An economic perspective What is the gender pay gap and what does it mean for the New Zealand economy? Prue Hyman

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1 CLEW Seminar May 2015 Achieving Pay Equity What needs to happen? An economic perspective What is the gender pay gap and what does it mean for the New Zealand economy? Prue Hyman

2 NZ Gender Pay Gaps Background horizontal and vertical occupational segregation and insecure work Women work part time much more than men (33% of women v 13% of men) Part time 1 hr or more women are 75% of part time workers Part timers have lower hourly rates on average than full timers median June 2014 $16.96 pt, $23.44 ft. Full time is 30 hrs or more per week Disparities AMONG women (and men) on the basis of other factors, particularly ethnicity, major and widening Maori, Pacific well below Pakeha

3 Various measures of gender earnings gaps, June 2014 quarter Income Survey Median hourly, full time only 6.0% Median hourly, pt/ft 9.9% Mean hourly, pt/ft 13.9% Median weekly ft 14.3% Mean weekly ft 18.4% Mean weekly pt/ft 25.1% Median annual personal income from all sources all adults 36.7% Men constitute over two thirds of those in the top 20% of incomes and the longer the period, the wider the gap. Means (average) show wider gaps than medians (half way point) because of influence of high incomes (right skewed), mainly men Trying to summarise any overall relationship or difference between two distributions by just one measure is problematic. Gillian Whitehouse s review of gender and pay equity internationally is apposite: As wage dispersion increases, trends in measure of central tendency (means and median) become increasingly inadequate indicators of labour market developments... There is a need to focus on both absolute and relative measures of earnings..., and to move beyond reliance on measures of central tendency to observations across the full wage distribution and to investigate trends at disaggregated levels (Gillian Whitehouse, 2003).

4 Gender Pay Ratios over time Hourly Earnings (thanks to Linda Hill and CEVEP)

5 HOW MUCH OF GENDER EARNINGS GAPS ARE DUE TO DISCRIMINATION? Partly judgement concept and measurement highly contentious. Disagreement over factors responsible for earnings gaps and proportions justified by non discriminatory factors but discrimination does not have to be deliberate direct and indirect discrimination by gender, race, other factors. Wage discrimination v other forms in labour market For orthodox economics, wage discrimination occurs if workers of equal productivity to an employer are paid unequally but how are productivity and skill assessed? By the market? Circular argument if markets believed perfect. If female dominated work is undervalued by the market, as feminists argue, equal pay for work of equal value policies are needed and justified Statistical fitting of earnings functions attempt to decide what proportion of gender earnings gaps are due to differences in human capital endowments/ what proportion to difference in returns to those endowments ambiguous results and fraught with problems/ different interpretations and judgements cannot yield unchallengeable answers on the extent even of direct wage discrimination, let alone overall discrimination. Individual productivity is unknown and variable" (Lester Thurow).

6 How can gender earnings gaps be narrowed? Gender wage gaps will narrow as women s human capital builds up. They will widen if the extent of collective and centralised bargaining falls, if the minimum wage fails to keep pace with average earnings and if overall relativities increase, so the proportion of low paid workers increases. The first has helped and the rest have hindered progress on the gender gap in NZ for 30 years as trade union power has been eroded. General policies (eg labour market deregulation) overall probably have more impact on women s progress (or lack of it) and gender gaps than specific policies aimed at reducing gaps. Hence living and minimum wage etc as important as gender pay equity for narrowing the gaps work on all fronts The MOBIE estimated in 2013 that 84,800 workers were on the minimum wage and 573,100 workers on less than the Living Wage women, Maori and Pacific overrepresented. I have concentrated on issues for lower paid groups of women matters more (to me anyway) than individual negotiations for higher paid women but of course there is discrimination there too

7 What do gender pay gaps mean for the New Zealand economy? Hard question! All international agencies now pay lip service at least to gender equality generally and in the labour market in the name of efficiency (and for some, equity) for example Gender equality is a core development issue... It strengthens countries abilities to grow, to reduce poverty and to govern effectively (World Bank, 2001) 2014 meeting of the Commission on the Status of Women investing in women and girls has a multiplier effect on productivity, efficiency and sustained economic growth women s economic independence is vital to their role as full and equal partners for development and essential to the achievement of the (MD) Goals, including the eradication of poverty More concretely, increasing pay of underpaid women has an immediate cost (unless men s pay lowered) but slong term gain if wages do not reflect productivity, they will distort allocation of resources and be inefficient. And seeing wages as a price or cost is only one limited aspect wages are also an investment, provide the ability to live and are a social practice (Mutari et al, 2001). Efficiency wage theory increasing wages can increase productivity, reduce turnover and hiring/ training costs etc See Prue Hyman, 2015 Is active intervention still needed to improve the position of women in the New Zealand labour market? If so, what can be done?, Policy Quarterly, 11 (1) pp 3 10 and my forthcoming book on women in the labour market in the BWB text series