Introduction
In the article “New market power models and sex differences in pay,” Ramson and Oaxaca discussed the
difference in pay between male and female employees. The authors focused on the role of monopsony
power over the labor supply in the market and how the same informed decisions regarding pay
discrimination based on gender. Ramson and Oaxaca (2010) aimed to identify the reasons which inform
labor supply elasticity for organizations and why there existed a difference between male and female
employees.
Article Summary
Ramson and Oaxaca (2010) developed their argument on the complex market environment based on various
economic models and their characteristics. While they noted that the labor market was heterogeneous,
workers’ preferences for job opportunities were influenced by incentives, insurance coverage,
location, and the wage system. Moreover, the employees had many opportunities available, hence, as
soon as they found a better position, they were willing to quit and move to a new job.
In addition, the authors discussed the wage elasticity factors and compared them between male and female employees. Ransom and Oaxaca (2010), identified that female employee had significantly lower-wages compared to their male counterparts for the same positions. Moreover, male employees were more willing to quit their job for a better opportunity as compared to female employees. Hence, female employees were more loyal as compared to their male counterparts with a lower elasticity of about 1.5-2.5 while male employees had one of 2.4-3. While management positions provided higher compensation in comparison to non-managerial roles, females had limited access to such opportunities due to low promotion rates. The authors also found that the monopsony models were unable to differentiate between the differences in wages based on the gender gap and that employers faced various challenges since workers and their unions controlled the contract-based opportunities.
Reflection
While I knew that wage differences exist between male and female employees, the article provided me
with further insight into the factors which inform the differences. Wage discrimination has been a
present factor in the field of labor economics and has informed how labor unions represent their
members. However, I was particularly surprised by the increased loyalty to organizations among
female employees. While they receive lower compensation, female employees displayed more loyalty
based on the lower elasticity of labor. I expected that the higher sense of more loyalty would
encourage organizations to increase female employee compensation as they performed the same
responsibilities as male workers. In the future, I believe the high probability of men to quit their
jobs based on wages being higher than that of female employees should be considered as a limitation
for employers to pay their male workers more. I noted that the data has a low relative impact on the
decision making of organizations working under a monopsony labor market. Hence, I believe that there
exists a need to educate the management of small and medium organizations on gender equality and the
potential of female employees.
Conclusion
According to Ramson and Oaxaca (2010), market models had an impact on the wage differences existing
between male and female employees. Through the comparison of the elasticity between the different
groups, the authors provide insight into the role of the monopsony power in the labor market.
Through using data and comparison of different factors which guide the different groups, the authors
provided credible work. The conclusion and information on the work can be used in organizations to
guide the improvement of employment policies.
References
Ransom, M. R., & Oaxaca, R. L. (2010). New market power models and sex differences in pay.
Journal of Labor Economics, 28(2), 267-289. doi:10.1086/651245.