This chapter provides a comprehensive overview of decomposition methods that have been developed since the seminal work of Oaxaca and Blinder in the early 1970s. These methods are used to decompose the difference in a distributional statistic between two groups, or its change over time, into various explanatory factors. While the original work of Oaxaca and Blinder considered the case of the mean, our main focus is on other distributional statistics besides the mean, such as quantiles, the Gini coefficient or the variance. We discuss the assumptions required for identifying the different elements of the decomposition, as well as various estimation methods proposed in the literature. We also illustrate how these methods work in practice by discussing existing applications and working through a set of empirical examples throughout the paper.

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Decomposition methods in economics

Do formalized human resources management (HRM) structures promote goals of equal employment opportunity and affirmative action or symbolize good faith in the absence of real change? We examined the antecedents and outcomes of formalized HRM structures in over a hundred organizations, assessing the presence of “identity-conscious” and “identity-blind” HRM structures. Findings indicated that identity-conscious structures were associated with some positive indicators of the employment status of women and people of color. II was concluded that such practices, although perhaps adopted for symbolic purposes, improved the employment status of protected groups.

Formalized Hrm Structures: Coordinating Equal Employment Opportunity Or Concealing Organizational Practices?

This chapter summarizes recent research in economics that investigates differentials by race and gender in the labor market. We start with a statistical overview of the trends in labor market outcomes by race, gender and Hispanic origin, including some simple regressions on the determinants of wages and employment. This is followed in Section 3 by an extended review of current theories about discrimination in the labor market, including recent extensions of taste-based theories, theories of occupational exclusion, and theories of statistical discrimination. Section 4 discusses empirical research that provides direct evidence of discrimination in the labor market, beyond “unexplained gaps” in wage or employment regressions. The remainder of the chapter reviews the evidence on race and gender gaps, particularly wage gaps. Section 5 reviews research on the impact of pre-market human capital differences in education and family background that differ by race and gender. Section 6 reviews the impact of differences in both the levels and the returns to experience and seniority, with discussion of the role of training and labor market search and turnover on race and gender differentials. Section 7 reviews the role of job characteristics (particularly occupational characteristics) in the gender wage gap. Section 8 reviews the smaller literature on differences in fringe benefits by gender. Section 9 is an extensive discussion of the empirical work that accounts for changes in the trends in race and gender differentials over time. Of particular interest is the new research literature that investigates the impact of widening wage inequality on race and gender wage gaps. Section 10 reviews research that relates policy changes to race and gender differentials, including anti-discrimination policy. The chapter concludes with comments about a future research agenda.

Chapter 48 Race and gender in the labor market

Occupational sex segregation and its relationship with wages during 1973-93 are examined. Wage level and wage change models are estimated using Current Population Survey data matched with measures of occupational skills and job disamenities. Standard analysis confirms that wage levels are substantially lower in predominantly female occupations. Gender composition effects are reduced by about a quarter for women and by over one-half for men following control for skill-related occupational characteristics. Longitudinal analysis indicates that two-thirds or more of the standard gender composition effect is accounted for by occupational characteristics and unmeasured worker skill or taste differences.

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Wages and Gender Composition: Why do Women's Jobs Pay Less?

Most previous research on gender inequality and management has been concerned with the question of access to managerial jobs and the “glass ceiling.” We offer the first largescale analysis that tur...

https://www.terpconnect.umd.edu/~pnc/ASR07.pdf

Working for the Woman? Female Managers and the Gender Wage Gap:

Using data from the March 1988 Current Population Survey, the authors find that the wages of female workers differ significantly by industry, even when the analysis controls for workers' productivity-related characteristics. Although these interindustry wage differentials are at least as large as men's and are highly correlated with them as well, there are statistically significant differences between the two. Of the overall gender wage gap (the average female worker earns about 65% as much as the average male worker), 12–22% can be explained by differences between the patterns of interindustry wage differentials of men and women and 15–19% by differences in the distribution of male and female workers across industries. Thus, the combined industry effects explain about one-third of the overall gender wage gap.

Interindustry Wage Differentials and the Gender Wage Gap

This study makes use of 1970 and 1980 Census of Population employment and earnings data at the detailed occupation and industry level to examine changes in the distribution of the U.S. work force by sex and to assess their impact on relative female earnings. First, we find clear evidence that both occupational segregation and industrial segregation declined during these years. Second, high employment growth within an occupation is associated with declines in segregation. Third, declines in industry segregation within occupation are associated with improvements in relative female earnings independently of other factors which affect relative pay. Fourth, high employment growth is associated with improvements in relative female earnings, independently of its effect on occupational segregation. As a result, employment growth acts to reduce the wage gap directly, possibly by lowering barriers to women finding jobs at high wage firms, and also indirectly by lowering the degree of industrial segregation. These results thus suggest that barriers or discrimination against women tend to be lower in sectors where demand is strong.

The Decline of Sex Segregation and the Wage Gap, 1970-80.

A Comparison of Intercity Differences in the Labor Force Participation Rates of Married Women in 1970 with 1940, 1950, and 1960

The present study examines factors that might explain the difference between female and male industry wage premia. It focuses on three industry characteristics in particular -- the extent to which firms in each industry were likely to be targeted for Affirmation Action compliance review or investigation, industry employment growth, and industry profitability. We find strong evidence that all three factors help narrow the gender gap in industry wage premia. Other characteristics that we have looked at, including average plant size, the capital intensity of the production process, both the average level and variance in work education, and changes in overall sales and wage levels were statistically much less important. Our principal finding is that Affirmation Action, employment growth, and profitability each leads to a narrowing of the gender gap in industry wage premia. These effects act independently of each other. With regard to the Affirmation Action variable, our results contract sharply with those of Leonard (1996), who concludes that Affirmative Action had lost its effectiveness as a measure to reduce the gender wage gap in the 1980s. The difference in results is likely attributable to the fact that the dependent variable in his regression analysis is the gender gap in earnings, whereas ours is the gender gap in industry wage premia. In terms of policy implications, our results provide new support to the recent effectiveness of the Affirmative Action program, which is currently under fire from so many sources and has been greatly diminished in size and is also clear that import-competing industries, for which output prices and sales declined during this period, showed smaller wage increases for all workers during the 1980s. This would narrow the gender gap in wage premia, if males had been more likely than females to benefit from rent sharing before the decline in demand for the industry's output, or if males at the top of the wage ladder were more likely than others, of both genders, to have left these industries when demand and pay declines. Sachs and Shatz (1996) support this argument with the observation that the overall gender gap in wages tended to narrow in these industries.

Judith Fields

Papers

Interindustry Wage Differentials and the Gender Wage Gap

The Decline of Sex Segregation and the Wage Gap, 1970-80.

A Comparison of Intercity Differences in the Labor Force Participation Rates of Married Women in 1970 with 1940, 1950, and 1960

Gender Wage Differentials, Affirmative Action, and Employment Growth on the Industry Level