Mobility, human capital acquisition and gender wage growth differences in the Australian youth labour market

Abstract

This thesis uses data from the Australian Longitudinal Survey of Youth, (1985-1988), to analyse the relationships that exist between wages, labour mobility and human capital acquisition. Conventional theory informs us that there are strong causal relationships between these factors, and that the expectation of intermittent participation will result in the accumulation of less human capital. The high job mobility rates of women have been cited as one explanation for their lower investment in human capital and their lower wages. The panel nature of the data set allows us to introduce a new dimension to the study of gender wage differences in Australia, namely to directly quantify the impact of labour mobility on wages. By 1988 the average wage level of 15-29 year old males is significantly higher than that of women in the same age group. We find that the size of the components of the wage gap differ according to whether or not mobility is accounted for. When mobility is accounted for the explained component of the gap increases whilst the unexplained (discriminatory) component simultaneously decreases. This has implications for existing literature. The wage differential is also found to vary considerably by mobility category and amongst those who have remained continuously employed between 1985 and 1988 it is highest amongst men and women who have stayed in the same job (as opposed to changing jobs). We find that job changing is similar in incidence between men and women but that women exhibit greater risk aversion to job changing than men. On the other hand, even amongst youth, women are twice as likely to experience discontinuous employment than men. Job changing is important in determining the wage levels of women, but not men, this is an interesting gender difference. A common outcome irrespective of gender is that discontinuous employment for what we define as "non-market" reasons such as pregnancy, child care or travel (as distinct from education or job search) has a negative impact on wages. The ALS data show that young women who leave employment to study earn significantly higher wages in 1988 than other groups of men and women, in fact by 1988 they represent the highest paid group. Of particular importance is our fmding that mobility is important in determining an individuals position in the relative wage distribution. For example, in 1985 women who subsequently remained in the same job were the top female income earners. By 1988 they had lost their relative position and were in the middle of the female income distribution. Their earnings had been over-taken by those of two groups of women, job changers and women who left employment to study. Both of these latter groups of women had improved their position in the relative wage distribution. However this was not true of men who remained in the same job between 1985 and 1988. They were the top male income earners in 1985 and the second highest income earner (second by a very small margin) in 1988. Our analysis also shows a significant decline in the relative income of both men and women who experience discontinuous employment for "non-market" reasons. In 1985 women who subsequently left employment for these reasons earned more than four of the five groups of males and three of the five groups of women. By 1988 they had completely reversed this to earn less than four of the five groups of men and less than each of the other groups of women. This obviously represented a very large fall in their position in the relative wage distribution. Men in tiiis same category do not experience such a significant decline in position, falling by one position from the middle income earners in 1985 (third highest out of five) to the second lowest (fourth highest out of five) in 1988. We can partially explain the larger reduction in the relative earnings of women in this category by looking at their unobserved ability and aptitude for paid employment and their lower (on average) completed education than other women. We will show that women in the youth labour market who experience discontinuous employment for non-market reasons, have completed less education than other women. Korosi et al (1993) suggest that ".. explanations of the gender pay gap for the whole population rely on career interruptions, family formation and work experience as reasons for women's relatively lower pay. Among the ALS respondents less than a quarter had married by 1988 and fewer were parents. Thus it is unclear that such life cycle factors would dominate any gender based pay differences." Contrary to these sentiments we find that such factors are of crucial importance in establishing an individuals place in the labour market, even amongst the youngest of our work force. Show more