Chapter 2 describes how economic models are used to explain economic observations. This essay explores the way labor economists look at the evidence and apply models to understand gender pay gaps.

Is there a gender pay gap in the United States? Although many people speak generally about the difference between the average pay of women and men in this country, labor economists such as Francine Blau of Cornell University and June O’Neill, formerly at Baruch University and now director of the Congressional Budget Office, have confirmed the existence of a significant gender pay gap—but one that has narrowed in recent years. Women earned 60 percent as much as men earned on average in 1980, but by 1990, women’s wages were on average 71 percent that of men.

In order to explain the gender pay gap, labor economists look at the evidence and apply models. Such models indicate that the pay gap is due either to differences in the qualifications of workers (schooling or experience) or to discrimination. According to Francine Blau, "A large body of evidence . . . suggests that both gender differences in qualifications and labor market discrimination as conventionally measured play a role in explaining gender earnings differences. . . . Precisely the determining the relative importance of each factor is difficult, however."*

Determining the relative importance of qualifications versus discrimination is crucial in court cases involving gender discrimination, in which women bring suit against firms for illegally discriminating. Such cases also illustrate how economics can be used in a partisan as well as a scientific way. Consider, for example, Stender v. Lucky Stores Inc, a recent court case in which a California grocery store chain, Lucky Stores, was sued for discriminating against female workers.

Economists were called as expert witnesses for both sides. Labor economist John Pencavel testified for the plaintiffs, the women who brought the suit. He found that women at Lucky earned between 76 percent and 82 percent as much as Lucky’s male workers earned. Pencavel found that women were regularly placed in jobs that paid less than jobs given male coworkers, although there was no significant difference between the education and experience of the workers. There was little difference in the wages of the male and female workers within each type of job; but some jobs paid more than others and women happened to be assigned to the lower-paying jobs.

Joan Haworth, another labor economist, was an expert witness for the defendant, Lucky Stores. She reported survey evidence showing that Lucky’s assignment of women and men to different jobs reflected differences in the work preferences of men and women. Thus, Lucky justified its job assignments by arguing that there was a gender difference in attitudes toward work. Lucky argued that its employment policies were based on observed differences in the career aspirations of male and female employees. For example, one manager at Lucky testified that women were more interested in cash register work and men were more interested in floor work.

After weighing the facts and economic arguments, Judge Marilyn Hall Patel decided the case in favor of the plaintiffs. Although male and female employees received equal pay for equal work, she concluded that Lucky’s employment policies involved discrimination. Judge Patel wrote: "The court finds defendant’s explanation that the statistical disparities between men and women at Lucky are caused by differences in the work interests of men and women to be unpersuasive."^†

The decision is a landmark because of the economic analysis that showed that discrimination could exist even if men and women were being paid the same wage for equal work. Of course, not all sex discrimination cases are decided in favor of the plaintiffs. But whoever wins a given case, economics is almost always a key consideration in the judge’s decision.

*Francine Blau, "Gender and Economic Outcomes: The Role of Wage Structure," Labour, Vol. 7, 1993, pp. 73–92.  

^†West’s Federal Supplement, Vol. 803 (St. Paul, Minn.: West Publishing Company, 1993), pp. 259–337.