1.

In most advanced economies, women's hourly earnings are, on average, lower than
men's hourly earnings and there is a positive return to higher levels of education in
terms of earnings. Do these two facts together constitute evidence of discrimination in
the labour market?

Discrimination in the labour market is generally defined as when employers make decisions
based on prejudices such as race, sex, religion or sexual orientation. This essay will discuss
whether the gender wage gap and the positive return to higher education constitute evidence of
this.

According to a recent analysis by Gould, women are still being paid 83 cents for every dollar
that a man makes. Prima facie, this clearly seems to suggest discrimination in the labour
market, as employers are failing to treat both sexes equally. Nevertheless, there have been
many arguments that have been made that attempt to explain the wage gap without distributing
all the fault to discrimination (although most would agree that discrimination plays a role).

For example, women tend to work in jobs that pay less, such as nursing or teaching, whereas
much more men are surgeons or engineers. Some would suggest that this is due to innate
biological dispositions (e.g 1 Beckwith on superior male mathematical ability). This notion was
prevalent and asserted by other scholars, such as the ex-president of Harvard University Larry
Summers who controversially believed women would be less qualified in STEM careers due to
different intrinsic abilities. However, more recent studies such as that of Janet Mertz2 have
shown that there is no innate biological difference between the two sexes in terms of
quantitative reasoning (which can be seen through major breakthroughs by female
mathematicians such as Ada Lovelace - the first computer programmer) and instead, the
observed difference in mathematical ability is due to societal and cultural expectations for both
sexes.

To elucidate, Mertz would posit that this is due to societal pressures and expectations for
women to work fewer hours so that they are able to look after their family, whereas the man is
expected to be the ‘breadwinner’, who needs to earn enough money to support their family.
Although this would be societal discrimination, it is not market-based, meaning that it is not
discrimination within the labour market. However, this is only referring to disparities within
different sectors, but a disparity between genders within the same sector (e.g ‘male NHS
doctors earning 17% more than their female peers’) does imply discrimination within the labour
market.

Another classical argument to explain the gender wage gap is the ‘human capital theory’ which
suggests that the gender pay gap is due to men having more ‘human capital’ (knowledge; skills;
work experience) than women, which then gave rise to lower productivity, and therefore lower
wages for women. However, the male advantage in human capital has diminished over the
years. This can be seen in a variety of ways (e.g 56.6% of women are in higher education

1
http://beck2.med.harvard.edu/jon_genetics_society/BeckwithGender.pdf
2
https://pubmed.ncbi.nlm.nih.gov/19487665/

Written by Neel Podder Page 1

compared to only 44.1% of young men), and yet the wage gap still persists, showing that this is
not an adequate explanation for the disparity between male and female wages.

Unlike other theories mentioned prior which focus on why women work in lower-paying sectors,
the ‘undervaluation theory’ questions why sectors which are female-dominated are
worse-paying in the first place. Proponents of the theory would assert that society undervalues
certain types of work strictly because women are the ones doing the work. Due to this,
employers will pay less to industries like housekeeping (which is an industry which is 88%
female). On the other hand, it is enigmatic whether this can be considered discrimination in the
labour market since although the employers are clearly paying these fields less, a lot of
female-dominated fields do not require the qualifications and training that jobs such as doctors
or engineers require. In other words, a lot of female-dominated jobs are classed as
low-skilled/unskilled labour and thus many would argue that those jobs being paid less is
justified as many could do those jobs. In terms of a supply and demand diagram, a shift of the
supply curve to the right (a supply increase) would decrease the demand, and therefore the
market equilibrium would be set at a lower price. An attempt to increase the price would likely
result in an excess supply of labour (a form of market failure).

According to the UK BIS department, ‘the average graduate will earn comfortably over £100,000
more … than a similar individual with 2 or more A-Levels who does not continue into higher
education’. Interestingly, there is a higher return to a degree for graduates with ‘protected
characteristics’ such as women and people hailing from lower-income backgrounds. As data
from the DfE shows, 26.6% of pupils who received free school meals at 15 went to university,
compared to 45.7% of students who did not, suggesting that higher education is much more
accessible for students who come from wealthier households. These two facts together mean
that students from poorer backgrounds are less likely to attend university, which then, in turn,
reduces their chances of finding a well-paying job.

However, there is also statistical evidence against the view that a positive return to education
hurts those with protected characteristics (e.g more women are in higher education than men
and 85% of women gain net positive lifetime returns to higher education when compared to only
three-quarters of men3). Moreover, students of every other ethnicity are more likely to go to
university than white students4. Therefore, it could be argued that a positive return to higher
education is a step in the right direction and could be used to partially fix the racial and gender
wage gap.

Individuals with higher levels of education are often paid more than those without, even within
the same job (e.g median salary for a personal assistant with a degree is $63,860, whereas the
median salary for a personal assistant without a degree is 38,990). This is based on the
assumption that those with higher levels of education are more likely to be successful in the job.

3
https://www.hepi.ac.uk/2020/03/07/mind-the-gap-gender-differences-in-higher-education/
4

https://www.ethnicity-facts-figures.service.gov.uk/education-skills-and-training/higher-education/entry-rate
s-into-higher-education/latest

Written by Neel Podder Page 2

Some would argue that those without a degree are more likely to have had actual relevant work
experience (although there are exceptions) and so, they should be treated as either more or
equally qualified to those with a degree.

In addition, as shown by a study done by Harvard Business School 5, nine out of ten job
postings required a bachelor’s degree, even though they did not contain different duties to those
that did not. Some would say that this is discrimination in the labour market in terms of the hiring
process; those without higher education are immediately discounted even though they may
provide a valuable addition to the company.

On the other hand, there is a case to be made for those with a degree being more qualified
since they have gained knowledge from reputable experts in their respective courses, especially
if they have graduated with a first from a high-ranking university. In addition, some would say
that a degree shows proof of dedication and commitment, meaning that candidates with a
bachelor’s degree have a higher potential as a worker in the long run, which is yet to be
actualised. The Harvard Business study found that employers feel that applicants with a degree
possess more hard and soft skills, making them more job-ready, employable, and likely to be
successful.

Overall, I would posit that the gender wage gap and the positive return to higher education
constitute evidence of discrimination in the labour market to an extent. Regarding the gender
wage gap, I would argue that the income equality between the sexes is too significant and
persistent to not include some form of prejudice, especially as historical attempts to explain the
wage gap have become redundant (e.g human capital theory; superior male mathematical
gene). On the other hand, I do not believe the undervaluation theory to be cogent, given the
earlier counterarguments of female-dominated industries generally being unskilled labour, and
would also distribute some of the culpability to societal factors that make women choose
lower-paying careers. In addition, there are some careers in which women earn more (e.g male
models earn 75% less than their female counterparts). In reference to education-based income
inequality, the earlier Harvard study found that employers admit that ‘having a degree does not
guarantee that a candidate will be any better at the job’. I would proffer that this shows that there
is discrimination in the labour market, at least to a limited extent. However, as mentioned prior,
there are benefits to university graduates in terms of more probable hard and soft skills. In
addition, there are some careers in which a degree is required (e.g medicine or law). I do not
hold the position that someone should be allowed to become a doctor/lawyer without getting the
respective degree, as they require specialized knowledge, skills, and training that can only be
acquired through formal education and are critical to society. In the final analysis, the gender
and degree-based wage inequality provides evidence of discrimination in the labour market to
an extent, but should not be taken as the only factor.

5
https://www.flexjobs.com/blog/post/education-vs-experience/

Written by Neel Podder Page 3

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