Daniel Harris 5/04/12 Community Report Theories on Wage Discrimination and Occupational Segregation Substantial research has been conducted proving that occupational segregation and wage discrimination still exist in today's society. Despite recent gains by women and minorities in the field of employment, other factors aside (such as skills, qualifications and education) women and minorities still fall behind men when considering pay and occupational choices. The consequences of such actions are that women are often concentrated in clerical and service jobs which overall result in less pay and opportunities for advancement. Blau, Ferber and Winkler (2001) point out that even though an almost equivalent number of men and women work in professional positions, men are still more likely to be concentrated in lucrative professions including law, medicine and engineering, whereas women are segregated into lower paying positions including teaching and nursing (p. 211). Several different theories lend credence and explanation to occupational segregation and wage discrimination forces. Some are more supply sided in nature while others depend more on institutionalized practices. Human and capital theory for example suggest that women generally anticipate "shorter and less continuous work lives than men" and are generally paid lower at the outset, thus have lower wage penalties for taking time off from work (Blau, Ferber and Winkler, 2001:213). The studies that will be most closely examined in this paper include theories along this line including neoclassical theory and theories opposing this viewpoint including the Institutionalist or Marxist idealisms related to economic theory. Blau, Ferber and Winkler (2001) suggest that occupational or labor discrimination occurs when "two equally qualified individuals are treated differently solely on the bases of their gender" (p. 202; Becker, 1971). This can occur from a variety of factors, and theorists have discussed labor market or economic factors as well as personal ones when evaluating segregation and discrimination. One can reasonably conclude that occupational segregation will adversely affect the economic status of individuals directly, particularly women, by producing differences ineconomic outcomes (Blau, Ferber and Winkler, 2001:202). The neoclassical theory of wage discrimination suggests that discrimination results more from individual actions and preferences than from organizational or institutionalized ones. Neoclassical economists and theorists consider wage discrimination as a form of how "individuals discriminate" and how that discrimination is subsequently "translated" into labor market outcomes (Giempetro-Meyer, 2000:1). Opposing this viewpoint is the institutional theory of discrimination which suggests that institutions in society have "rules and regulations that are discriminatory" even if individuals at those institutions personally do not discriminate (Giampetro-Meyer, 2000:1). A majority of the research conducted on wage discrimination thus far has focused on the direct effects of wage discrimination, including pay and occupational differences between equally qualified men and women (Blau, Ferber and Winkler, 2001:202). These studies indicate that over time, women still earn less than men. Female college graduate for example, are less likely to acquire high paying jobs then men (Shulman, 1992). One form of wage discrimination is wage depreciation, which occurs when a woman has lower "real" wages upon returning to work if she leaves for a period of time and is out of the labor force (England, 1984:727). Blau, Ferber and Winkler point out that the gap in wage differentials between women and men is relatively small at the beginning of most individual's careers; however, given that for the most part if men and women have equivalent qualifications, women still receive pay that is only 60 percent of that which men receive (p. 208). Some of these differences may be the result of choices that worker made, however even after accounting for differences that may be attributed to skill differentials, varying hours worked etc. men still make 13 percent more wages than men (p.208). Neoclassical theory suggests that discrimination can be costly under certain circumstances, and thus employers are discouraged from discriminating against women. This goes along with the idealisms that men and women make the choices that put them place them where they are. In an economy that is not monopolistic in nature, where competition is strong, discrimination is less likely. Important to note here is that individual discrimination may not stem from an employer only however, I may stem from customers. If customers have certain preferences or discriminatory idealisms, and the employer is working in a monpsony type environment where there might be only one customer for a product, than that customer likely has more influence that a variety of customers would (Blau, Ferber and Winkler, 2001: 224). England (1984) performed a study of occupational segregation generating from the neoclassical theory of human capital. In his work, he cites Polacheck who argues that segregation results because women who have intermittent employment maximize lifetime earning by choosing occupations with low deprecation' during the time that they might spend at home. He further argues that men and women choose positions that for financial reasons. Women make decisions that result in higher income early on, whereas men opt for positions that will have the potential for higher income later in their careers (England, 1984:726). Neoclassical economists might argue that segregation results from hiring discrimination that might be motivated from an employer's non- financial preferences (England, 1984:726). Marxist theory slightly differs suggesting that occupational sex segregation is a tool for capitalists use to "divide and conquer workers" and suggest that economic factors including the desire to raise capital play a primary role (England,1984). Marxian and institutionalist economists are more similar in nature and thus the two are compared together. The idealisms associated with Marxist or institutionalist theory are very different from neoclassical theory. Institutionalist or Marxist support the notion that economics is an "interpretive, historically conditioned discipline" which generally opposes the "empiricism and rationalism" that is more often synonymous with neoclassical theory (Shulman, 1992:1). Women and certain ethic groups face the potential for occupational segregation and wage discrimination (lower wages). The trend seems to be universal, not limited to individuals working in the United States. A study conducted of average gross annual earnings of full time employees in Great Britain for example, showed that regardless of the position an individual worked in, men continuously earn more than women (RHUL, 2003). Though many differences can be explained by historical factors, culture, skill and labor supply, inequalities still exist outside of these factors. Neoclassical theories tend to suggest that preferences or prejudices and statistical information relate to discrimination and segregation. The primary differences between neoclassical theories and Intitutionalist related to both occupational segregation and wage discrimination are outlined in the chart below. Gender preferences may indeed play some role in occupational segregation between men and women. Institutionalist theory would primarily support the notion that institutionalized difference play a role in occupational segregation. For example, historically men have come to expect higher wages, thus an organization should automatically assume that then need to pay male workers more than female worker for the same job. Thus a firm might expect to pay women less for performing the same job. This is not a result of individualized discrimination, but rather a result of historical practices that have become the standard rather than the exception to the rule. Becker points out that an organization will higher a woman only if the cost of hiring a woman is less overall than the cost of hiring a man (Blau, Ferber and Winkler). Neoclassical theorists would suggest that historically women have made choices that have influenced the types of jobs that they come into. They choose to enter fields that pay lower overall than men. Some of their choices might be related to their preference for working fewer hours than men. The true answer is perhaps a combination of the two. Personal preferences likely do have some impact on an individual's selection for future wage potential and occupational success. However, if you take two people, a man and a woman, raise them exactly the same, give them the same credentials and identical skills, it is still very likely that the man will end up in a position with greater potential for high wages over time than females. This can be attributed to institutional factors. Changes to institutional factors are slow in coming, and often require major interventions from authoritative figures. Thus, one must examine the question: should women consider working in self employed occupations only in order to completely avoid wage discrimination and occupational segregation' The neoclassical theory would support the idea that by doing so women will ultimately realize equivalent success. Because individual behaviors and personal decisions under neoclassical theory suggest the potential for success, a woman setting out on her own would likely do well if the right choices are made. Unfortunately, the Marxist or institutionalized economic theorists might point out that because segregation and discrimination are institutionalized, discrimination might still occur. For example, a largercorporation might be more willing to conduct business with a male self employed business owner than a female business owner. This would be an interesting venue to examine in the future. Women might be more likely to realize personal satisfaction if they are self employed. Self employed women may be just as likely to pursue endeavors that will result in higher profit margins as men would in this type of environment. Research has steadily shown that segregation and wage discrimination still are common against women in the United States and abroad. Depending on the school of though, these differences may be attributed to individual preferences or institutional considerations. The reality is however, that a combination of both exists. Institutionalized factors for example, may influence women's personal preferences to select lower paying occupations or those occupations in certain fields including clerical and service oriented positions. Neoclassical or supply sided theories might undermine the importance of the influence the labor market has on the roles and personal decisions women make related to their careers. Likewise institutionalized theorists may neglect to consider their impact on personal preferences. One cannot happen without affecting the other. For example, institutional practices that are discriminatory in nature may serve to reinforce traditional gender roles and idealism's held by men and women. One the same note women's and men's personal choices and preferences may also reinforce cultural and institutional norms. Thus as Bauer, Ferber and Winkler suggest a vicious cycle commences, whereby segregation and discrimination continue. Women may indeed be better off in self employed positions. One thing that may be concluded is that without official intervention, change is likely to be slow in coming.

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American Business Law Journal, Vol. 37 Shulman, S. (1992). "Metaphors of Discrimination: A Comparison of Gunnar Myrdal and Gary Becker." Review of Social Economy, Vol. 50 RHUL. (2003). "Discrimination." {Online}Available: