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10 Women's Pay in Australia, Great Britain, and the United States. The Role of Laws. Regulations, and Human Capital R. G. GREGORY, R. ANSTIE, A. DALY, and V. HO The 1970s were a remarkable time for women. Labor force participation rates in- creased markedly throughout the Organi- zation for Economic Cooperation and De- velopment (OECD) (Mincer, 1985), an(1 in most OECD countries the pay of women relative to that of men increased signifi- cantly. Two of the largest changes in the pay ratio occurred in Australia and Britain (Figure 10-1~. In Australia women's pay increased 30 percent relative to that of men. In Britain the pay ratio increased about 20 percent. The United States seems to be an exception to the general trend in that the relative earnings of women did not in- crease. ~ At the beginning of the 1970s, the ratio of women's to men's earnings, which we will call the female earnings ratio, was sim- ilar in Australia and the United States. Women in Britain fared relatively worse. By the end of the decade Australia hacT joined those countries that pay women well, PA more detailed discussion of the U.S.-Australian comparison can be found in Gregory and Ho (1985~. The British-Australian analysis is developed further in Gregory et al. (1986~. 222 relative to men; Britain had caught up to the United States, but both ranke(l Tow among countries groupe(1 by the female earnings ratio. A considerable amount can be learned from comparing the three labor markets, which encompass the range of ex- periences of the clecade. We focus on three sets of questions. First, why is the female earnings ratio so (li~erent in the three countries? In 1981, for example, adult women who worked full time in Australia earned about 79 percent of the fulI-time average earnings of men. In Britain and the Uniter] States the female earnings ratios were about 64 an(1 60 per- cent, respectively. How much of these dif- ferences can be explained by human capital models? Second, why was it that two of the coun- triesBritain and Australia exhibited su(l(len and sharp changes in female pay? What explains the speec] of the changes and their extent? What has been the role of equal pay laws and regulations? These ques- tions are acl(lressed by assessing the im- portance of institutions. Third, what are the relationships between changes in the female earnings ratio an

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WOMEN'S PAY 80 75 70 o i: . 223 r 60 55 - 50 I I . , 1966 1968 1970 If._. ',''- ~ ;=;~- United States Britain 1972 1974 1976 YEAR 1978 1980 1982 1984 1986 FIGURE 10-1 Ratio of female to male average weekly earnings. Notes: Australia: Average weekly earnings for full-time (more than 35 hours) adult nonmanagerial employees in the private sector. Australian Bureau of Statistics, warnings and Hours of Employees, Cat. No. 6304. United States: Median usual weekly earnings for full-time (more than 35 hours) wage and salary workers, May 1967 to May 1978, and second quarter, 1979 to 1983. U.S. Department of Labor, Bureau of Labor Statistics, The Female-Male Earnings Gap: A Review of Employment and Earnings Issues. September 1982. Report 673, pp. 9-10. Washington, D.C. Great Britain: Average weekly earnings for full-time (more than 30 hours) males age 21 and over and females 18 and over. Department of Employment, The New Earnings Survey. London. changes in the employment and unem- ployment of women? What can we learn about supply and demand elasticities for female labor from a comparison of countries with such different wage experiences? We address these questions in a discussion of employment and unemployment in the three countries. RELEVANCE OF THE HUMAN CAPITAL MODEL Method of Analysis There are many reasons why men and women are paid at different rates within a country. These reasons may include differ- ences in the quality of workers, the clistri- bution of workers across industries and oc- cupations, the (legree of pay (discrimination against women, and the relative deman(l an(l supplies of labor. The usual way to measure the contribution of these factors is to fit earnings equations to the data for each sex. The most common earnings equations adopt a human capital framework an(l hy- pothesize that the differences in the earn- ings of men and women can be explainer! primarily in terms of differences in human capital, as measure(1 by years of schooling, work experience, marital status, and so on (Mincer, 1974; Oaxaca, 19731. For simplicity, we can add the male and female earnings equations that are (derived

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224 from human capital theory and form one equation, which can be written as n n Ei = ~ Bj Xij +~. ~ ~jXtF + Ui j- 1 (1) where Ei is the log of the earnings of the ith person and Xj are human capital and experience variables. The superscript F re- fers to female individuals. Consequently, male workers earn Bj for each attribute and female workers (Bj + Jo. Ui is an error term. Once Equation (1) is fitted to the `data the earnings gap between males and females is usually decomposed into two components; one component is attributable to the dif- ference in human capital endowments of men and women, the X variables, and the other component is attributable to the dif- ference in the estimated coefficients for men and women, OFF. With the information de- rived from the estimation of (1) the female earnings ratio can be written as n E F EM = ~ B (XF XM) n + ~ X Tj j=1 (2) where the superscript M refers to males. The first term on the right-hand side of (2) captures the contribution of the difference in endowments, an(l the second term cap- tures the contribution of the difference in coefficients. As a general rule, both (differences in endowments and differences in coefficients are important contributors to the earnings gap. The contribution of endowment dif- ferences is explained in the context of the human capital model. Human capital en- clowmer~ts generate labor productivity in the marketplace, and to a large extent, workers choose the optimal amount of hu- man capital that they wish to invest. Women are paid less, according to this theory, be- cause they invest less and are therefore less productive. PAY EQUITY: EMPIRICAL INQUIRIES The contribution of coefficient differences to the earnings gap is not explained by the human capital mo(lel. This effect is usually referred to either as pay discrimination, to be explained largely by noneconomic fac- tors, or within the human capital framework, as a measure of our ignorance of the factors that cause the earnings gap. This ignorance is usually assumed to stem primarily from two sources: mismeasurement, as a result of data deficiencies, and omission of relevant variables from the regression equation. . Over the past decade, considerable work has been ~lone, particularly in the United States, to exten(1 the list of variables that may be included in regression equations, such as Equation (1), an(1 to refine the data so that the contribution to the earnings gap of the (differences in coefficients, the unex- plaine(1 contribution, is reduced. At this stage, however, progress has been slow in the United States so that the contribution of the differences in coefficients to the earn- ings gap is still usually around 50 percent (Blau and Ferber, 1986:233, 235; Daymont and Andrisani, 1984~. In Britain and Aus- tralia the (differences in coefficients also con- tribute to at least half of the earnings gap, although the size of the gap is very different in each country (see Greenhalgh, 1980, for Britain; Chapman and Mulvey, 1986, for Australia). In Britain the earnings gap is similar to that for the United States. In Australia the earnings gap is very small. The human capital approach for explain- ing the female earnings ratio within a coun- try may also be used to explain differences across countries (Gregory and Ho, 1985~. In each country, for example, the estimated coefficients may be similar, but the earnings gap may be generated by differences in the relative endowments of human capital. A1- ternatively, there may be the same relative stock of human capital endowments of men and women in each country, but the relative rewards for the endowments of men and women may be different. In the latter case the human capital model would have noth-

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WOMEN'S PAY ing to contribute to explaining the difference in the female earnings ratio across countries. What would be needed is a theory to explain why the coefficients are different in each country. To use the human capital mode! to explain the different pay ratios across the countries, our analysis would proceed in the following steps: 1. Fit earnings equations for men and women in each country; see Equation (1~. 2. Calculate the female earnings ratio from Equation (1) and derive the differences in the ratios between the countries. The differences provide the cross country earn- ings gaps to be explained. If the female earnings ratio is 66 percent in Britain and 78 percent in Australia, for example, we would attempt to explain the 12 percentage points difference. 3. Calculate the contribution of differ- ences in relative endowments of men and women to the cross country earnings gaps. This might be best explained by considering two countries, say Britain and Australia, for which we have identified in step 2 a cross country earnings gap of 12 percentage points. In step 3 we substitute the average endow- ments of male and female workers in Britain into the Australian earnings equation to derive the earnings of British workers if they were paid according to the Australian pay structure. A comparison of this hypo- thetical British earnings ratio with the Aus- tralian earnings ratio will provide a measure of the contribution to the cross country earnings gap of the different relative en- clowments of men and women (that is, the calculation for Britain and Australia uses identical coefficients taken from the Aus- tralian equation). For example, if the hypothetical British earnings ratio and the Australian earnings ratio were equal, then we would know, on the basis of the Australian coefficients, that the cross country earnings gap cannot be explained by the different relative endow- 225 meets of men and women in each country. All the earnings gap would be explainecl by the difference in coefficients in each coun- try. In this instance, the human capital theory would make no contribution to an explanation of the cross country earnings gap. The calculations of step 3 can be re- peated using the coefficients of Britain. 4. Finally, find the difference between the original British earnings ratio, calculated from the British equation, and the hypo- thetical ratio, using the Australian coeffi- cients. This residual might be interpreted a number of ways. It might be interpreted as the difference between the two countries in the level of pay discrimination against women. Alternatively, it might be inter- pretecl as the outcome of different biases in the coefficients of each country. These biases may have arisen either by variables being omitte(l from the regression equations or from the mismeasurement ofthe incluclec] variables. Results from the Earnings Equations The sample is restricted to full-time wage and salary earners. The Australian data (N = 17,100), for workers aged 15 to 54 years gill, are drawn from the 1981 House- holds Sample File of the Australian Bureau of Statistics' Census of Population and Hous- ing (Australian census). The British data (N = 7,018), for workers aged 16 to 54 years, are drawn from the 1981 General Househoicl Survey ((lata tape available from Her Maj- esty's Stationery Office, London). The U. S. (lata (N = 13,949) are from the March 1982 Current Population Survey (data tape avail- able from Bureau of the Census) and refer to the labor force status of individuals in 1981. The regression equations are as in Equa- tion (1), with the addition of a constant term. The dependent variable is the natural log of weekly earnings. We use weekly earnings because the Australian data do not provide good estimates of hourly earnings.

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226 In each country a fulI-time worker is em- ployed 35 hours or more per week. The coefficients of Equation (1) are interpreted as the percentage changes in earnings in response to a one-unit increase in the value of the inclependent variable. The constant terms measure the average Tog of weekly earnings of a male high school graduate, of urban residence, never mar- ried, working full time, and in his first year in the labor market. The coefficients for the variables estimate the additional payoff for men over and above the constant term. Thus, an estimate of the average earnings of a male university graduate, with all the other attributes included in the constant term, is given by the acIdition ofthe constant term to the estimated coefficient, B. at- tached to the graduate dummy variable. The estimated earnings of a female univer- sity graduate, with all the other attributes of the constant term, is given by the addition of the constant term to the sum of the university graduate coefficients B and By. By presenting the data in this way the t statistics for the It's indicate whether the female coefficients are significantly different from the male coefficients. (The definitions of the variables are given in the appendix.) The individual coefficients from the earn- ings equations for each country are mostly as expecter] and will not be discussed in any detail (Table 10-1~. Among full-time workers in each country those with more education earn more. Women also earn less than men in each educational category.2 Other coefficients indicate that married women earn less than married men, and women with children earn less than those without children. For the workers of each country more potential experience increases earnings and, once again, there is a differ- 2The British sample is not as large as that for Australia, and in some cells the sample size is quite small. This may explain why the female coefficients in the higher education categories are not significantly different from those of men. PAY EQUITY: EMPIRICAL INQUIRIES ence between men and women. For women, the earnings experience profile is less steep. One difficulty that we share with many other researchers (e.g., Johnson and Solon, 1986) is that the experience variable is not correctly measured. We use potential ex- perience (age minus years of school minus six). The correct measure would be actual experience but such data are not available for cross country comparisons. The use of potential experience limits our ability to make comparisons between men and wom- en within a country, because for women as a group actual experience is so much less than potential experience. Across countries, however, the problem should be much less serious in that relative to males the over- statement of female experience in each country should be similar.3 In other words, there should be a close correlation across countries in the ranking of the unobserved ratios of actual experience of men ant! wom- en and the ratios of potential experience that are used in our calculations. The fit of the earnings equations is similar in each country; the R2 is .49 for Britain, .46 for Australia, and .36 for the United States. Our first conclusion, therefore, is that within each country, and at a point of time, the human capital mo(le} seems to perform reasonably well, and to a similar degree, as an explanation of the variation of earnings among men and women. Within each country, however, the coefficients at- tache`d to the human capital variables are different for each sex. As inclicated earlier, other studies suggest that the human capital model, on average, can explain only about half of the pay gap within each country. We now turn to an investigation of the 3There are some differences in labor force partici- pation rates for women across the countries, and a more extensive study would attempt to take those differences into account, especially because they may affect the gaps between potential and actual experience. At this stage, however, we do not believe that our inability to measure actual experience is a significant source of error.

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WOMEN'S PAY cross country earnings gaps. The basic data are presented in Table 10-2. Row 1 lists the calculated earnings ratio in each country using the coefficients from the British earn- ings equations but the own endowments from each country. Similarly, the data listed in row 2 are derived from the U. S. earnings equation, and those in row 3 from the Australian equation. The cells along the principal diagonal represent the earnings ratio calculated for each country using its own regression equation. A comparison of these numbers produces the earnings ratios to be explained. The earnings gaps relative to Australia are listed in row 4. Proceeding down the principal diagonal, the first point to emerge from Table 10-2 is the similarity of the earnings ratios be- tween the United States and Britain. On the basis of these data, female workers in Britain earn 64.2 percent of the average weekly earnings of mates; in the United States the ratio is 61.7 percent. This pro- cluces a relatively small earnings gap of 2.5 percentage points between Britain ant! the United States. The second point to emerge is that Aus- traTia is obviously different. Women are relatively well paid compared with their U. S. and British counterparts. The earnings gap between Australia and Britain is lS.1 percentage points; between Australia and the United States, 17.6 percentage points (row 4~. Finally, the human capital endowments of women, relative to those of men, seem to be much the same in each ofthe countries. This is illustrated by the fact that there is little difference in the earnings ratios across the columns. Proceeding across row 1, for example, if workers with the average level of endowments of U.S. workers are paid according to the British pay structure, then the female to male ratio of average weekly earnings would be 64.0 percent, an earnings ratio very similar to that in Britain. Simi- larly, male and female workers with the same level of endowments as the average 227 of Australian workers, when paid according to the British pay structure, wouIc] receive an earnings ratio of 68.6 percent, again a ratio quite close to that of Britain. This fincling, that the human capital en- clowments of women, relative to those of men, are similar in each country, is a general one. It holds whichever set of country coef- ficients is used to calculate earnings. For example, if British ant] American workers were paid according to the Australian pay structure (row 3), their earnings ratios would be 76.3 and 77.6 percent, respectively. These are earnings ratios that are quite close to those prevailing in Australia. It follows from the fact that the relative endowments of human capital are so similar across countries that most of the difference in relative earnings, especially with regard to the difference between Australia and the others, flows from differences in coefficients an(l not from (li~erences in enclowments. Our second major conclusion is that the simple human capital model, as usually specified, cannot explain the difference in earnings ratios across countries. Only a small fraction of the earnings gap between Aus- tralia, on the one han(l, and the Unite States and Britain, on the other, can be explained by different endowments of hu- man capital. The next major question, therefore, is why is Australia different? Why does Aus- tralia pay women so well?4 To answer these questions it is necessary to provi(le some institutional background to the Australian 4Some of the difference in the earnings ratios across countries might be explained by differences in the average hours worked by men and women in each country. From other data sources (see Gregory and Ho, 1985: footnote 10), it is apparent that the ratio of full-time weekly hours worked by men and women is much the same in Australia and the United States. In Britain, women's hours relative to men's hours are lower than in the other two countries, so some ad- justment should be made for this fact. The adjustment required, however, does not seem to change the results to any significant degree (see Gregory et al., 1986:11~.

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Measure Australia 228 PAY EQUITY: EMPIRICAL INQUIRIES TABLE 10-1 Earnings Equations for Australia, Great Britain, and the United States (standard] errors in parentheses) Great Britain United States Educationa Dropout 0.1463 - 0.1433 - 0.3053 (.0086) (.0145) (.0107) High school Postsecondary 0.0663 0.0015 0.1228 qualifications (.0091) (.0167) (.0098) 0.2213 0.2106 (.0130) (.0178) University degree 0.4664 0.4368 0.3035 (.0121) (.0248) (.0107) Postgraduate degree 0.6011 0.6382 0.3791 (.0220) (.0504) (.0114) Female x dropout 0.0717 - 0.1135 - 0.0705 (.0159) (.0252) (.0258) Female x high school - 0.0700 - 0.1192 - 0.1375 (.0127) (.0247) (.0220) Female x postsecondary 0.1883 - 0.1448 - 0.1128 qualifications (.0364) (.0440) (.0232) - 0.1616 - 0.0727 (.0200) (.0296) Female x university 0.0861 - 0.0381 - 0.1265 (.0201) (.0522) (.0237) Female x postgraduate 0.0682 - 0.2443 - 0.0182 (.0404) ~ 1733) (.0268) Experiences Experience 0.0469 0.0484 0.0428 (.0013) (.0020) (.0015) Experiences - 0.001 - 0.001 - 0.0008 (.00003) (.00005) (.00004) Female x potential 0.0016 - 0.0109 - 0.0106 experience (.0022) (.0033) (.0024) Female x potential 0.0001 0.0002 0.0001 experiences (.00004) (.0001) (.0001) Area Rural 0.1217 - 0.0122 - 0.110 (.0102) (.0098) (.0070) Female x rural 0.0307 - 0.0239 - 0.0194 (.0199) (.0178) (.0114) Urban Marital Status Spouse present 0.1577 0.2128 0.1734 (.0106) (.0159) (.0129) Other marital status 0.0852 0.1145 0.1298 (.0158) (.0282) (.0161) Female x spouse present - 0.1049 - 0.1588 - 0.1453 (.0165) (.0247) (.0187) Female x other marital 0.0123 - 0.0576 -0.0724 status (.0241) (.0417) (.0226) Single never married Children - 0.0117 - 0.0165 - 0.0160 (.0087) (.0127) (.0088)

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WOMEN'S PAY TABLE 10-1 Continued 229 Great United Measure Australia Britain States Female x children - 0.1691 - 0.0946 - 0.1154 (.0154) (.0241) (.0135) Constant 5.0126 4.1867 5.311 (.0079) (.0168) (.0145) R2 .46 .49 .36 Dependent variable, in week- ly earnings aSee the appendix for definitions of the education variables. bFor Australia and Britain, this group has been divided into two parts; the first coefficient relates to those who completed trade qualifications, and the second to those with other postsecondary qualifications. CSee the appendix for the definition of experience for each country. SOURCES: Australia: Australian Bureau of Statistics, 1981 Census, Household Sample file, full-time wage and salary earners, ages 15 to 54. Great Britain: 1981 General Household Survey (data tape available from Her Majesty's Stationery Office), full-time wage and salary earners, ages 16 to 54. United States: Bureau of the Census, Current Population Survey, March 1982 (data tape), full-time wage and salary earners, ages 15 to 54. labor market. This will give rise to a new and related question: Why is it that the pay ratios have changed in some countries but not in others? THE IMPORTANCE OF INSTITUTIONS Australia In Australia the female earnings ratio is vitally affected by a complex network of federal and state tribunals that evolved in the early years of this century. The tribunals set minimum rates of pay, referred to as awards, for each occupation. The pay of university professors is fixed along with that of bus drivers, laborers, fitters and turners, storemen, and so on. Before 1975 the tri- bunals acIjusted downward the award rates of pay for women, relative to the pay of mere. Occupations were categorized as to whether they were filled predominantly by mates or females: blacksmith was a male occupation, for example; milliner was a fe- maTe occupation. When an occupation was determined to be male, the tribunal cal- culated the man's wage what he needed to support himself, his wife, and his children living in "a civilized community" and then added a margin for the work value of the occupation. When an occupation was de- termined to be female, the tribunals macle the calculations as though it were a male occupation and then acljuste(l the notional rate of pay downward. From 1950 to 1969 the markdown in pay for a female occupation was usually to 75 percent of the notional male wage for each occupation. Because women work fewer hours an(1 are disproportionately represented in low-paying occupations and because men often earn significantly more than the min- imum rates of pay, the 75 percent rate procluce(1 an aggregate weekly earnings ratio of full-time workers of about 60 percent. Before 1970, it was clear that the tribunals believed that they were discriminating against women, and so (lic1 the community at large, although there seems to have been no ex- plicit questioning as to what the market pay relativity might be if the tribunals were not an active participant in pay setting. Con- sequently, although there was explicit dis- crimination according to tribunal criteria, the question was never posed as to whether the prevailing pay ratio could be thought of as discrimination relative to a national free market for labor. The 6 years between 1969 an(1 1975 wit-

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230 TABLE 10-2 Explaining the Pay Gap Among the United States, Great Britain, and Australia: The Ratio of Female to Male Full-Time Average Weekly Earnings - Great United Britain States Australia Measure Aggregate British pay structure U.S. pay structure Australian pay struc- ture Earnings gap to be ex- plained (compared with Australia) Attributable to Endowments Coefficients 64.2 64.0 60.6 61.7 76.3 15.1 77.6 17.6 4.4 1.9 10.7 15.7 68.6 63.6 79.3 SOURCES: Australia: Australian Bureau of Statistics, 1981 Census, Household Sample file, full-time wage and salary earners, ages 15 to 54. Great Britain: 1981 General Household Survey (data tape available from Her Majesty's Stationery Office), full-time wage and salary earners, ages 16 to 54. United States: Bureau of the Census, Current Population Survey, March 1982 (data tape), full-time wage and salary earners, ages 15 to 54. nesse(l a very great change. On June 19, 1969, the federal tribunal, following the lead of four of the six state tribunals, ruled that the sex of the worker was not to be used as a wage criterion in those jobs that were neither preclominantly male nor predomi- nantly female. By 1972 there should be "equal pay for equal work. " It would become illegal, for example, to pay graduates in the public service different starting salaries based on their sex. Similarly, in the private sector, beginning bank tellers would be paid the same whether they were male or female. Women working in female occupations, such as nursing en c] secretarial work, were to be excluded from "equal pay for equal work" provisions. Then, in 1972, the federal tribunal de- ci(le(1 that the concept of equal pay for equal work should be widened to "equal pay for work of equal value" or approximately in U. S. terms "comparable worth." This wider concept was to be introduced in three uni- PAY EQUITY: EMPIRICAL INQUIRIES form steps over the perio(l to June 1975. After 1975 award rates were to be deter- mined without regard to the sex of workers (Niland and Isaac, 1975~. Finally, between 1950 and 1974 the fed- eral tribunal ha(l maintaine(1 a "basic wage," which was the minimum wage that any fulI- time worker couIc3 be paid within any award determination. Over this period the basic wage for females was 75 percent of that of males. Because the basic wage is such a large fraction of the average wage, this formula ten(le(1 to produce average award wage relativities between men and women that were very close to 75 percent. In 1974, the federal tribunal decided to extend the male minimum wage to females, an(1 this reinforced the substantial pay increase for low-paid women on the bottom of the pay scales in female occupations. As a result, a substantial pay increase for all women was ensured no matter what the outcome of the "equal pay for work of equal value" decision in each individual instance. (See Nilan(1 anti Isaac, 1975, for a fuller discussion. ~ The changes in award rates of pay are presented in column 1 of Table 10-3. After almost two decades of constancy, the rel- ative awards began to increase in about 1970, and by 1977 they were 29.6 percent higher than 9 years earlier. Most of the large increase in awards occurre(3 from 1972 onward, so it is evident that the "equal pay for work of equal value" and the basic wage decisions were the important factors. The arbitration system (letermines min- imum awards an(l (loes not directly cleter- mine the earnings that are paid. Many work- ers, particularly men, receive over-awarc3 payments. There is no reason, therefore, why changes in relative award rates shoul(1 necessarily be reflected in changes in rel- ative earnings. After the equal pay ~leci- sions, male workers coul(1 systematically seek over-awarcT payments to offset the change in the award relativities. The impact of the award rate decisions on earnings is shown in columns 2 and 3

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WOMEN'S PAY TABLE 10-3 Female to Male Awards and Earnings Ratios 237 Australian Ratios British Ratios Earnings, Awards/ Awards, Earnings, Awards/ Private Earnings Manual Manual Earnings Year Awards Sector 1976= loo Workers Workers <1976= loo' 964 72.0 59.2 98.6 83.1 s9.8 101.0 969 72.0 58.4 97.2 83.3 59.s 100. 970 73.2 59.1 96.8 82.6 60.1 102. 971 74.6 60.7 97.6 84.9 60.6 100.1 972 77.4 63.2 99.6 85.6 60.7 99.4 973 79.4 65.9 99.5 87.4 62.5 100.3 974 85.2 70.9 99.7 92.1 67.0 102.1 975 90.8 75.7 100.0 95.1 68.0 100.3 976 92.4 77.1 100.0 100.0 71.3 100.0 977 93.2 76.6 98.6 100.0 71.8 100.2 1979 92.1 74.1 96.5 100.0 70.7 99.2 NOTES: Australia: Awards = adult average minimum award rates for a full week's work, all industry groups, average of four quarters to December 31 each year (Gregory et al., 1985~. Earnings = adult average weekly earnings for full-time (more than 30 hours) nonmanagerial employees in the private sector (Gregory et al., 1985~. Great Britain: Awards = weighted average of minimum rates laid down in collective agreements (Tzannatos and Zabalza, 1984~. Earnings = relative hourly earnings of full-time manual workers (Tzannatos and Zabalza, 1984~. Of Table 10-3. Earnings increased by 30 percent over the 1970 to 1977 period, so there was remarkably little slippage from the tribunal decisions. Award changes were fully translated into earnings. The data in Table 10-3 are interesting because they illustrate the effectiveness of the equal pay decisions, and as is eviclent in Figure 10-1, they show that it is only after discrimination has been removed from the Australian pay structure that the earn- ings ratio increases relative to the 1981 earnings ratios of Britain and the United States. This raises two interrelated ques- tions. First, could it be argued that the current British and U.S. pay structures reflect the discrimination that used to prevail in Aus- traTia? Could we go a little further and argue that with respect to pay Australia is now a discrimination-free country but the others are not? This is a position that is at least consistent with the results of the earlier section, which indicate that the difference between the pay relativities across countries relates to differences in coefficients and not differences in human capital endowments. Second, given that labor market insti- tutions have been so important in changing the pay relativities in Australia, what has been the role of labor market institutions in Britain an(l the United States? Britain British labor market institutions appear to be similar to those that prevail in Aus- tralia. Trade union membership is large and national agreements set minimum rates of pay in a wide range of industries. A relatively small number of collective agreements de- termine the minimum rates of pay of a very large number of workers. The four largest agreements cover almost one-fifth of the work force.5 The network of wage agreements in Brit- ain, however, is not as extensive as the coverage of fe(leral an(l state awards in Australia. In Australia 90 percent of female workers are directly coverer! by the aware] This section draws heavily on Zabalza and Tzannatos (1985~.

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232 wage system. In Britain 41 percent offemale workers are directly covered by agreements. As in Australia, before 1975, the British labor market institutions explicitly recog- nized pay discrimination. Different rates of pay for men and women who performed the same job were written into wage agree- ments, anti before the 1970s it was common not to provide equal pay for equal work. An attempt was made to remove this explicit discrimination by the introduction of The Equal Pay Act of 1970, which was to become effective by December 1975. The act included three important clauses. First, it sought to institute "equal pay for equal work" within establishments. This clause might be thought of as the equivalent of the main clause in the Equal Pay Act or the Civil Rights Act in the Uniter] States. Second, the act provicled for a pay change if a female job had been given equal value to a different male job by means of a job evaluation. At the broadest level this would provide for "comparable worth" or, in Aus- tralian terms, "equal pay for work of equal value." The act did not require job evalu- ations, however. Third, and perhaps most important, if a female pay rate with no male equivalent was included in a wage agree- ment, the act provicled that the female pay rate must be at least equal to the lowest level of the male pay provision in the agree- ment. From the point of view of changing the pay relativities, this clause could be loosely thought of as the equivalent of the 1974 Australian basic wage judgment, al- though the level of the minimum pay in Britain would differ from one wage agree- ment to another.6 6 An agreement may lay down a rate of pay for women workers only in a particular category while making no provisions for men in the same category, because, for example, there are at the time, no men doing that kind of work. In such a case, if a rate of pay applying to women only is lower than the lowest rate of pay applying to men in the agreement, the Committee is required to raise the rate applying to women to the level of the lowest rate applicable to men" Zabalza and Tzannatos (1985:100). PAY EQUITY: EMPIRICAL INQUIRIES On the basis of the Australian evidence it might be expected that the provisions of the British Equal Pay Act would be fairly easily carrier! into the labor market by the extensive set of wage agreements and the large degree of unionization. Some incli- cation of the success of the legislation is seen in column 4 of Table 10-3, which refers to the covered sector in Britain. It lists the average ratio of female to male minimum rates of weekly pay for full-time manual employees covered by wage agreements. The story is similar to the Australian ex- perience. After very little change over two clecacles, the minimum rates of pay sullenly began to increase in the early 1970s, anc! by 1977 the index was 21.6 percent greater than in 1969. In column 5 we list the actual earnings of British manual workers for the economy as a whole, that is, the aggregation of the covere(1 and uncovered sectors. It is evident from column 6, which compares minimum awards for the covered sector to average earnings for the economy as a whole, that there was no significant slippage between changes in minimum rates of pay for the covered sector an(l changes in average earn- ings for the economy as a whole. Over the period 1969 to 1977 the ratio of the average earnings of female to male manual workers increased by about 24 percent, marginally more than the minimum rates of pay. The parallels between Australia an(l Britain are remarkable (see Figure 10-1~. The earnings ratios increase in tandem. In Australia the "equal pay for equal work" (recisions of the federal tribunal prob- ably increased female pay by less than 5 percent. In the Unitecl States, if the Equal Pay Act hail any effect at all, it is likely that it changed the female earnings ratio in ag- gregate by considerably less than 5 percent. Why then was the British Equal Pay Act, which di(1 not require comparable worth or equal pay for work of equal value, so ef- fective? It seems to us that the institutional structure trade unions and national wage agreements provi(led the essential pre-

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236 _ X _ _ V, Cal Cal . U) o C) - o Cal C) o V) o Ct U' be ~ C~ o C~ 50 U: o . ~ C~ oo - C~ . 50 :i ~ ~ CD 00 . . . co ~ GO _ C~ CO . . . C~ ~ oo o _ o - x . . . oo ~ o C~ o - x o . . . C~ ~ o _ o - oo _ _ o CO o - o o o . . . ~7 o oo _ o oo oo ~ ~ o o ~ . . . . . . . O ~ C~ CD CO C~ CD ~ ~ 00 ~ O ~ ~ ~ ~ ~ ~ ~ o . . . . . . . - . ~ CD 0 oo ~ ~ ~ o oo U: C~ _ o C~ C~ o ~ C~ o C~ C~ _ C - o ~ ~ C C,, C c,, te bc C o ~ C C ~ =, ~ ~ o ~ ~ o O ~ ~ ~ ~ ~ g0 C 0 c 5 ~ ,~ O -c ~ ~ C O ~ C 11 X C~ . ~ C~ C~ s~ O 3 4- o V: C~ s~ o C~ s~ o C: 11 . C~ o :d oo O _ b4 c4 e~ ~o =, ~ C~ ~ ~ oo O ~ P4 _ C~ =50 C) C O ,o ~ oo ~ o _ C) ~ a' O v, O ~ + ~ oo _ V' ~ ~ C) s~ ~ ~ :~ ~ . ~ ._ Ct ~ C C C) ~ U) ~ O 4~ C,: C~ ~ ~ Ct = ~ =- s~ ~ ~ ~ 0 2 u: 3 ~ ~, E -> e 'E e ~ o~ O ~ ~ ~o O _ ~ ~ C~3 S _ c ~ ~ ~ e ~ c ~ - o~ o ~ 3 O ~ O :^ u, . . v, ct c~ ._ 3 o , ~ 0 ~ u' _ . _ o o

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WOMEN'S PAY reflects the rankings of the aggregate earn- ings ratio. In the early 1980s, women in male occupations received 89.0 percent of the average male wage in Australia, 82.6 percent in Britain, ancI 72.7 percent in the United States. This gap between the United States and the other countries leads us to suggest, somewhat tentatively, that perhaps it is true that the Equal Pay Act in the United States was ineffective, not because equal pay already existed before the act, but because the nature of the act and the institutional framework of the labor market in the Uniter! States prevented the equal pay initiative from being effective. EMPLOYMENT AND UNEMPLOYMENT The sudden and dramatic change in the female earnings ratio in Britain and Australia was not reflected in a sudden and dramatic change in relative employment growth. The ratio of total hours worked in the labor market by women to the total hours worked by men is given in Figure 10-2 for the three countries. The vertical scale is plotted as a log of the employment ratio so that the slope of these lines is a measure of the growth rate of the female to male hours worked. In each country women have increased their share of total hours worked. In Australia the increase of female to male hours worker] between 1970 and 1984 was 25 percent. The increase was 27 percent in Britain and 31 percent in the United States. The growth of female employment relative to that of males has been greatest in the United States, where the female pay relativ- ities have not increased; but the surprising feature of these data is that each of the employment series is dominated by a trend. There is no noticeable break in the trends for Britain and Australia despite relative pay increases on the order of 20 to 30 percent. This suggests a very low elasticity of substi- tution between men and women in the pro- duction process for example, an elasticity 237 of one, that implied by a Cobb-Douglas pro- cluction function, should have led to a 20 to 30 percent fall in female hours worke(1 relative to male hours worked. Nothing like that occurred. The slow upward trends persisted. Alternatively, there could have been shifts in the demand for female labor at the same time as the pay increases so that the effects of the relative cost changes are undetectable in a simple diagram such as Figure 10-2. We JO not believe that this is an important phe- nomenon because it requires both that the unusual shifts be confined to the period of the pay changes and that the shifts just offset the effects of the pay change. It all seems so unlikely, especially because the trenc! in the United States towar(l female employment is also fairly smooth. At this stage, we prefer to think that the elasticity of substitution between men and women in production is very low because the labor market is so segregate(l into malt? and female inbc {T~hl~ 10-5). The insensitivity of the relative employ- ment growth in Figure 10-2 need not mean that there are no employment effects at all. We have not investigated the macroconse- quences of the pay changes, that is, the (legree to which male and female employment to- gether may have been reducecI. If, as a first approximation, male and female labor can be thought of as being used in fixed proportions, then it wouIcl be total employment that is affected. An increase in female wages would increase the total wage bill, in real terms, if the increase in female pay is not offset by a reduction in male pay. Finally, a cursory glance at relative un- employment rates also suggests that the impact of the large change in pay relativities on female demand and supply must have been marginal (Figure 10-3~. In Britain fe- male unemployment is not well measurecl. The statistics are based on recipients of unemployment benefits an(1 many married women are ineligible; consequently, we compare unemployment only for Australia and the United States. The data are col- ~ ~ ~ ~ \ ~ ~~.~ . . . .

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238 80 70 60 50 40 O _ _ ~ _ . _ CC _ - - - _ 30 i 1 1 1 1 1 1 1 1 1 1 1 1 1964 1968 1972 1976 YEAR - _ - PAY EQUIIT: EMPIRICAL INQUIRIES ! r. i \_ ,!united States I' . _ '_ __ _ Great Britain Australia 1980 1984 1988 FIGURE 10-2 Ratio of female to male aggregate weekly hours worked. Sources: Australian Bureau of Statistics, Labour Force, Cat. No. 6303, August. U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings Monthly Bulletin, annual averages. Great Britain, Annual Abstract of Statistics, mid-June. lected from household surveys. During and after the period of the equal pay initiatives in Australia, the unemployment of women continued to fall relative to that of men and appears not to have been affected by the pay changes to a great degree. In both countries female unemployment has been marginally above that of male unemploy- ment for most of the period and subject to a strong downward trend. It is remarkable how highly correlated the relative unem- ployment series is across the two countries. Again, there is no evidence of Australian women being seriously (lisadvantaged after the equal pay judgments. CONCLUSIONS In the three countries female employ- ment, relative to that of males, has grown strongly over the past decade and a half. The history of the pay gap between men an(1 women in each country, however, has been (different. There was a significant nar- rowing ofthe pay gap in Britain and Australia cluring the 1970s, but there was no change in the Unitecl States. Recently, there has been relative constancy in Britain and Aus- tralia, but a more moderate narrowing of the pay gap in the Unite(l States. This analysis has focused on the pay gaps of the 1970s and leacls to the following major conclusions. First, an application of the usu- al human capital mode] cannot explain pay gaps across countries. In 1981 the relative endowments of human capital of men and women seem to be much the same in each of the three countries. Within a human capital framework the variation in the pay gap among these countries stems from dif- ferences in coefficients rather than from differences in enclowments. Second, between 1969 anti 1976 the ratio of female to male pay increased about 30

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WOMEN'S PAY 3.00 2.50 o CC 239 2.00 1.50 1.00 - \ 0.501 1 964 \~W \~stralia \ ~ United States ~ 1 1 ~ ~ 1 ~ 1 1968 1972 1976 YEAR ._, tic , , , 1980 1984 1988 FIGURE 10-3 Ratio of female to male unemployment rates. Sources: Australian Bureau of Statistics, The Labour Force, Historical Summary, Cat. No. 6204, August. U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings Monthly Bulletin, annual averages. percent in Australia and by 20 percent in Britain. The human capital mocle] cannot explain these large pay changes, which flowed from official intervention in the labor mar- kets. The pay changes followed two clecades of relative constancy. The Australian and British experience, therefore, was different from that of the United States, where, dur- ing the early 1960s, official intervention in the form of the Equal Pay Act and Title 7 of the Civil Rights Act prover] to be inef- fective. These results suggest that research in this area must place increaser] emphasis on institutions and the impact of the law. Third, we are not sure why official in- tervention was effective in Australia and Britain but ineffective in the United States. The labor markets of Britain ancl Australia possessed institutional features within which change was easily effected. The key feature seems to have been national wage agree- ments, which, before the large pay changes, explicitly discriminated between men en c! women by giving them different rates of pay for the same job. As a result, some part of pay discrimination was easily identified. This, however, seems to be only a small part ofthe answer. The fraction ofthe female work force covered by "equal pay for equal work" is not sufficient to bring about directly such large changes in the pay ratio. A larger part of the explanation probably relates to the fact that the interventions in Australia ant] Britain went beyond equal pay for equal work by adopting simple, across-the-board rules. In Britain these simple rules related to setting equal the male ant] female min- imum rates of pay within each wage agree- ment. In Australia, there was one minimum wage the basic wage and that, too, was set equal for men and women. Fourth, currently, Australian women are much better paid relative to men than their British or U.S. counterparts. An important

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240 PAY EQUITY: EMPIRICAL INQUIRIES Chapman, B. J., and C. Mulvey 1986 An analysis of the origins of sex differences in Australian earnings. Journal Of Industrial Relations 28~4):504-520. Chiplin, B., M. Curran, and C. Parsley 1980 Relative female earnings in Great Britain and the impact of legislation. Pp. 57-126 in P. J. Sloane, ea., Women and Low Pay. London: Macmillan. Daymont, T., and P. Andrisani 1984 Job preferences, college major, and the gen- der gap in earnings. Journal of Human Re- sources (3) (Summer):408-428. Department of Employment 1975 Progress towards employment. Employment Gazette (London). Greenhalgh, C. A. 1980 Male-female wage differentials in Great Brit- ain: Is marriage ah equal opportunity? Eco- nomic Journal 90(December):751-775. Gregory, R. G., and R. G. Duncan 1981 Segmented labor market theories and the Aus- tralian experience of equal pay for women. Journal of Post Keynesian Economics II(3):40 428. reason for this is the pay ratio in female occupations. In the three countries between 62.8 and 53.7 percent of women work in occupations in which 70 percent or more of the workers are female. In Australia, these women, on average, are paid 71.4 percent of the average male weekly wage. In Britain and the United States the ratio is 60.3 and 56.0 percent, respectively. Fifth, in Britain and Australia it appears that all women shared in the large pay in- creases. There is no evidence of a significant development of uncovered sectors, nor of groups of fi~-time workers whose working conditions ~leter~orated as the working con- ditions of those covered by equal pay im- proved. It does not appear that the labor market is evolving toward two classes of wom- en, although there has been a faster rate of growth of women working part time in Britain and Australia. Finally, in Britain and Australia the ex- Gregory, R. G., and V. Ho perience of large pay changes seems to suggest 1985 that the relative employment response is not large. To a significant degree, women (lo not seem to lose jobs restive to men. In fact, the relative employment of women increased in all three countries during the 1970s. We have not unclertaken an analysis of aggregate employment growth, in which an important consideration would be who pays for the female wage increases. If there is an offset in male wages, then the employment response in aggregate is likely to be much less than if men maintain their real wages and compa- rable worth acts as a profit tax. REFERENCES Beller, A. H. 1979 The impact of equal employment opportunity laws on the male/ female earnings differential. Pp. 304-330 in C. B. Lloyd, E. Andrews, and C. Gilroy, eds., Women in the Labor Market. New York: Columbia University Press. Blandy, R. 1963 Equal pay in Australia. Journal of Industrial Relations 5:13-28. Blau, F., and M. Ferber 1986 The Economics of Women, Men and Work. Englewood Cliffs, N. J.: Prentice-Hall. Equal Pay and Comparable Worth: What Can the U.S. Learn from the Australian Experi- ence? Discussion Paper No. 123. Centre for Economic Policy Research, Australian Na- tional University, July. Gregory, R. G., A. Daly, and V. Ho 1986 A Tale of Two Countries: Equal Pay for Women in Australia and Britain. Discussion Paper No. 147. Centre for Economic Policy Research, Australian National University, August. Johnson, G., and E. Solon 1986 Estimates of the direct effects of comparable worth. American Economic Review (Decem- ber):lll7-1125. Mincer, J 1974 - Schooling Experience and Earnings. National Bureau of Economic Research. New York: Columbia University Press. 1985 Intercountry comparisons of labor force trends and of related developments: An overview. Journal of Labor Economics 341) (Part 2~:S1- S32. Niland, J. R., and J. E. Isaac 1975 Australian Labour Economics Readings. Mel- bourne: Sun Books. Oaxaca, R. 1973 Male female wage differentials in urban labor markets. International Economic Review 14 (October):693-709. Zabalza, A., and T. Tzannatos 1985 Women and Equal Pay. New York: Cam- bridge University Press.

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WOMEN S PAY APPENDIX: DEFINITION OF VARIABLES USED IN THE REGRESSION EQUATIONS The results relate to full-time workers, that is, those working more than 35 hours per week. In Australia the sample was men and women aged 15 to 54 years; in Britain, 16 to 54 years; ant] in the United States, 15 to 54 years. Australia Education Variables Dropout Age on leaving school was less than or equal to 15; no further qualifications. High school- Age on leaving school was greater than or equal to 16, but the person hac] no postsecondary qualifications. PostsecondaryTrade certificate or oth- er postseconciary certificate. University degree completion of a bach- elor's degree. Postgraduate higher degree level. Experience Age minus years of schooling minus six. Chiil(lren A crummy variable taking the value of 1 if children under the age of 18 were present in the household and were the responsibility of the head of the household or spouse. Area Rural Those living in a community of less than 1,000 people. UrbanThose living in a community of more than 1,000 people. Marital Status Spouse present Currently married and living with spouse. 241 Other marital status Widowed, sepa- ratecI, and clivorced indivicluals. Single Never married. Great Britain Education Variables Dropout Those with no qualifications or with ungraded] or grades 2 to 5 of a Certificate of Secondary Education. High schoolThe person had one of the following: a Certificate of Secondary Eclu- cation grade 1, school certificate, one or more General Education Certificate "0" lev- els or the Scottish equivalent (Scottish Leav- ing Certificate of Education), or clerical and commercial qualifications. Postsecondary trade apprenticeship, GCE "A" level or other postsecondary qual- ifications. University completion of a bachelor's degree. Postgraduate higher (legree level. Experience Age Age on leaving fulI-time education. Children A dummy variable taking the value of 1 if children under the age of 16 were present in the household and were the responsibility of the heat] of the household or spouse. Area Rural Those living in rural local au- thority areas. Urban Those living in urban local au- thority areas or in the conurbations (e.g., Greater London). Marital Status Spouse presentCurrently married and living with spouse.

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242 Other marital status Widowed, sepa- Children rated, and divorced indivicluals. Single Never married. United States Education Variables Dropout Completer] less than 4 years of high school. High school Completed 4 years of high school. Postsecondary qualifications Complet- ed 1 to 3 years of college. University degree Completed 4 years of college. Postgraduate degreeCompleted 5 or more years of college. E. xper~ence Age minus years of schooling minus six. PAY EQUITY: EMPIRICAL INQUIRIES A crummy variable taking the value of 1 if children uncler the age of 18 were present in the househoicl and were the responsibility of the head of the household or spouse. Area RuralThose living in communities of less than 1 million people. Urban Those living in central cities or other communities of more than 1 million people. Marital Status Married spouse present Currently mar- rie(1 and living with spouse. Other marital status Widowed, sepa- ratecI, and divorced individuals. Single Never married.

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Commentary RONALD G. EHRENBERG At the start of the 1970s, the average weekly earnings of employed women rel- ative to the average weekly earnings of employed men (which I henceforth call the female relative wage) was approximately equal in the United States and Australia and some- what lower in Great Britain. During the decade, however, the female relative wage rose substantially in Australia and Great Britain, but remained roughly constant in the United States. As a result, by the early 1980s, the female relative wage in Australia exceeded that for the other two countries and the relative wage in Great Britain had reached roughly the same level as the rel- ative wage in the United States. With these facts as background, the Greg- ory, Anstie, Daly, and Ho paper aciclresses four questions. First, why do female relative wages slider across countries in the early 1980sdo the differences reflect cliffer- ences in relative (female/maTe) human cap- ital endowments or differences in labor mar- ket institutions across countries? Second, why dicl women achieve such large relative wage gains vis-a-vis men in Great Britain and Australia during the 1970s? Third, what is the implication of the experience in Aus- 243 tralia and Great Britain for the debate over comparable worth in the United States and elsewhere? Finally, what can we learn from the Australian and British experiences about the effects of such relative wage changes on employment and unemployment of wom- en? To answer the first question, the authors use the now standard Oaxaca decomposition method to determine whether differences in female relative wages across countries are clue to differences in relative (female/ mate) human capital endowments or differ- ences in wage equation coefficients across countries. "Comparable" micro-level data sets from househoIc] surveys are used for each country, and log weekly earnings equa- tions for men and women are specified to be a function of education, potential labor market experience (age minus years of schooling minus six), marital status, the presence of children in the home, and rural/ urban location. The estimates (fount] in Table 10-1) are used to compute the extent to which the female relative wage in a country changes when one substitutes the mean value of male and female characteristics from either

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244 of the other two countries into its wage equation to arrive at a predicted female relative wage. By substituting the mean characteristics of British workers into the Australian wage equations, for example, one can compute what the female relative wage in Australia wouIcT look like if Australian workers had the same human capital en- dowments as British workers. In fact, the authors find (Table 10-2) that the predicted female relative wage in each country appears to be quite insensitive to which country's characteristics are used. Thus, they con- clude that most of the clifference in female relative wages across the three countries is due to differences in the wage structures (coefficients of the wage equations); human capital differences are relatively unimpor- tant. To answer the second question, why fe- maTe relative wages rose in Australia and Great Britain during the 1970s, the authors focus on the unique labor market institutions that exist in each country and the funda- mental changes that took place in them cluring the decade. Turning first to Aus- tralia, minimum wage rates are set there by occupation through a system of federal and state tribunals. Prior to the early 1970s, minimum wages in male-clominated occu- pations were set by determining some min- imal living standard for a family and then acIding to that a premium for the "work value" of the occupation. Minimum wages in other occupations were similarly deter- mined, but in femaTe-dominatec! occupa- tions an explicit downward adjustment was then maple (usually 25 percent cluring the 1950-1969 period). Discrimination against women, then, was explicit in Australia. Between 1969 and 1975, two very im- portant changes occurred in the tribunal's behavior. First, by 1972 the federal and most state tribunals had ruler] that the sex of a worker should not be used as a criterion in setting wages in those jobs that were neither predominantly male nor pre(lomi- nantly female (equal pay for equal work). PAY EQUITY: EMPIRICAL INQUIRIES Second, between 1972 and 1975, the tri- bunals introclucec] the concept of"equal pay for work of equal value?' by eliminating in three stages the (lownwarcl adjustment of wages in femaTe-dominate(1 occupations. Thus, something akin to comparable worth was mandated by the fe~leral government for all workers in Australia. As these changes occurred, the female relative wage in Aus- tralia rose from roughly 60 percent in 1970 to 75 percent in 1979 (Table 10-3~. Turning next to the British experience, the British labor force, as is well known, is heavily unionized; the four largest national agreements cover almost one-fifth of the work force. Prior to 1975, explicit sex dis- crimination in pay (different pay rates for men and women doing the same job) was built into the agreements. The Equal Pay Act of 1970, which was to become effective in 1975, required equal pay for equal work within a firm, equal pay for jobs of equal value within a firm if a job evaluation was undertaken, and that women's wages be at least equal to the lowest male wage rate in the firm. The authors conclude that the act appeared to be effective: The female relative earnings of manual workers rose from rough- ly 60 percent in 1970 to 71 percent in 1979. The authors next address the third issue, the implications of these fin(lings for the comparable worth debate. They point out that in both Great Britain and Australia pay discrimination was explicit, and it was thus easy to identify where (discrimination was occurring. Given the unique labor market institutions in each country, government intervention could be direct; they observed that "the marketplace" did not appear to frustrate the equal pay efforts. For the future, the authors see little room for expansion of comparable worth in Aus- traTia (effectively, a variant is aireacly in place). An Equal Pay Act amendment in Great Britain (effective January 1984) now permits British women to bring claims through the judicial process if they believe they are not receiving equal pay for work

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COMMENTARY of equal value. The amenciment's ultimate effects will depend on the judicial process. The authors also claim that although the introduction of comparable worth in the United States in the state and local sectors has led to considerable initial pay changes (although some economists would dispute this cIaim), the decentralized wage deter- mination process in the Unitecl States is likely to make the overall effects of any larger comparable worth policy much small- er (due to likely incomplete coverage and employment of women in low-paying es- tablishments). Finally, the authors address the issue of whether the female relative wage changes that have occurred in Australia ant] Great Britain have had any adverse employment and unemployment effects. They note that during the 1966-1984 period! women in- creased their share of hours worked in all three countries, and that the increase was greatest in the United States. They claim a growth trend was dominant in all cases, and no sharp slowdown in growth was ob- servec] in Great Britain or Australia after those countries implementecl their antidis- crimination policies. They assert (without proof) that this is due to small elasticities of substitution between male- and female- clominated occupations. A cursory glance at the pattern of female relative unemploy- ment rates in each country over time sim- ilarly leads them to the conclusion that there is no evidence that the relative wage changes affecter] these rates either. They note, though, that they have not analyzed the effect of the female wage adjustments on total em- ployment, on male wages, or on corporate profits. My reaction to this paper is mixed. On the one hand, it represents one of the few serious efforts I know of to place discussions about comparable worth in a comparative perspective and to bring evidence from oth- er countries' experiences into the (rebate about policy in the United States. For this the authors should be resoundingly applaud- 245 eel. On the other hand, I am left with the feeling that they have not pusher] their empirical analyses as hard as they might have, and because of this, in places they may have drawn some inappropriate con- clusions. My discussion will elaborate on this latter theme. Consider, first, the analyses of the de- terminants of intercountry differences in the female relative wage differentials. Although the authors, probably justifiably, conclude that the differences are due to cliffering coefficients of wage equations across coun- tries, not to differences in human capital endowments, they do not attempt to explain why the coefficients found in Table 10-1 might (lifter across countries. The presence of children in the home, for example, ap- pears to have a much larger negative effect on women's wages in Australia than it floes in the United States. Is this because Aus- tralian families have more children than U. S. families, or because the lack of chil~l- care facilities in the former makes it more likely that women will leave the labor force temporarily to care for children? To take another example, the return to potential experience for women appears to be greater in Australia than in the United States (Table 10-1~. When one takes into account the higher labor force participation rates of aclult women in the United States, it is likely that potential experience (age minus years of schooling minus six) systematically over- states actual experience by more in Australia than in the Unite(l States and, thus, that the actual returns to female labor market experience are certainly greater in Australia. I wish the authors tract provided an expla- nation for this, as well as for other findings. Consider, next, their analysis of how fe- male relative wages changed after the pas- sage of the anticliscrimination laws in Aus- tralia and Great Britain. They base their analysis here on casual analysis of obser- vations on annual data from 1964 to 1979. I am troubled by their conclusion ~com- parable-worth-type policies caused relative

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246 wage changes), for a number of reasons. First, their data inexplicably end in 1979. Given the availability (presumably) of data for another 5 or 6 years, they couIc3 have studied whether the trencis they observed in the data continued. Second, one must question their failure to estimate a multi- variate mode} that would permit other forces, such as aggregate (leman(l pressures, to influence the female wage ratio; their con- clusions are implicitly based on simple cor- relations of policy changes and wage ratio changes. Third, they implicitly treat the policy changes as exogenous. No thought is given to the possibility that social or eco- nomic pressures that might leac] female rel- ative wages to rise might also lead to the policy changes ant] tribunals' decisions. Put another way, they may have the direction of causation backwards. Indeed, their Fig- ure 10-1 suggests that the female relative wage started to rise in both Australia (1965- 1969) and Great Britain (1970-1971) prior to the implementation of the policies that they describe. The conclusion that female relative wage changes have hack no ejects on female rel- ative employment and unemployment lev- els is similarly based solely on cursory ex- aminations of trends in the data. Since Gregory and Duncan's earlier paper (Iour- PAY EQUITY: EMPIRICAL INQUIRIES nal of Post-Keynesian Economics, 1981) es- timated relative (male/femaTe) employment equations for Australia for the 1938-1978 period and fount] some role for relative wages tin the aggregate a -.3 elasticity of substitution with respect to relative wages), after controlling for trend terms and macro- leve! conditions, one wonders why a similar structures] analysis was not clone here. At the very least, such an analysis wouIcl pro- vide some comparative data on elasticities of substitution between men and women. To do this correctly, of course, would re- quire a formal model of employment anc] labor force behavior. Ignoring my concerns about the nature of their empirical evidence, I take away a message from this paper that is a simple but important one: It is likely to be much easier to improve the female relative wage rate by a comparable-worth-type policy in a world in which wages are set centrally and discrimination is overt than it is in a (decentralized market economy in which we still argue over whether labor market dis- crimination occurs. Proponents of compa- rable worth in the United States should take heed. Widespread comparable worth ini- tiatives here are unlikely to improve the female relative wage by as much as they did in Australia and Great Britain.