Brian Chiplin

The Effect of Britain's Anti-discrimination Legislation on Relative Pay and Employment: A Comment

a substantial role, but to question our ability to isolate at all precisely the separate effects of equal pay and incomes policies using the methodology adopted by ZT, given British institutional arrangements in the I970s. Before examining these issues it is worth commenting on international experience, since the British case is far from typical judged in the light of what has happened in the rest of Europe and the United States. The Eurostat publication, Hourly Earnings-Hours of Work, provides comparable data on gross hourly earnings from I964 for the original six members of the European Community and from I975 for the four new members. These show a general improvement in the relative position of women, though there is little similarity in the timing or size of these adjustments. What is instructive, however, is that, paradoxically, the improvement in pay generally precedes the implementation of equal pay and opportunities legislation in each country and the pay of women relative to men stabilises subsequently. A similar situation prevails in other European countries such as Sweden, Norway and Austria. In contrast, in the United States, which has the most extensive equal employment opportunities legislation in the world, with provision for affirmative action, system-wide enforcement and severe financial penalties, female relative earnings have been remarkably constant since the I960s, and significantly lower than in the majority of OECD countries. The only country which matches British experience is Australia, where an increase of nearly 30 0 in the pay of women relative to men between I969 and I975 occurred contemporaneously with the phased introduction of equal pay for work of equal value (see Gregory and Duncan, I98I). Nonetheless, it seems reasonable to conclude that legislation is neither a necessary nor a sufficient condition for the attainment of equality between the sexes. In the section below we question a number of aspects of the ZT analysis including whether the timing of the increase in female relative earnings was as

Women and Equal Pay: The Effects of Legislation on Female Employment and Wages in Britain.

This book looks at the change in the relative pay and employment of women, and the effect and its extent, if any, of equal pay legislation. Satisfactory data on womens pay and employment are examined and show, for the first time, that the impact of legislation has been underestimated in the case of Britain and this makes this study, an important one for all those interested in these issues. During the 1970s women saw their relative pay increased by 15 per cent. The results of this research tend to suggest that this improvement cannot be attributed to shifts in female employment from low to high paying sectors of the economy, but is the result of genuine increases in relative pay within sectors. It cannot be explained by incomes policies, and has not been achieved at the expense of female employment. Indeed the main factor behind this remarkable increase in female pay is shown to have been the anti-discriminatory legislation passed in Britain during this period.

Economic Models of Discrimination

Most of the economic models of discrimination have been primarily directed towards racial discrimination though it is acknowledged either explicitly or implicitly that they are also applicable to sex discrimination. However, there are important differences between race and sex, particularly on the supply side, and the application of models of racial discrimination to sex must be handled with considerable caution. Whilst it is true that there is a substantial area of overlap, it must not be assumed that predictions relating to race automatically apply to sex. For instance, in his survey of the economics of racial discrimination, Ray Marshall suggests that a major shortcoming of neoclassical theory is the implication that equally qualified blacks and whites doing identical jobs in the same firms are paid different wages.1 This he regards as unrealistic and yet it is precisely what has happened to some of the female population.

Women’s Role in Employment

Like most other developed economies Britain experienced an acceleration in the trend rate of growth in the number and proportion of married women in the work force in the decade up to 1970. Furthermore, in the more advanced countries generally the female labour force is expected to grow by 36 per cent (68 million) in the period 1970–2000, compared with a projected growth of 31 per cent in the male labour force,1 and Britain will share in this growth. However, over the 100 years between 1851 and 1951 the relative importance of women in the British labour force was remarkably constant. Census of population data show that women comprised approximately 30 per cent of the occupied population throughout the period. Despite this, however, there was a substantial increase in the number of women in the occupied population, which rose from 2.8 million to 7 million over the period and major fluctuations in this pattern occurred on account of the two World Wars.

Non-Market Work and the Family

It is appropriate to begin an analysis of discrimination against women in employment by reference ab initio to the family and the female role within it. This follows from the fact that much of what passes for discrimination can be seen as stemming from the role differentiation implied by the organisational framework of the family. If indeed women are to achieve full equality in the labour force some reassessment of the traditional division of labour in the household would seem to be a necessary if not sufficient condition for the attainment of this objective. Despite the importance of the subject, however, concentration on market activities has at least until recently led to the neglect of non-market productive activities. This is perhaps exemplified in conventional measures of national income which exclude the value of housewives’ services on the grounds of estimation difficulties, although conceptually some account ought to be taken of them. Recently, however, a number of economists, particularly in the United States, have emphasised the need to distinguish and analyse (paid) market work, (unpaid) household work, and leisure within an environment in which the family operates as a utility-maximising entity under certain constraints. Thus marriage itself, family size, the value of housewives’ time, household production and even church attendance have been given an economic interpretation. Whilst much of this work is not directly related to the question of discrimination, such studies do provide some pointers to differences in behaviour patterns relating to labour force participation and hence indicate underlying factors germane to the practice of discrimination on the part of both employers and employees.

Women’s Future Role in the Economy

It has been shown in earlier chapters that the current labour market position of women is characterised by marked occupational segregation and substantially lower earnings than men. Neither of these factors can by themselves be taken as indicative of the extent of discrimination in operation against women; they may to a considerable degree merely reflect underlying economic forces and the application of rational free choice by women themselves.

Personal Characteristics and Hiring Practices: Informational Aspects of Discrimination

In the light of the imperfections of some of the models discussed in the last chapter, and particularly dissatisfaction with taste-based theories, several writers have turned to the role of information in sustaining discrimination. Thus, Arrow1 suggests that employer discrimination can be thought of as reflecting perceptions of reality rather than tastes. If employers believe that women have lower productivity than men they will only hire them at a lower wage. Similarly Phelps2 has argued that an employer who seeks to maximise expected profits will be less willing to hire women if he believes them to be less qualified and more unreliable and to have a higher turnover than men on average, and if there are high costs of obtaining information about the characteristics of individuals. Thus an analysis of employer hiring practice is vital to an understanding of sex discrimination.

Occupational Discrimination and Equal Opportunities Legislation

In the last chapter it was noted that equal pay and equal opportunity measures are essentially complementary policy tools, and several countries have found it necessary to legislate in both areas. For the danger of legislation to enforce equal payment between the sexes in isolation and without full regard to the long-run relative costs of employment of each type of labour from the point of view of the individual enterprise is that inequality of opportunity may be intensified as the access of females to particular types of employment becomes even more difficult. As noted by one investigator1 there is a clear theoretical rationale for such actions, for a fundamental theorem of economic analysis states that a change in relative price leads to a substitution away from the good whose relative price has risen. In this context the passage of a fair employment law adds an expected cost to firms and unions that are violating either the segregation or wage differential provision of the law, and induces a substitution away from discriminatory behaviour. The magnitude of the expected cost equals the cost of violating the fair employment law if one is caught (e.g. adverse publicity, costly litigation, possible fines and imprisonment) times the probability of apprehension.

Wage Discrimination and the Equal Pay Act

Despite the relative importance of females in the British labour force and general statements in favour of the concept of equal pay for men and women made by various employers, trade unions and the government over a period of almost a century, the issue has generally been pushed into the background by what have been considered to be more pressing policy objectives such as full employment, price stability and economic growth. In line with other areas of labour utilisation few laws have been passed relating to the question of female employment but exceptions include the Employment of Women and Young Persons Act 1963 and the Factories Act 1961. The latter which consolidated earlier legislation, has the effect of limiting the hours and times of employment of women, protecting them from materials and processes which present particular health hazards to the female sex, and imposing restrictions on the lifting of weights and on working near moving machinery. The Mining and Quarries Act 1954 also, amongst other things, prohibits the employment of females below ground. Further, certain differences between the sexes are implicit in the fact that pensions have been payable to men at age 65 since 1925, whilst the age for women has been 60 since 1940.

How much Discrimination is there against Women

As was discussed in Chapter 4, the gross difference between male and female earnings (i.e. ‘statistical’ discrimination) will overestimate the extent of ‘pure’ discrimination. The whole of the statistical difference is unlikely to be solely the result of male. prejudice leading to women being paid less than men doing the same work and denying women equal opportunities for advancement. Part of the difference will be due to causes which are ‘economic’ rather than discriminatory in origin. In Chapter 3 we attempted to show the contribution of various factors to this differential and we were able to isolate occupational distribution, hours of work and age. Allowing for these factors the major source of the difference in average earnings was the fact that women were paid substantially less than men within each occupational category. In this chapter we attempt to isolate supply-side differences between the sexes which would ‘explain’ at least a part of the difference, so that the remainder can then be regarded as an upper estimate of the extent of discrimination.