EMPLOYMENT RELATIONS IN AUSTRALIA

Gender-Wage Gap in Australia

Introduction:

Gender-wage gap is ubiquitous in almost all countries of the world, and Australia is not an exception. Research has established the fact that gender-wage gap exists in Australia (Borland, 1999; Miller, 1994). Fig.1 depicts the gender-wage gap in Australia in the period 2000-2009.

Fig.1 Gender Wage Gap over 2000-09 (Source: Cassels et al., 2009)

Baron and Cobb-Clark (2010) have shown that the gender-wage gap exists across industries in public as well as private sectors, with it being more prominent at the high-wage and low-wage segments. The existence of this gap has led to a lot of research about the factors that give rise to it. Some of the major explanation theories include discrimination, personality traits, occupational segregation, reward structures, productivity-related characteristics etc. (Cassels et al., 2009).

The Australian women face an advantageous situation at the lower and middle wage levels, with the women in high-paid jobs facing disadvantage (Baron and Cobb-Clark, 2010). Thus, it is not wrong to assume that in general gender differences are advantageous for women (except those in high-paid jobs), and hence, rule out discrimination as a cause for gender-wage gap.

Gender-wage gap depends on the different job preferences between males and females, encouraged by their different personality traits. The two important explanations for the existence of the gap discussed in the essay are Occupational Segregation and Personality Factors, assuming discrimination is not a reason for the gender-wage gap. The following sections discuss these two explanations and also establish a link between the two.

Occupational Segregation and Gender-Wage Gap:

The Occupation Segregation is explained through many theories like the Human Capital theory, Labour Market theory, Feminist theory etc. (Watts, 2003). Human Capital theory says that the different choices in occupation, and hence the associated wages, can be attributed to personal decisions on the part of males and females based on different gender roles in the society and reproductive processes (Watts, 2003).  Occupational Segregation dismisses the idea of discrimination as the reason for gender-wage gap.

According to an experiment conducted by Baron and Cobb-Clark (2010) using HILDA data, there exists clear occupation segregation in Australia in both public and private sectors. Women percentage is seen to be high in jobs like intermediate and advanced clerical, sales and service workers and professionals like teachers and nurses; Men are seen to dominate in Managerial and administrative positions, and have higher percentage than women employees in intermediate production and transport works and trading (Baron and Cobb-Clark, 2010).

Human Capital theory explains the above described segregation through the following arguments: Due to different roles in the reproductive processed and social upbringing, men and women have different job preferences. Women prefer to go for a job that has convenient working hours to take care of their family, hence, many opt for part-time and work-from-home job options. Women also take less training as they expect to have short work life; they go for jobs where interruptions to the jobs are not costly (Watts, 2003). Women also prefer to work in jobs which involve less physical strength and risk-taking.

The question to be addressed here is how occupational segregation accounts for gender-pay gap. Due to the occupational segregation, men and women are required different skill sets. The pay is generally a function of skill sets, work-hours, and riskiness of the job. As seen from the results of experiment carried out by Baron and Cobb-Clark, women are in clerical jobs which require low skill sets, and hence involve less pay. Men are essentially found to dominate in production-related jobs, where the pay is good as well. Women are mostly confined to the middle-wage level jobs, while men are distributed almost throughout, with thembeing present in higher managerial and administrative positions which have high pay-structures. Hence, the wage gap exists among males and females, not due to discrimination, but due to inherent job choices.

However, Occupational Segregation theory doesn’t explain why gender-wage gap exists in similar jobs. Men and Women working in the same job category are often assigned different job titles which have a great bearing on the pay and status (Harrison, 2002).

Personality traits and Gender-Wage Gap:

It is a well-known fact, corroborated by various literature, that men and women have different personality traits and non-cognitive skills (Browne, 2006; Cobb-Clark and Tan, 2009; Mueller, 2006; Nyhus and Pons, 2012). Two personality factors used for explaining the difference in wages are: Locus of Control or personal self-efficacy and Time preference (Nyhus and Pons, 2012). Personality traits govern many important job-related behaviors: Personality can influence the choice of jobs, productivity, and hierarchy negotiation tactics at workplace, thereby influencing the wages (Nyhus and Pons, 2012). Even for similar jobs, the rate of progress of males and females upwards in the organizations is very different.

On studying the big-five traits in men and women, it was seen that women have more extraversion, agreeableness, and conscientiousness. On the other hand, men are found to have less extraversion, and more of emotional stability, and openness to experience (Nyhus and Pons). These traits are differently valued by employers, with the traits ‘openness to experience’ , ‘emotional stability’ and ‘ working with a future outlook’ valued more for high-skill jobs; and traits like ‘agreeableness’ and ‘extraversion’ used for low-skill jobs. Thus, women, even if having interests in performing administrative work may not be preferred by the employers. The wage gap thus arises.

There have been some interesting developments in the literature regarding the link between occupational segregation and personality, which have combined effect on the gender-wage gap. Personality differences in males and females arise because of evolved sexual differences (Bowne, 2006). Hormones and social upbringing play a great role in personality. From the very beginning, females are associated with child-bearing and rearing responsibilities. Males, on the hand, have to be aggressive and competitive to secure a partner for the extension of family (Browne, 2006). This has resulted in women to be more caring, social, and risk-avoiding. Men, on the other hand, are competitive and show a great preference for risk (Browne, 2006). Moreover, the social upbringing also results in personality differences. Boys are given cars and guns to play with, while girls are given dolls to encourage their nurturing skills.

The difference in personality results in different preferences for job and different goals in life for men and women resulting in different career trajectories and hence, the wage gap

Conclusion:

Although a lot of literatures do suggest that discrimination is a reason for gender-wage gap (Borjas, 2010), however, it is strongly believed that in today’s age, Australian women are more advantaged than their men, with exception of women at higher-paid jobs. Hence, discrimination cannot be used for explaining the wage-gap. On the other hand, today, men and women have the freedom to decide their jobs, which is dependent to a lot of extent by their personality traits, and personal requirements. However, similarity in thinking among the same gender species has resulted in men coveting high-skill jobs and women going for lower-skill jobs have people aspects. Occupation segregation has been observed in intermediate and high-skill jobs. This unequal distribution of men and women in different jobs in different sectors results in different wages for them, and hence, the gender-wage gap continues to exist in Australia.

(Word Count excluding references: 1210)

References:

Baron, J.D. and Cobb-Clark, D.A. 2010, ‘Occupational Segregation and the Gender Wage Gap in Private and Public-Sector Employment: A Distributional Analysis’, the Economic Record, vol. 86, no. 273(June), pp. 227-246.

Borjas, G. 2010, Labour Economics, McGraw Hill Irwin, 5^thed.

Borland, J 1999, ‘The equal pay case — thirty years on’, Australian Economic

Review, vol. 32, no. 3, pp. 265–72.

Browne, K.R. 2006, ‘Evolved sex differences and occupational segregation’, Journal of Organization Behavior, vol. 27, pp. 143-162, Viewed on 1 May 2012, Available at http://faculty.law.wayne.edu/browne/Documents/Articles/Evolved%20Sex%20Differences%20and%20Occupational%20Segregation_Browne.pdf

Cassells, R., Vidyattama, Y., Miranti, R. and McNamara, J. 2009, ‘The impact of sustained gender wage gap on the Australian economy’, Report to the Office for Women, Department of Families, Community Services, Housing and Indigenous Affairs, Viewed on 1 May 2012, Available at http://www.eowa.gov.au/Pay_Equity/Pay_Equity_Information/NATSEM%20Report%2020101%20impact_of_gender_wage_gap[1].pdf

Cobb-Clark, D. and Tan, M. 2009, ‘Noncognitive Skills, Occupational Attainment, and Relative Wages’, Discussion Paper No. 612, The Australian National University Centre for Economic Policy Research.

Harrison, J. 2002, ‘Gender Segregation in Employment in Australia: A workplace perspective’, Working Paper No. 186, Murdoch University.

Miller, P 1994, ‘Effects on earnings of the removal of direct discrimination in minimum wage rates: a validation of the Blinder composition’, Labour

Economics, vol. 1, pp. 347–63.

Mueller, G. 2006, ‘Estimating the effect of personality on male and female earnings’, Industrial &Labour Relations Review, vol. 60, no. 1

Nyhus, E.K. and Pons, E. 2012, ‘Personality and the gender wage gap’, Applied Economics, vol. 44, no. 1, pp. 105-118

Watts, M. 2003, ‘The Evolution of Occupational Gender Segregation in Australia: Measurement and Interpretation’, Australian Journal of Labour Economics, vol. 6, no. 4(December), pp. 631-655.

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