty and fairness. Income inequality metrics or income distribution metrics are used by social scientists to measure the distribution of income, and economic inequality among the participants in a particular economy, such as that of a specific...

  • International inequality
    International inequality
    International inequality is inequality between countries . Economic differences between rich and poor countries are considerable...


External links

  • Gender pay gap statistics by Eurostat
    Eurostat
    Eurostat is a Directorate-General of the European Commission located in Luxembourg. Its main responsibilities are to provide the European Union with statistical information at European level and to promote the integration of statistical methods across the Member States of the European Union,...

     of the European Commission
    European Commission
    The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....

  • Visualization of the gender pay gap in the UK across different occupations.