David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

CHAPTER 10 The labour market
Table 10.6 Wage gap between men and women
Gender wage gap (%)
Country 1997
Austria 23
-
Denmark 13
France 10
Germany 24
Spain 29
Sweden 17
UK 26
2007
22
9
12
23
1 7
15
21
Source: OECD, Employment Outlook, 2009.
Age-earnings profiles may induce recruits to reveal their true career plans. If women, or any other group
with a high risk of quitting at a young age, accept the steeper profile, the firm can embark on training with
some confidence that its investment will not be wasted.
Some firms may still try to pay female workers less than male workers who are identical in every respect,
including their risk of quitting. This is overt discrimination.
Society may discriminate against women in more subtle ways. Our analysis suggests that paternity leave
for fathers, the provision of creches for working parents, or a greater acceptance of part-time working by
both sexes, would reduce the incentive for hard-nosed firms to decide to favour the training of men.
Whether or not society wishes to organize its work and home life on such principles is not just a matter of
economics.
In Table 10.6 some data about the wage differential between men and women for some European countries
are reported. The wage differential between men and women is measured as a percentage of the difference
between the median wages of men and women relative to the median wage of men. In the UK, in 2007,
women tended to earn a wage 21 per cent lower than men.
From Table 10.6 we can see that in most of the countries the wage gap between men and women has
tended to decrease over time (apart from in France); nevertheless it is still substantial in many cases.
Summary
• In the long run, a firm chooses a production technique to minimize the cost of a particular output. By
considering each output, it constructs a total cost curve.
• In the long run, a rise in the price oflabour (capital) has a substitution effect and an output effect. The
substitution effect reduces the quantity oflabour (capital) demanded as the capital-labour ratio rises
(falls) at each output. But total costs and marginal costs of output increase. The more elastic the firm's
demand curve and marginal revenue curve, the more the higher marginal cost curve reduces output,
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