Suppose that after controlling for age and education, it is found that the average woman earns $0.80 for every $1.00 earned by the average man. after controlling for occupation to control for compensating differentials (i. e., maybe men accept riskier or more stressful jobs than women, and therefore are paid more), the average woman earns $0.92 for every $1.00 earned by the average man. the conclusion is made that occupational choice reduces the wage gap 12 cents and discrimination is left to explain the remaining 8 cents. explain why discrimination may explain more than 8 cents of the 20 cent differential (and occupational choice may explain less than 12 cents of the differential). explain why discrimination may explain less than 8 cents of the 20 cent differential.

Consider the following explanations

Explanation:

a. The whole argument is based on the controlling of different factors such as age, education and occupation among males and females. Now, this is very subjective how they have controlled occupation. For e.g. – Which all occupation they have considered for as stressful job, which all jobs they have considered as physical tiring jobs. Working in a refinery may be physical tiring job but then working in IT Company can also be tiring.

Therefore since there are lot of factors at play apart the one considered to calculate ratio’s we can say that these differential percentage points can always be more than or less than of what presented in question.

b. The same logic has to be applied to (b) as well. When we say that discrimination account for less than 8 percent of differential we implied to say that occupation nature may have more than 12 percent of differential. Now, if you use above logic and applied from occupation point of view.

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