1 Gender Pay Differences in the European Union: Do Higher Wages Make Up For Discrimination?

This paper explores the role of social interactions at the wor k floor for understanding gender pay differentials in the EU, using data from the European Working Conditions Survey. Sex similarity between subordinate and supervisor decreases the gender pay disadvantage for women in non-managerial occupations, though wo rking for a female boss is associated with a lower wage. This may point at a discrimination-for-pay effect. Female workers can avoid part of the discrimination against them by working for a woman and accepting lower pay. And when they face stronger discrimination in the situation of a male supervisor, they are “bribed ” by being offered a better salary. Different results are obtained for managerial workers, and for this group sex similarity between worker and superior actually puts women at a further disadva ntage. We also inspect whether wage formation is influenced by the proportion of women in a sector, but find no empirical support for this so-called social bias theory. Our main message here is that the traditional human capital model tends to study the wage formation process for workers in isolation, while gender pay differentials seem to be at least to some extent a sociological phenomenon, stemming from social interactions on labor markets. 1