Still more on #marilynwaring and economists ignoring home production @waring_marilyn @women_nz



Jon Elster on the lack of gender analysis in the labour theory of value

Time spent in paid and unpaid work across the OECD by gender


Data extracted on 28 Jul 2016 05:17 UTC (GMT) from OECD.Stat via OECD Employment Outlook 2016.

Haggling and the gender pay gap

Geoff Simmons attributes part of the gender wage gap to the reluctance especially among women in high-paying jobs to haggle over pay. These women at the top end of the labour market are more likely to accept the first offer.

This relative reluctance of women to haggle over their pay is important to explaining why the gender wage gap is much larger at the top end of the labour market than at the bottom according to Geoff Simmons. Women have to haggle more if the gender pay gap is to close further.

Haggling over the wage has costs as well as benefits as Richard Epstein explained 20 years ago within a search and matching framework when commenting on a paper written by Carol Rose in 1992:

If one party is known to gobble up virtually all the cooperative surplus, then that party will find it difficult to attract deals. People anticipate getting some portion of the gain and will have a tendency to migrate to other individuals and transactions when they do not have to be ever watchful of their fair share of the gain.

If women have the characteristics that Rose attributes to them, then they would be able to enter more deals and find jobs more easily than men. At this point it becomes an empirical question: whether the greater frequency of deals (or shorter periods of unemployment) offset the tendency to gain a larger share of the profits of any given transaction.

Women will find it easier to get a job because they haggle less and therefore negotiations are less likely to breakdown, which will increase their lifetime income. This reduction in the cost of search because of a greater prospect of a match offset the losses in wages from successful haggling.

Indeed, does not this reluctance to haggle among women make it more likely that employers will hire women and promote the because their reluctance to haggle makes them cheaper. This starts off a competition between employers that will slowly drive up the wages offered to women.

It is also the case that women invest in human capital that is more mobile between the jobs and they are more likely to quit the workforce and return again after motherhood.

The ability to quickly find a job after a career interruption is a competitive advantage rather than a disadvantage.

Men have more specialised human capital and are more likely to stay in one job so they have more to gain from haggling. In comparison, women invest in human capital that is more mobile between jobs because they anticipate downscaling or quitting because of motherhood.

In such a case, it is advantageous to have human capital that appeals to a wide range of employers and become can be quickly matched so that full-time or part-time employment and the associated income stream can start quick as quickly as possible. Workers who changed jobs more often and have shorter job tenures have less to gain and more to lose from haggling and not getting the job at all.

If women do not like to haggle, does this not imply they are less likely to be attracted the jobs with performance pay? Alan Manning investigated this specific question a few years ago.

The propensity of women to seek or avoid jobs with performance pay in a more competitive workplace is an important question because up to 40% of jobs have some form of performance pay which would put women off if they do not like to haggle as Geoff Simmons implies.

Manning used jobs with performance pay in the the 1998 and 2004 British Workplace Employees Relations Survey as a proxy for the level of competition in the workplace.

If Geoff Simmons is right, women should shy away from jobs with performance pay. Women should be less likely to hold these jobs with performance pay, other things being equal. That is precisely the hypothesis that Alan Manning explored. He is a world-class labour economist. What did he find?

We find very modest evidence for differential sorting into performance pay schemes by gender, and small effects of performance pay on hourly wages. Furthermore, and unlike the laboratory studies, we find no significant effect of the gender mix in the job on the responsiveness to performance pay.

We do find some evidence for an effect of performance pay on a measure of work effort in line with the experimental evidence but the bottom line is that a very small part of the gender pay gap can be attributed to these factors.

The gender pay is already tiny in New Zealand and only a tiny part of that can be explained as any reluctance of women to compete in the workforce such as through signing on for performance pay.

Manning found that the gender mix of jobs in occupation is not affected by the presence of performance pay but it should be if women are reluctant to angle and to be competitive as suggested by Geoff Simmons.

The reluctance of women to sign on for performance pay maybe be an aspect of the asymmetric marriage premium and the marital division of effort. Mothers, unlike fathers, cannot afford to go home at the end of the workday completely exhausted if there are children to care for.

Women have a long history of carefully selecting education and other human capital and occupations to anticipate the responsibilities of motherhood and minimising human capital depreciation during the associated career interruptions. Anticipating that motherboard is a lot of work is no stretch on that occupational sorting by women.

That division of effort between the sexes has got nothing to do with the behaviour of employers and everything to do with the marital division of labour. As to what to do about that Richard Posner raised a very good conundrum in a paper from 20 years ago:

The idea the government should try to alter the decisions of married couples on how to allocate time to raising children is a strange mixture of the utopian and the repulsive. The division of labour within marriage is something to be sorted out privately rather than made a subject of public intervention.

Liberal and radical frameless can if they wanted women to stay in the labour force and have no children or fewer children, or, persuade their husbands to assume a greater role in child rearing. Others can search the contrary. The ultimate decision is best left to private choice.

I remember from decades ago a couple at work who were very modern and trying to share the child rearing equally. Their three-year-old daughter was not very cooperative because she found that her mother was much better at braiding her hair than a father. That tantrum by their three-year-old was the beginning of the end of a grand plan.

The role of the six-day working week in Japanese sexism and the gender wage gap

When I was studying in Japan, they were at the end of phasing out working on Saturdays. The staff at my university work on Saturday mornings for four hours and then went home.

The Japanese working week was reduced by law from 48 to 44 hours per week in 1988 and to 40 hours per week from 1993 (Prescott 1999; Hayashi and Prescott 2002). The Japanese stopped routinely working on Saturdays over the 1990s. The number of national holidays was increased by three and an extra day of annual leave was also prescribed by law.

While feuding with strangers on an unrelated matter about the gender wage gap, it somehow occurred to me that the six-day working week might have something to do with what is on the face of a large amount of sexism in Japan and a large gender wage gap.

That feud with strangers was about unconscious bias as a driver of the gender wage gap in New Zealand. The gender wage gap Japan is attributed to conscious prejudice.

Source: OECD Stat.

In the above chart I have plotted the average weekly hours worked of Japanese workers and the Japanese gender wage gap. Two things can be noticed from the above chart:

  1. there is a sharp reduction in the number of hours worked per week by Japanese workers when they stopped working on Saturdays; and
  2. the gender wage gap started declining after the introduction of a five-day working week in Japan.

In a country where it is standard to work six days a week, the price of motherhood would be much higher than in other countries industrialised countries that phased out the 48-hour week decades previous. The asymmetric marriage premium would also be much higher if one partner to the marriage worked a six-day week while the other looked after the children.

Other drivers of the gender wage gap that arise from human capital specialisation and depreciation and from the differences of a few years in the marrying ages of men and women would be intensified if people worked another day per week. The payoff from a marital division of labour and human capital specialisation where one worked long hours and the other focused on investing in human capital that allow them to care for the children and move in and out of the workforce with less human capital depreciation would be much larger.

Much is made of the distinctiveness of Japanese culture and its sexism. In my time in Japan, the thing I notice most distinctively about Japanese culture was its extraordinary pragmatism and willingness to change rapidly. The Japanese economic miracle was founded on rapid industrialisation, innovation and repeated renewal of human capital. That requires an entrepreneurial spirit and open-mindedness.

Cultural and preference based explanations of the gender wage Including that in Japan underrate the rapid social change in the role of women in the 20th century in all countries in all cultures. As Gary Becker explains:

… major economic and technological changes frequently trump culture in the sense that they induce enormous changes not only in behaviour but also in beliefs. A clear illustration of this is the huge effects of technological change and economic development on behaviour and beliefs regarding many aspects of the family.

Attitudes and behaviour regarding family size, marriage and divorce, care of elderly parents, premarital sex, men and women living together and having children without being married, and gays and lesbians have all undergone profound changes during the past 50 years. Invariably, when countries with very different cultures experienced significant economic growth, women’s education increased greatly, and the number of children in a typical family plummeted from three or more to often much less than two.

A good explanation of this rapid social change is in Timur Kuran’s “Sparks and Prairie Fires: A Theory of Unanticipated Political Revolutions” and “Now Out of Never: The Element of Surprise in the East European Revolution of 1989“.

Kuran suggests that political revolutions and large shifts in political opinion will catch us by surprise again and again because of people’s readiness to conceal their true political preferences under perceived social pressure:

People who come to dislike their government are apt to hide their desire for change as long as the opposition seems weak. Because of the preference falsification, a government that appears unshakeable might see its support crumble following a slight surge in the opposition’s apparent size, caused by events insignificant in and of themselves.

Kuran argues that everyone has a different revolutionary threshold where they reveal their true beliefs, but even one individual shift to opposition leads to many others to come forward and defy the existing order. Small concessions embolden the ground-swell of revolution.

Those ready to oppose social intolerance or who are lukewarm in their intolerance keep their views private until a coincidence of factors gives them the courage to bring their views into the open. They find others share their views and there is a revolutionary bandwagon effect.

Plenty of people have had personal experiences of this in the 1980s and the 1990s when there were rapid changes in social and political attitudes about racism, sexism and gay rights. This includes Japan.

In the case of the Japanese gender wage gap, the move from a six-day to a five-day working week radically changed the asymmetric marriage premium and the payoff from investing in both specialised human capital and in human capital that depreciates quickly when away from work.

This large shift in incentives to work and invest in human capital would embolden a change in social attitudes. This is because the previous views were no longer profitable and many would gain from the change. Others who prefer just to go along with crowd would quickly follow them in to stay in tune with whatever is now popular.

Much of Japanese sexism may be the preference falsification that was low-cost when there was a six-day working week. The move to a five-day working week greatly increased the cost of that sexism and the profits from finding new ways of organising the workplace that better matched motherhood and career in Japan.

Undervalued workers are an untapped business opportunity for more alert entrepreneurs to hire these undervalued workers. In the case of Japan, with a five-day working week, hiring women for jobs that involved considerable investment in firm-specific human capital became more profitable. Previously under a six-day working week it was more profitable to invest in men because they undertook few childcare responsibilities. Under a five-day working week, that payoff matrix favours women more than in the past.

The diffusion rates of household appliances in the 20th century

@EconomicPolicy showed gender pay equality when arguing the opposite @CHSommers @Mark_J_Perry

The Economic Policy Institute were good enough to dig out unit record data on the unadjusted US gender wage gap by percentiles. In attempting to show there was a persistent gender pay gap, the impeccably left-wing Economic Policy Institute showed that the unadjusted gender pay gap has all but disappeared in the USA.

There is next to no gender wage gap even in unadjusted terms towards the bottom of the labour market. This is despite all the protestations of the Left of an inherent inequality of bargaining power between the bosses and workers.

The low paid are supposed to be powerless unless unionised. Declining unionisation is a leading explanation on the Left of the rising income shares of the top 10%, top 1% in the top 0.1%.

If that inherent inequality of bargaining power trundled out at every opportunity by the Twitter Left explains anything in the labour market, this inequality of bargaining power should be operating with greatest strength at the bottom of the labour market.

Clearly the inherent inequality of bargaining power between the bosses and workers is not doing its job regarding the gender wage gap. The gender wage gap in the USA increases as you move up the income ladder rather than the other way around.

The explanation of the Economic Policy Institute for greater gender pay equality at the bottom is the minimum wage and male wage stagnation:

It is interesting to note that the wage gap between genders is smaller at the 10th percentile than at the 95th. At the 10th percentile, women earn 91 percent of men’s wages while women make only 79 percent of men’s wages at the 95th percentile.

The minimum wage is partially responsible for this greater equality among the lowest earners—it sets a wage floor that applies to everyone, which means that people near the bottom of the distribution are likely to make more equal wages. Also, low-wage workers are disproportionately women, which means that the minimum wage particularly bolsters women’s wages.

…Although women have seen modest wage gains in the last several decades, the main reason the gender wage gap has slowly narrowed is that the vast majority of men’s wages have stagnated or declined.

It is a bit rich for the Economic Policy Institute to praise the minimum wage as a force for increasing incomes after spending so much of its time saying how the minimum wage has fallen way behind wages growth in general.

The gender gap lingers at the top of the labour market despite the quite substantial wage gains  for women as compared to men over the past 15 years. The Economic Policy Institute dismissed the substantial gains as modest despite their own documenting of them.

It is even richer for the Economic Policy Institute to start extending the male wage stagnation hypothesis to the top 20% and top 10%.

The top of the income distribution has not been known previously known as victims of wage stagnation.

The gender wage gap remains stubbornly high at the top end of the US labour market at 20% for the last few decades. The gender wage is so large and has stayed large at the top half of the labour market  for the past few decades because of compensating differentials. Women on higher incomes are balancing families and careers in choosing the occupations that best suits each individual woman, their talents and educational choices.


Source: OECD Employment Database.

Studies of top earning professionals show that they make quite deliberate choices between family and career. The better explanation of why so many women are in a particular occupation is job sorting: that particular job has flexible hours and the skills do not depreciate as fast for workers who take time off, working part-time or returning from time out of the workforce. Low job turnover workers will be employed by firms that invest more in training and job specific human capital.

  • Higher job turnover workers, such as women with children, will tend to move into jobs that have less investment in specialised human capital, and where their human capital depreciates at a slower pace.
  • Women, including low paid women, select careers in jobs that match best in terms of work life balance and allows them to enter and leave the workforce with minimum penalty and loss of skills through depreciation and obsolescence.

This is the choice hypothesis of the gender wage gap. Women choose to educate for occupations where human capital depreciates at a slower pace. This gender wage gap for professionals can be explained by the marriage market combined with assortative mating:

  1. Graduates are likely to marry each other and form power couples; and
  2. There tends to be an age gap between men and women in long-term relationships and marriages of two years.

This two-year age gap means that the husband has two additional years of work experience and career advancement. This is likely to translate into higher pay and more immediate promotional prospects. Maximising household income would imply that the member of the household with a higher income, and greater immediate promotional prospects stay in the workforce.

This is consistent with the choice hypothesis and equalising differentials as the explanation for the gender wage gap. As Solomon Polachek explains:

At least in the past, getting married and having children meant one thing for men and another thing for women. Because women typically bear the brunt of child-rearing, married men with children work more over their lives than married women. This division of labour is exacerbated by the extent to which married women are, on average, younger and less educated than their husbands.

This pattern of earnings behaviour and human capital and career investment will persist until women start pairing off with men who are the same age or younger than them.

In low-paying jobs, there is little in the way of trade-offs other than full-time or part-time work. Low-paid jobs do not involve choosing majors at university, choosing careers, industries and employers that call for long hours and uninterrupted careers or not so long hours, fewer human capital and promotional penalties for time off and more work-life balance. The choice hypothesis is the far better explanation for the persistence of the unadjusted gender wage gap in  the USA as Polachek explains:

The gender wage gap for never marrieds is a mere 2.8%, compared with over 20% for marrieds. The gender wage gap for young workers is less than 5%, but about 25% for 55–64-year-old men and women.

If gender discrimination were the issue, one would need to explain why businesses pay single men and single women comparable salaries. The same applies to young men and young women. One would need to explain why businesses discriminate against older women, but not against younger women. If corporations discriminate by gender, why are these employers paying any groups of men and women roughly equal pay?

Why is there no discrimination against young single women, but large amounts of discrimination against older married women? … Each type of possible discrimination is inconsistent with negligible wage differences among single and younger employees compared with the large gap among married men and women (especially those with children, and even more so for those who space children widely apart)

The main drivers of the gender wage gap are unknown to employers such as whether the would-be recruit or employer is married, their partner is present, how many children they have, how many of these children are under 12, and how many years are there between the births of their children.

The marital division of labour


South Korean gender pay gap for the 10th, 50th and 90th percentile since 1985


Source: OECD Employment Database.

Men need to get off the sofa and do some housework

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