Friday, 10 January 2014

Maternity penalties: average is over edition

Matt Yglesias makes the case that, in a world in which workers are not interchangeable widgets, compulsory jury duty places an unreasonable burden on firms.
The implicit model of jury duty is one in which workers are basically interchangeable widgets. John is going to be missing for a while, so Jane will pull some extra shifts to cover for him. Since different people have different tastes and circumstances, the odds are pretty good that at any given time there's someone on staff who actually prefers to work longer hours in exchange for higher pay. Consequently, John is put out a bit but basically the company trundles on.
There obviously are some work roles that function this way. But there are a lot of work roles that don't. Even when we have people doing similar jobs, that doesn't mean anyone can actually double-up. If I'm on a jury, Weigel can't write my blog while also writing his blog. He could try to write his blog during regular business hours and then write my blog at night, but all the news will have already happened. By the same token, even if other editors step up to fill in for a missing editor and work longer hours the reduction in parallel processing still means articles will be published more slowly. The impact of the slowdown then trickles through the entire enterprise and lowers everyone's productivity. And I think we're hardly unique in this regard. People are collaborating in complicated ways in workplaces all across America, and while nobody is irreplaceable, it's also fairly unusual to just be able to swap a given person in and out without consequence.
Jury duty is random-draw. At least here in New Zealand, you'll have a few weeks' notice and trials might last a fortnight. If your employer can make a case that you're irreplaceable during that period, then you can get an exemption or deferment.

Imagine that jury duty were longer: three months to a year if called. Imagine further that one identifiable group of employees - half of all potential employees - would never ever be called for jury duty. And imagine further that, among those in remaining group, there were a pretty high chance of being called for jury duty a couple of times while in their 20s and 30s. And there's no opportunity for employers to get deferment for critical staff. Would you, as an employer, lean towards hiring the first group for task-critical roles, even though you think jury duty is really valuable and important?

Maternity leave isn't jury duty: it's chosen by the employee. We then have two effects going on. Women who wish to have children disproportionately select into jobs allowing flexible time arrangements and less overtime. And, employers fearing incipient maternity leave may be reluctant (all else equal) to assign women of higher childbearing likelihood into mission-critical and higher paying tasks.

Claudia Goldin's superb Presidential Address at the AEAs makes the case that the structure of mission-critical jobs in some industries is what's driving the gender wage gap. Women disproportionately prefer workplace flexibility over pecuniary benefits. And some high-paying jobs require massive time investment.
Residual differences by occupation in earnings by gender, I will demonstrate, are largely due to the value placed on the hours and job continuity of workers, including the self-employed.23 Individuals in some occupations work 70 hours a week and receive far more than twice the earnings of those who work 35 hours a week. But in other occupations they do not. Some occupations exhibit linearity with respect to time worked whereas others exhibit nonlinearity.24 When earnings are linear with respect to time worked the gender gap is low; when there is nonlinearity the gender gap is higher. 
... In many workplaces employees meet with clients and accumulate knowledge about them. If an employee is unavailable and communicating the information to another employee is costly, the value of the individual to the firm will decline. Equivalently, employees often gain from interacting with each other in meetings or through random exchanges. If an employee is not around that individual will be excluded from the information conveyed during these interactions and has lower value unless the information can be fully transferred in a low cost manner.
The point is quite simple. Whenever an employee does not have a perfect substitute nonlinearities can arise.25 When there are perfect substitutes for particular workers and zero transactions costs, there is never a premium in earnings with respect to the number or the timing of hours. If there were perfect substitutes earnings would be linear with respect to hours. But if there are transactions costs that render workers imperfect substitutes for each other, there will be penalties from low hours depending on the value to the firm.
I've not seen a better single compilation of the existing evidence on the gender wage gap.

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