I n t h I s c h a p t e r y o u w I l L

L a b o r a n d W o m e n P u s h f o r E q u a l
P a y f o r E q u i v a l e n t W o r k
B
Y
M
ARY
L
EONARD
W
ASHINGTON
—Nobody says men and
women shouldn’t get equal pay for doing
the same job. But what’s brewing now is
a big push nationally by the president,
organized labor, and women’s rights
groups to level the gender playing field
on wages for different but equivalent
work.
In a strategy session today, Senator
Tom Harkin, an Iowa Democrat who has
been the lonely champion for pay-equity
legislation since 1996, will meet with John
Podesta, the president’s chief of staff,
and other officials on ways the White
House can boost his bill this year. Yester-
day, the AFL-CIO launched a nationwide
campaign to pass comparable-worth bills
in 24 states, including Massachusetts.
What’s going on here? Trying to de-
termine comparable salaries for jobs tra-
ditionally held by men and women is an
old idea, discredited by some economists
as unwieldy, if not downright dumb. They
wonder who can and will decide the eco-
nomic value of a riveter versus a nurse,
the comparable pay for a probation offi-
cer and a librarian, the equivalent pay for
an auto mechanic and a secretary.
Many see pay equity, even if it is dif-
ficult to enforce, as the only remedy for
wage discrimination, a problem that per-
sists for women, even as they have
earned advanced degrees, climbed the
corporate ladder, and plopped their chil-
dren in day care while pursuing full-time
jobs in large numbers. . . .
“For too long, working women have
been seething while politicians have re-
mained silent,” said Karen Nussbaum,
director of the AFL-CIO’s Working
Women’s department. “Pay equity can
right a long-standing wrong.” . . .
Diana Furchtgott-Roth, a resident fel-
low at the American Enterprise Institute,
says there are plenty of reasons why men
and women earn different wages—senior-
ity, job risk, and market demand for cer-
tain skills—that have nothing to do with
discrimination and would not be erased by
“cockeyed” pay-equity laws. She said
when you compare men and women with
the same qualifications doing the same
jobs, women earn 95 percent of men’s
salaries.
“Comparable worth is certainly mak-
ing a comeback,” Furchtgott-Roth said,
“and I believe it’s because feminists who
supported Clinton through the Lewinsky
mess are demanding a political payoff. I
don’t see any Republican support for
these proposals.”
S
OURCE
:
The Boston Globe,
February 25, 1999, pp.
A1, A22.
I N T H E N E W S
The Recent Push for
Comparable Worth
◆
Workers earn different wages for many reasons. To
some extent, wage differentials compensate workers for
job attributes. Other things equal, workers in hard,
unpleasant jobs get paid more than workers in easy,
pleasant jobs.
◆
Workers with more human capital get paid more than
workers with less human capital. The return to
accumulating human capital is high and has increased
over the past decade.
◆
Although years of education, experience, and job
characteristics affect earnings as theory predicts,
there is much variation in earnings that cannot
be explained by things that economists can
measure. The unexplained variation in earnings is
S u m m a r y

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4 3 4
PA R T S I X
T H E E C O N O M I C S O F L A B O R M A R K E T S
largely attributable to natural ability, effort, and 
chance.
◆
Some economists have suggested that more educated
workers earn higher wages not because education raises
productivity but because workers with high natural
ability use education as a way to signal their high ability
to employers. If this signaling theory were correct, then
increasing the educational attainment of all workers
would not raise the overall level of wages.
◆
Wages are sometimes pushed above the level that brings
supply and demand into balance. Three reason for
above-equilibrium wages are minimum-wage laws,
unions, and efficiency wages.
◆
Some differences in earnings are attributable to
discrimination on the basis of race, sex, or other factors.
Measuring the amount of discrimination is difficult,
however, because one must correct for differences in
human capital and job characteristics.
◆
Competitive markets tend to limit the impact of
discrimination on wages. If the wages of a group of
workers are lower than those of another group for
reasons not related to marginal productivity, then
nondiscriminatory firms will be more profitable than
discriminatory firms. Profit-maximizing behavior,
therefore, can act to reduce discriminatory wage
differentials. Discrimination can persist in competitive
markets if customers are willing to pay more to
discriminatory firms or if the government passes laws
requiring firms to discriminate.
compensating differential, p. 419
human capital, p. 419
union, p. 425
strike, p. 425
efficiency wages, p. 425
discrimination, p. 426
comparable worth, p. 432
K e y C o n c e p t s
1.
Why do coal miners get paid more than other workers
with similar amounts of education?
2.
In what sense is education a type of capital?
3.
How might education raise a worker’s wage without
raising the worker’s productivity?
4.
What conditions lead to economic superstars? Would you
expect to see superstars in dentistry? In music? Explain.
5.
Give three reasons why a worker’s wage might be
above the level that balances supply and demand.
6.
What difficulties arise in deciding whether a group
of workers has a lower wage because of 
discrimination?
7.
Do the forces of economic competition tend to
exacerbate or ameliorate discrimination on the basis of
race?
8.
Give an example of how discrimination might persist in
a competitive market.
Q u e s t i o n s f o r R e v i e w
1. College students sometimes work as summer interns for
private firms or the government. Many of these
positions pay little or nothing.
a.
What is the opportunity cost of taking such a job?
b.
Explain why students are willing to take these jobs.
c.
If you were to compare the earnings later in life of
workers who had worked as interns and those who
had taken summer jobs that paid more, what would
you expect to find?
2. As explained in Chapter 6, a minimum-wage law
distorts the market for low-wage labor. To reduce this
distortion, some economists advocate a two-tiered
minimum-wage system, with a regular minimum wage
for adult workers and a lower, “sub-minimum” wage
P r o b l e m s a n d A p p l i c a t i o n s

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C H A P T E R 1 9
E A R N I N G S A N D D I S C R I M I N AT I O N
4 3 5
for teenage workers. Give two reasons why a single
minimum wage might distort the labor market for
teenage workers more than it would the market for
adult workers.
3. A basic finding of labor economics is that workers who
have more experience in the labor force are paid more
than workers who have less experience (holding
constant the amount of formal education). Why might
this be so? Some studies have also found that experience
at the same job (called “job tenure”) has an extra
positive influence on wages. Explain.
4. At some colleges and universities, economics professors
receive higher salaries than professors in some other
fields.
a.
Why might this be true?
b.
Some other colleges and universities have a policy
of paying equal salaries to professors in all fields.
At some of these schools, economics professors
have lighter teaching loads than professors in some
other fields. What role do the differences in
teaching loads play?
5. Sara works for Steve, whom she hates because of his
snobbish attitude. Yet when she looks for other jobs, the
best she can do is find a job paying $10,000 less than her
current salary. Should she take the job? Analyze Sara’s
situation from an economic point of view.
6.
Imagine that someone were to offer you a choice: You
could spend four years studying at the world’s best
university, but you would have to keep your attendance
there a secret. Or you could be awarded an official
degree from the world’s best university, but you
couldn’t actually attend. Which choice do you think
would enhance your future earnings more? What does
your answer say about the debate over signaling versus
human capital in the role of education?
7.
When recording devices were first invented almost 100
years ago, musicians could suddenly supply their music
to large audiences at low cost. How do you suppose this
event affected the income of the best musicians? How
do you suppose it affected the income of average
musicians?
8.
Alan runs an economic consulting firm. He hires
primarily female economists because, he says, “they will
work for less than comparable men because women
have fewer job options.” Is Alan’s behavior admirable or
despicable? If more employers were like Alan, what
would happen to the wage differential between men
and women?
9. A case study in this chapter described how customer
discrimination in sports seems to have an important
effect on players’ earnings. Note that this is possible
because sports fans know the players’ characteristics,
including their race. Why is this knowledge important
for the existence of discrimination? Give some specific
examples of industries where customer discrimination is
and is not likely to influence wages.
10. Suppose that all young women were channeled into
careers as secretaries, nurses, and teachers; at the same
time, young men were encouraged to consider these
three careers and many others as well.
a.
Draw a diagram showing the combined labor
market for secretaries, nurses, and teachers. Draw a
diagram showing the combined labor market for all
other fields. In which market is the wage higher?
Do men or women receive higher wages on
average?
b.
Now suppose that society changed and encouraged
both young women and young men to consider a
wide range of careers. Over time, what effect would
this change have on the wages in the two markets
you illustrated in part (a)? What effect would the
change have on the average wages of men and
women?
11. Economist June O’Neill argues that “until family roles
are more equal, women are not likely to have the same
pattern of market work and earnings as men.” What
does she mean by the “pattern” of market work? How
do these characteristics of jobs and careers affect
earnings?
12. This chapter considers the economics of discrimination
by employers, customers, and governments. Now
consider discrimination by workers. Suppose that some
brunette workers did not like working with blonde
workers. Do you think this worker discrimination could
explain lower wages for blonde workers? If such a wage
differential existed, what would a profit-maximizing
entrepreneur do? If there were many such
entrepreneurs, what would happen over time?

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