Why are women paid less than men?

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Why are women paid less than men?

It’s been twenty years since the equal pay legislation and the gap between women’s and men’s wage is as big as it ever was.  On average female post-graduates start their working lives at a 15% lower wage than men.  It is also estimated that this gap will grow to approximately 45% when women are in their mid-40’s.

In this piece of coursework I will attempt to discover if there is a difference in wage rates in the UK between men and women in the jobs, which require the same skills.  I will need to decide if the wage difference if due to discrimination or due to other economic factors such as education and lifestyles etc.  I am going to look at the wage pattern at a local school and see if there are any differences in the wage rates, and if these results fit the national trend.


Real wage rate is determined by the demand and supply of labour.

In a perfect market, where labour is homogenous, wage rates would be identical as the same skills and education would be required for each job.  There would be perfect knowledge, perfect mobility, no trade unions and no barriers to entry.  However, we do not work in a perfect market so wage rates differ as there are many individual labour markets requiring different skills.  This stops people moving between job as they do not have the skills needed for that labour market.

The demand for labour is downwards sloping showing that the lower the wage rate, the more labour is demanded.  At lower wage rates, employer’s costs are lower so more workers can be employed.  Marginal Revenue Product (MRP) explains why the demand for labour is downwards slopping.  The MRP is the amount that is added to a firm’s revenue by employing one more worker.  A firm will employ workers up to the point where the extra cost of hiring an additional worker is equal to its MRP.  Beyond this point, their costs of hiring an additional worker would outweigh the profits received from the product.  MRP declines in the short run with each additional worker as a result of diminishing returns.  Diminishing returns is when increasing expenditure and investment beyond a certain point ceases to produce a proportionate yield.  When a firm will have passed the optimum level of production that is most productive efficient, diminishing average returns will occur.

The supply of labour is upwards slopping.  This is due, to the fact that more people will have the incentive to work for a higher wage rate.  Therefore the supply for labour increases when wage rates increase.

The demand and supply for labour can change for a number of reasons, leading to a change in the markets equilibrium, wage rates and employment figures.

An increase in demand will occur if the MRP increases.  This may be due to:

  • An increase in productivity which leads to an increase in output per worker
  • An increase in the selling price of the product which increases the value of the output of each worker
  • An increase in demand for the product as labour is a derived demand- labour is only demanded as it produces a good/service which is demanded
  • The price of capital increasing which leads to a substitution of labour for capital
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Supply for labour will increase when:

  • There is an increase in the number of available workers due to demographic changes
  • Taxes are reduced or a minimum wage is set which gives people incentives to look for work.
  • Conditions deteriorate in one market making another industry look more attractive

Each worker has a unique factor of production with a unique sat of characteristics.  Wage rates are usually determined by:

  • Part of the country you live in
  • The amount of hours you do (part time and full time)
  • The skills and education required
  • The type of shift ...

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