Labour Market Matters - February 2013

Wage disparity can be driven by a number of different factors. Previous research has found evidence that disadvantaged workers often face a “glass ceiling†: a barrier that limits access to high-wage jobs. Because of data limitations, however, researchers have not been able to distinguish whether wage disparities are driven by poor access to jobs at high-wage firms, or poor wage outcomes within firms. CLSRN affiliates Krishna Pendakur and Simon Woodcock (both of Simon Fraser University) introduce the idea of a “glass door†in a paper entitled “Glass Ceilings or Glass Doors? Wage Disparity within and between firms†(CLSRN Working Paper no. 46). They define a “glass door†as a barrier that limits access to employment at high-wage firms for disadvantaged workers. The study assesses the extent to which exclusion from high-wage jobs is driven by a glass ceiling, or a glass door effect. Empirically, the magnitude of the glass door effect is given by be the difference between a within-firm wage gap measure, and a corresponding economy-wide measure. Recent research has found that the increase in the wage returns to skill and the growing prevalence of performance pay jobs to account for approximately a quarter of the growth in wage inequality over the 1980s and 1990s and nearly all the wage inequality growth in the upper fifth of the earnings distribution. It has been suggested that racial differences in access to high-paying jobs points to evidence of occupational segregation of black workers. When combined with lower levels of human capital and earnings for blacks and the possibility of strong network effects in referral, hiring, and promotion, the incidence and influence of performance pay should not be assumed to be consistent by race. In a paper entitled “Performance Pay and the White-Black Wage Gap†* CLSRN researchers John S. Heywood (University of Wisconsin-Milwaukee) and Daniel Parent (HEC Montreal) show that the reported tendency for performance pay to be associated with greater wage inequality at the top of the earnings distribution applies only to white workers. The white-black wage gap among those in performance pay jobs is found to become greater with higher pay even as the same gap shrinks over the distribution for those not in performance pay jobs.