Urban wage premium greater for women than men

New research on the earnings boost of working in cities shows women benefit more than men.



Women who work in cities in the UK benefit from an urban wage premium that is 43% larger than that for men, according to a study presented at a major conference this week.

The study, led by Sabine D’Costa from the University of Westminster, shows that whilst male employees of similar age and working in similar jobs in the same industry earn 2.3% more per hour in cities than in rural areas, women employees earn 3.3% more in cities than similar women in similar jobs in rural locations. For women, the study shows, urban jobs represent a particularly important opportunity to increase wages.

Presenting their research at the Royal Economic Society 2021 annual conference this week, the researchers say this phenomenon is not only observed in very large cities such as London, although the wage premium from working in London is the largest, with men earning 7.1% more there than in equivalent jobs in rural areas and women earning 9.3% more in London.

Nevertheless, more able, productive or ambitious women are less likely to work in cities, compared to productive men.

The researchers say the reason for the better premium for women is that women have more opportunity to change occupation in cities. Occupational upgrading, they say, explains about 30% of British women’s urban wage premium.

They add: “The way forward to help close the gender pay gap is therefore to take corresponding local measures to facilitate their access to urban jobs. In addition, we show that cities offer women an opportunity to improve their job match and obtain a higher wage by switching to a more appropriate occupation corresponding to their skills (more than for men): this raises an important shortcoming of rural labour markets that do not function efficiently for women and calls for a range of place-based policies improving both women’s practical access to jobs farther away from home and their job search through networking schemes, employment support and coaching. This will be even more crucial when developing post-Covid crisis policy responses to widening economic differences between men and women.”

Gender discrimination is bad for the economy

Another paper presented at the conference this week focuses on gender discrimination and the impact on economies recovering from economic shock.

The research led by Daniel Stempel from Heinrich Heine University Düsseldorf also finds that monetary policy reactions by central banks that aim to mitigate negative macroeconomic effects not only increase discriminatory wage gaps, but are also less effective.

The study analyses the effects of gender discrimination by firms on macroeconomic outcomes. It suggests that adverse economic shocks like the COVID-19 pandemic would be less detrimental to economic activity if there were no gender discrimination.

The authors find that even a low initial extent of gender discrimination implies a larger negative impact of such an event on Gross Domestic Product (GDP). Furthermore, they find that monetary policy reactions by central banks that aim at mitigating these negative macroeconomic effectsdo not only increase discriminatory wage gaps, they also are less effective.

The authors say: “These results have considerable policy implications: gender discrimination does not only lead to inefficient outcomes for women but has negative implications for the entire economy. This implies that institutional measures that aim at combating gender discrimination (such as pay transparency laws, for instance) may also be efficient stabilisation tools.”

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