Equal Pay: Is the Pendulum Swinging Back?

Abstract

The literature on female pay suggests that a key determinant of female relative pay is the overall system of wage determination. The more deregulated the system the greater the gender inequality, reflecting the fact that women occupy a greater share of low wage occupations and, relative to men, are in a weaker bargaining position. Using the unique character of the Australian industrial institutional arrange ments, this paper conducts a within-country test of the hypothesis that labour market deregulation adversely affects female relative pay. Since the early 1990s institutional arrangements for pay determination and labour market regulation in Australia have undergone considerable change, although the reforms introduced vary. At one end of the spectrum there are regulatory systems based on individualism (e.g. Victoria's). At the other there are collective systems, such as in New South Wales. The research in this paper shows that women in highly deregulated systems have experienced the greatest deterioration in their relative earnings when compared to more collectivist systems. The paper thus cautions against further labour market deregulation, noting also that the results shown here may just be the tip of the iceberg with respect to gender earnings inequality.