Evidence of Wage Discrimination - Essay Example

Evidence of Wage Discrimination Problem This analysis will focus on the implications of Gender arbitrage in economic growth. To reduce the scope of the problem, this paper will analyze the case of South Korea based on the article, Profiting from Sexism (2012). In support of the findings, the analysis will include other articles that describe gender discrimination as an economic problem. Scope of the problem In analyzing the problem of gender arbitrage, it is important to consider the issue of wage discrimination. Another economic consideration is marginal productivity since the country underutilizes its human capital. Classical economists, such as Lewis 1954, widened the aspect of wage to state that, wage determines the overall level of employment. Research Questions The article, Profiting from Sexism (2012), focuses on wage discrimination in South Korean labor markets based on gender. This raises two essential questions; 1. What evidence of wage discrimination exists and, why? 2. What will happen to the differential between wages of men and women of equal qualifications if multinational companies keep moving to South Korea and the process of "gender arbitrage" described in the article continues? Why? Evidence of Wage Discrimination Sexism affects productivity adversely. Economists have established that gender arbitrage in fields of economic advancement reduces the pace of development. South Korea is very advanced technologically, however, its economy is not level with Japan’s economy. An insight into OECD policies reveals that Japan and South Korea possess equal factors of production and economic growth capacities. Even so, South Korea still lags behind. According Solidarity (2012), records indicate that, a woman in South Korea earns 27% less than what a man in the same position would earn. Women make up less than 1 % of the managerial positions. This a very small percentage compared with the fact that, women in the UK and America account for 10% of executive positions. Modern economics recognizes the potential women possess and, the implications of wage discrimination. South Korea’s economic stagnation according IMF statistics is evidence enough that human capital goes to waste. Reason for wage discrimination in South Korea Wage discrimination in South Korea is deeply rooted in the cultural beliefs and practices. In the Korean culture, the woman’s role focuses on running domestic chores. Globalization has led the belief that relegation of women is an outdated practice. It is important to note that, outdated cultural practices form the basis for lack of economic growth. Movement of Multinational companies to South Korea 1. Short run Analysis Statistics indicate that only 60% of female graduates from South Korea between the ages of 24-65 years have employment. Therefore, the labor market in South Korea has a surplus. Firms hire men even though some women might have better qualifications than the men they hire. Based on O Ring theory of economic development, the skill set in Korean based firms contains an unhealthy combination of incompetence. Elasticity Consider multinational companies moving into South Korea. The discrimination of women creates an opportunity for the multinational corporations. They hire qualified women personnel at a low wage rate and create a competitive edge. In the short run, the supply of labor as an input is inelastic. Therefore, the differential wage aspect between men and women will remain unchanged because; 1. Labor supply remains constant; thus, there is no competition for inputs. The multinational firms make a rational decision to hire female workers at the original wage to reduce cost of production 2. Multinational firms are capitalistic and, they tend to exploit workers. The atmosphere of sexism in South Korea makes the Korean labor market an easy target. 2. Long run analysis An increase in the number of Multinational companies moving into South Korea leads to a decrease in the supply of labor. Eventually, the labor market will become flexible. In the long run, Multinational firms utilize all the available cheap labor to make the desired profits. It is true to state that, these companies present competition to local companies. Competition will lead all firms to seek high level qualified human capital including the women. Consequently, women cannot agree to low wage given they possess the same skill set as men. Conclusively, the wage differential between men and women will reduce significantly in the long run. Persistence of Gender arbitrage in South Korea during economic developmental phases only strengthens the foreign companies. Reason-: If gender arbitrage extends into the future, then Multinational companies will continue to poach for cheap labor. Korean based companies will tend to maintain their ideals of hiring fewer women. The Multinational companies take advantage of unemployed women. End result-: Multinational companies reap more profits and this may lead to economic imbalance. An influx of foreign companies is inevitable under these circumstances. Solution It is not possible to change the ideals of a country. Trying to influence the issue of gender arbitrage, sums up as interfering with a people’s culture. Therefore, the best solution lies in the manipulation of economic forces, so that, change comes from economic forces of supply and demand. The best solution lies in wage adjustment by the government. The government should set the minimum wage for female employees. This follows the implementation of the equality act passed in 1987. Setting minimum wage requirements from firms will ensure that firms do not exploit female workers and gain from sexism. According to Imai (2012) the government should promote liberalization policies. Gender arbitrage will change if people develop an open mind based on female workers in companies. The economic perspective of South Korean companies can change in response to the effects of competition. In this case, foreign Multinational companies will be influential in the introduction of new ideals where hiring female workers becomes equivalent to male workers. South Korean companies will be under pressure to hire women at a high wage rate in order to maintain a competitive edge. Works Cited Imai, Hiroshi. Asian Economic Review: The Employment Situation in South Korea. 13 April 2012. http://www.jri.co.jp/english/periodical/economic/AERe199903korea/ Pesek, William. Japan's Sexism Makes for Terrible Economics: The Ticker.14th April 2012. http://www.bloomberg.com/news/2011-11-22/japan-s-sexism-makes-for-terrible economics-the-ticker.html Solidarity, Lawrence. South Korea on Sexism. 26 Oct 2010. 14 April 2012. http://www.lawrencesolidarity.org/2010/10/26/south-korea-on-sexism/ The Economist. Gender arbitrage in South Korea: Profiting from Sexism. 13th April 2012. http://www.economist.com/node/17311877 Read More