Chocolate and Gold Coins

Thursday, October 27, 2005

Secondary Wage Effect

Years ago, I used to teach an undergraduate economics course at the University of Minnesota on labor economics. I should say that I was not a professor at that time, just a teaching assistant, but at the U of Mn, T.A.'s were almost the only teachers for undergraduate econ classes.

One subject that interested me was the discussion of the difference in female and male wages. An oft quoted statistic was that for every dollar a man earned, a woman would earn X cents. The “X” would keep rising over time. At that time it might have been 69 cents. Today I think it is up to 76 cents. This increase is reflective of a great revolution going on in the marketplace.

But the question is, “Why is it lower in the first place.” The answer, I knew, was that women have always tended to do different kinds of jobs than men did in the marketplace. Look around and you will see “male jobs” and “female jobs” all around. Sure, some jobs are mixed but many aren’t. But why is that?

One idea I had at that time was that most women who work have a husband who is the primary wage earner. It occurred to me that a secondary wage earner’s priorities in the labor market might be different than a primary wage earner’s. The primary wage earner cares almost exclusively about making as much money as possible since the family really depends on this income. But the secondary wage earner might trade a bit of salary for other benefits associated with work. These benefits might be pleasant work environment, nice job satisfaction, prestige, flexible work hours, no travel or relocation, and/or light work.

For example, my father was an engineer. The work often was unpleasant: he spent many years traveling to Nevada to work in caves that were built to test atomic bombs. Obviously the money was everything. My mother worked as a librarian. She could have made much more money as a bricklayer. Needless to say, she never considered such an option. She wanted to work, but the salary wasn’t the primary function of the work. She liked the work environment of the library and it gave her a lot of non-monetary benefits.

A regular reader of mine, Ravi of Ravisez pointed me to this interesting article on the male-female wage difference. Here is the money quote:

After years of research, I discovered 25 differences in the work-life choices of men and women. All 25 lead to men earning more money, but to women having better lives.

(Link).

For my wife and me, the roles are completely reversed: she now makes more money than I do. If she is transferred, I’ll have to follow and take whatever job is available. We have to do things that improve her career.

This blog is an example of a type of labor that provides no family income but immense job satisfaction. One might view “secondary wage effect” as a form of shirking. I suppose one might view blogging that way. But being the primary wage earner is always immensely satisfying in its own way.

16 Comments:

  • Reminds me of a discussion on a kind of parallel topic: Tennis. If I remember correctly, even to this day 3 out of 4 grand slams pay more to the men than women. However the argument was fairly simple in this case owing to the difference in the number of sets men play and women play. Since men play more sets, they 'hog' more viewership, hence more sponsorship, hence more money. Is there a flip side to this argument ?

    By Blogger abhishek mehrotra, at 10:18 AM  

  • Hi Abhishek
    Well the good news is that when men and women do the same things, typically the woman with similar qualifications does as well or better than the man. My wife has worked extremely hard and is quite capable so she makes a very good salary and should be promoted.

    The article points to a few examples where women really do well. I think over time the difference in pay between men and women will shrink and more men will suffer the secondary wage effect.

    By Blogger Michael Higgins, at 10:52 AM  

  • hopefully, when we finish our phd's, my wife will end up with a wonderful job, that makes lots of money, and then i can blog, and enjoy music all the time, without a care in the world.

    By Blogger Sunil, at 12:04 PM  

  • Hi Sunil
    I don't think it will work that way. But, the best of luck to anyway.

    By Blogger Michael Higgins, at 12:42 PM  

  • I think the tennis question is pertinent and I can explain why there's a difference in prize money. The reason is it is not equal work regardless of the number of sets played. I see no discrimination when women get paid less for the same championship because of difference in quality of tennis.
    If it were equal work, then women would be competing with men in the same league and not in a seperate league.
    Another factor is the difference in the amount of revenue generated by women's matches compared to the the men's matches. If they are the same, then women should be paid equally. If not Men's tennis is subsidizing Women's tennis.
    In the labor force, we don't talk about goods or services produced by women seperate from men and hence women are entitled to and are being paying at the same rate as men. Simple as that.

    By Blogger Ravi, at 1:05 PM  

  • At a work place, if you compare the wages of unmarried women and unmarried men (in which case there is no concept of a secondary wage), wouldnt the women still come out lower paid? I would think so.

    Even though I would agree that women might conciously choose non-monetary benefits, social outlook and legacies also play an important role. It hasnt been such a long time since the glass ceilings started breaking. Even recently, the Economist had an article on glass partitions in the corporate world.

    Maybe women getting paid lower than men is just an injustice, an unfair inequality? Or maybe men are just collectively better than women in their jobs?

    By Anonymous Sue, at 4:40 PM  

  • My mother worked as a librarian. She could have made much more money as a bricklayer.

    Interestingly, in India a librarian would definitely earn much more than a bricklayer.

    Regards Sunil's comment, isn't that the wish of every male blogger? :)

    By Blogger Patrix, at 5:20 PM  

  • Hi Ravi and Sue
    Ravi: sports is one area where women will probably lag in terms of salary for many years. I cannot think of any woman's team sport that has become popular. I thought woman's soccer had a big chance but it folded. Maybe the WNBA will succeed but I'm not sure. There is the issue that women will be compared to men and the men look more impressive.

    But I actually prefer women's tennis. It's more fun because they have longer rallies.

    Sue: I don't know about Holland but in the U.S. you will not see unequal pay for equal work. Where I work, we do a lot of analysis (basically we crunch numbers and write reports about them for the government). There are about 25% women in my division (economics). They're doing really well. Two have even made it to vice-president. One will be the new president when the current one retires, I'm fairly sure.

    But there is another division of physicists that is almost all men. Then there is a division of adminisration support types and they are almost all female. Obviously the secretaries don't get the same wage as the analysts, not by a long shot. You cannot compare their skill level and the difficulty of the work.

    Look around, men and women do different things. It is kind of interesting.

    By Blogger Michael Higgins, at 5:34 PM  

  • Neat Post Michael. I do agree that most women choose to opt for a better work atmosphere than enter the rat race.

    It's also easier for men to chase the gold, and leave their better half to bring up the family. If a woman tries that, I really fear the wrath she would encounter:-)

    Sure the atmosphere is changing, but career women are always facing difficult choices compared to their male counterparts:-)

    By Blogger Minal, at 1:28 AM  

  • the wage disparity is slowly vanishing. i'm there is not much discrimination at the entry level.

    Further, more and more employers are advertising themselves as Equal Opportunity Employers and trying to woo women employees. the leading magazines are conducting surveys which talk about the best companies for women. given this trend, i'm sure the wage disparities will disappear / reduce in the near future.

    Wonder what Neil french would say on this topic?

    By Blogger Kaps, at 6:34 AM  

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