Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations

We use a unique new data set that combines individual worker data with data on workers' employers to estimate plant-level production functions and wage equations, and thus to compare relative marginal products and relative wages for various groups of workers. The data and empirical framework lead to new evidence on numerous questions regarding the determination of wages, questions that hinge on the relationship between wages and marginal products of workers in different demographic groups. These include race and sex discrimination in wages, the causes of rising wages over the life cycle, and the returns to marriage. First, workers who have ever been married are more productive than never-married workers and are paid accordingly. Second, prime-aged workers (aged 35-54) are equally as productive as younger workers, and in some specifications are estimated to receive higher wages. However, older workers (aged 55+) are less productive than younger workers but are paid more. Third, the data indicate no difference between the relative wage and relative productivity of black workers. Finally, with the exception of managerial and professional occupations, women are paid about 25-35% less than men, but estimated productivity differentials for women are generally no larger than 15%, and significantly smaller than the pay differential.

Market Forces and Sex Discrimination

We report new evidence on the existence of sex discrimination in wages and whether competitive market forces act to reduce or eliminate discrimination. Specifically, we use plant- and firm-level data to examine the relationships between profitability, growth and ownership changes, product market power, and the sex composition of a plant's or firm's workforce. Our strongest finding is that among plants with high levels of product market power, those that employ relatively more women are more profitable. No such relationship exists for plants with apparently low levels of market power. This is consistent with sex discrimination in wages in the short run in markets where plants have product market power. We also examine evidence on the longer-run effects of market forces on discrimination, asking whether discriminatory employers with market power are punished over time through lower growth than non-discriminatory employers, or whether discriminatory employers are bought out by non-discriminators. We find little evidence that this occurs over a five-year period, as growth and ownership changes for plants with market power are generally not significantly related to the sex composition of a plant's workforce.

Market Forces and Sex Discrimination

We report new evidence on the existence of sex discrimination in wages and whether competitive market forces reduce or eliminate discrimination, based on plant- and firm-level data on profitability, growth and ownership changes, product market power, and workforce sex composition. Our strongest finding is that among plants with high levels of product market power, those employing more women are more profitable, consistent with sex discrimination in the short run when plants have product market power. We do not find that these discriminatory employers are punished over time through lower growth, or are bought out by nondiscriminators.