Differences Do Not Matter: Exploring the Wage Gap for Same-Sex Behaving Men
An emerging literature provides evidence that same-sex behaving men earn significantly less than different-sex behaving men. I corroborate these existing findings and explore the source of these earnings differentials. I show that differences in worker characteristics between same-sex behaving men and different-sex behaving workers cannot explain the significant wage differential that same-sex behaving men experience. Wage differentials for same-sex behaving men are surprising because sexual orientation is not a visible trait. It seems as though same-sex behaving men might use a strategy of “passing” to avoid discrimination. I develop a model of worker-firm interaction that incorporates passing. I show the existence of an equilibrium in which wage differentials reflect a compensating differential, where same-sex behaving workers accept lower wages in exchange for being able to reveal their sexual orientation within a tolerant firm. In this equilibrium, competition will not erode earnings differentials as traditional models of discrimination suggest.
Keywordslabor discrimination gay and lesbian wage differentials compensating differentials
JEL ClassificationsJ01 J31 J7
I would like to thank Mary Hansen, James Bono, John Willoughby, and Kara Reynolds (in addition to three anonymous reviewers) for their thoughtful comments that improved earlier drafts of this manuscript.
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