Industry wage differentials and affirmative action: A comment

Abstract

Although I find the analysis in this paper superior to earlier papers that simply attempt to measure wage differentials across occupations, the analysis still remains flawed and the underlying assumptions of the authors are not clearly stated and can be questioned. The authors assume that firms erect barriers that prevent women from entering certain occupations and that, therefore, also prevent women from taking advantage of higher relative pay. The idea that there might not be a sufficient number of women who want to work in or are qualified for any given occupation is not considered. The authors also do not give an adequate theoretical explanation for their finding of a positive correlation between profitability and smaller gender wage gaps. Economic theory sometimes suggests the opposite conclusion and therefore it is up to the authors to provide an alternative theoretical explanation. It is also assumed that all productivity factors have been “controlled for” in the analysis and that any wage gap that exists between men and women is due to “bad” discrimination. The conclusion of the paper therefore being that if affirmative action is having an effect on wage differentials between men and women (which their evidence indicates is the case for some industries) that this is a positive effect. However, if the assumptions upon which this conclusion is based are questionable, then the conclusion is questionable as well. Affirmative action legislation that decreases the wage gap between men and women may actually be counter-productive.