A hierarchical theory of occupational segregation and wage discrimination

WILLIAM G. JOHNSON [*] Becker's model of discrimination is extended to the case where men exhibit distastes for working under female managers. The distribution of women in the resulting occupational hierarchy depends on the number of women in lower occupations, the wages of male workers in lower occupations, and male distastes for female management. Thus, there exists an occupational sorting function, related to wages, that determines the occupational distribution of women. We integrate this sorting function into a standard wage equation to derive a new decomposition of male-female wage differentials and apply it to a sample of insurance industry workers from the 1988 CPS. (JEL J71) I. INTRODUCTION This article describes and tests a model that relates wage discrimination to occupational segregation. The model is based on the hypothesis that labor market discrimination against women depends more on the positions of men and women in job hierarchies than on a reluctance of men to work with women. Stated simply, we assume that men are reluctant to work for women even if they do not object to working with women. We believe the hierarchical model more directly represents the social history of attitudes toward female workers than the usual models of tastes for discrimination based on physical or social distance. The hierarchical model also permits us to derive an empirical measure of the effect of occupational segregation on wage differentials that is directly linked to theory. In particular, the model predicts that the proportion of women declines exponentially as one moves up the job hierarchy. Therefore, there exists an occupational sorting function related to wages that determines the occupational distribution of women. We integrate this occupational sorting function into a standard wage equation to derive a new wage decomposition that accounts for occupational segregation. The model extends the analysis of discrimination against women beyond predictions of occupational segregation by recognizing that abilities to acquire managerial skills vary among individuals of both sexes. Thus, even in the presence of discrimination, the comparative advantage of some women as managers more than offsets the costs incurred to compensate for the tastes of the men whom the women supervise. We apply the new decomposition formula to a sample of insurance workers from the 1988 Current Population Survey (CPS). The results imply that, for this sample, approximately one-third of the male-female wage differential can be attributed to the occupational segregation of women. The article is organized as follows. Section II summarizes the literature on female work roles that is the basis for our hypothesis of male discrimination against female supervisors. The hierarchical theory of discrimination is developed in section III. Section IV presents simulations, based on the hierarchical model, to derive the prediction that the relative proportion of females declines exponentially as one moves up the job ladder. Section V derives the new wage decomposition, and section VI presents results from the CPS data. Section VII concludes. II. THE SOURCE OF HIERARCHICAL DISCRIMINATION There is a considerable literature that supports the assumption of hierarchical, gender-based discrimination. [1] Although the evolution, nature, and sources of men's attitudes toward working women are topics beyond the scope of this article, the principal findings of the research can be briefly summarized as follows. Women's traditional role in society was to manage the home and nurture children, leaving their spouses free to work for wages. Men were expected to be dominant in the world of work, whereas women were expected to support but not direct men's work activities as indicated in Bergmann (1986) and Fuchs (1988). Thus, female managers violate traditional work roles when they supervise men. [2] Goldin (1990) indicates that before 1950 it was typical for women to work for wages only until they married. …