Interview with Richard Anker on Occupational Segregation, Living Wages, and International Poverty Lines

December 2006

Richard Anker, former Senior Economist at the United Nations’ International Labour Office, took time during his tenure as a PERI Visiting Scholar to answer some questions from PERI Communications Director Debbie Zeidenberg.

DZ: You’ve done a lot of work in the area of occupational segregation internationally—the predominance of one gender in an occupation, which is a pervasive pattern both in the U.S. and elsewhere. What harm does occupational segregation do to individuals or society?

RA: Approximately half of all workers in the world work in an occupation that is highly gendered. There are a number of negative aspects associated with the segregation of occupations between men and women. First of all, occupational segregation reinforces and perpetuates gender inequality and bias in society. In my opinion, gender stereotypes in the labor market and gender stereotypes in other arenas of society and the home are intertwined. Breaking down biases and stereotypes in one area such as the labor market will help reduce it in other areas. Second, occupational segregation reduces labor market options open to individuals. This means that many individuals are not able to reach their full potential, as they face de facto barriers in the occupations available to them. Third, for the economy as a whole, occupational segregation increases labor market rigidity and reduces economic efficiency, since the potential workforce is not optimally allocated across occupations. Fourth, occupational segregation forces many women to crowd into a relatively small set of available occupations and this lowers women’s wages. This not only negatively affects women’s status and independence; it also reduces investments in women’s education. Fifth, occupational segregation increases the poverty rate, because it reduces the income of female-headed households where poverty is known to be higher. A sixth and related negative effect is on children’s welfare, since women around the world are mainly responsible for their care, so more female-headed households in poverty means more children in poverty.

DZ: Is the occupational segregation we see here in the U.S. typical of what is happening internationally?

RA: It is similar to that in other countries in the sense that there is a high level of gender stereotyping in the U.S. labor market. Almost all nurses, pre-primary teachers and secretaries are women in the United States, while almost all engineers and construction workers are men. But it is different than in most other countries in two senses. First, progress in the reduction in occupational segregation since 1970 has been unusually rapid in the United States. Second, the extent to which men and women work in highly gendered occupations (which I have defined in my work as occupations where the ratio of male to female or female to male workers is at least a 4 to 1) has an usual (but not unique) pattern in the United States: the percent of men and the percent of women who work in such occupations is approximately the same. What is much more common in other countries is for the percentage of men who work in a male occupation to be much higher than the percent of women who work in a female occupation. One statistic that illustrates both of these differences is that the proportion of male workers who work in a male occupation fell from approximately 2 out of 3 in 1970 to approximately 1 out of 3 in 2000 whereas the proportion for women who work in a female occupation fell from approximately 1 out of 2 in 1970 to approximately 1 out 3 in 2000.

DZ: What policy approaches have been tried around the world, and what works?

RA: Among the policy options for achieving wider occupational choice for men and women, it is important to note that only some are directly concerned with occupational segregation. There are, of course, education and training policies and programs that encourage and support women and men to obtain nontraditional skills. Without this education or training, women are effectively barred from certain occupations. It is important to remember that it wasn’t very many years ago that women in the United States were effectively excluded from the sciences. When my wife was in high school in Brooklyn, she could not go to the magnet school for science because girls were excluded from attending. As regards training, it is important that women have equal access and encouragement for various trades such the building trades that are now almost exclusively a male domain around the world. Where unions are active in these trades, it is clear that their active participation is important if women are ever going to enter these occupations.

From a legal perspective, anti-discrimination laws that provide a legal basis for breaking down barriers based on sex discrimination pressure employers to be more even-handed. Equal opportunity and affirmative action programs can provide an effective means to reducing segregation, although they are not widely used.

It is common to think of facilitating policies and laws that help women to combine work and family responsibilities as important, such as maternity leave, day care and after school care, and support for single parent families. While there is little doubt that these are critical for working women, it is not so obvious that they are effective as regards occupational segregation, since they are not occupation specific.

Finally and most important for me are the wide array of policies and programs that target gender stereotypes, since in my opinion since these have to be changed inside and outside the labor market if occupational segregation is to continue to decline. This change in gender beliefs and prejudices needs to take place in all of society: the media, workplace, home, government, schools, workers’ organizations, etc. One example is maternity leave. This should be parental leave; furthermore, in order to encourage men to take parental leave, I would include a provision as is done in some Nordic countries that if both parents do not use the available leave, some of those weeks would be lost to them.

DZ: In countries where female labor force participation remains very low, is occupational segregation important to tackle? Or is it more important to get women into the labor force, and broaden their opportunities afterwards?

RA: Both are important, for example in the Middle East. Women in the Middle East comprise a very small share of the non-agricultural labor force--only around 15 percent. So, it is clear that one form of gender inequality in the Middle East is the exclusion of most women from the wage labor force. But it is also true that women in the Middle East who enter the labor force face considerable discrimination and limited opportunities, as indicated by the fact that occupational segregation is higher in the Middle East than in other regions of the world. Indeed, these two forms of gender inequality in the labor market are reinforcing, because many women in the region who want to get a job face a small choice set of occupations due to cultural values and gender stereotypes. For example, women who would like to work as a professional are mainly restricted to teaching and nursing. Women who want to work in manufacturing are mainly restricted to sewing, spinning and weaving. And few women in the Middle East have the option of sales occupations, because these require public interaction with men.

DZ: You’ve done some interesting analysis of the prevalence of women in managerial and professional positions in relation to the number of women in parliamentary systems. You’ve found that in the U.S. we don’t fit the pattern—we have a relatively high number of women in management and professional positions, but the U.S. Congress remains more male than your model would predict. Can you offer any explanation?

RA: That’s right. When I looked at the extent to which managers in a country are women and related this to the extent to which parliamentarians at the federal level are women, I found a strong positive relationship. I think what I was observing is an underlying phenomenon that indicates women’s overall status and decision-making in different spheres of life move together--in the economy and in the political realm. The thing about the United States was that the U.S. had too few women in Congress according to the observed relationship for countries in the world. While percent female in the U.S Congress was rather average, percent female among managers in the U.S was unusually high. I think this implies that women in the United States have catching up to do in politics. I think the result from the recent election [November 2006] is a harbinger of continuing increasing female representatives in Congress.[1]

DZ: You’ve done important work on establishing international poverty levels and living wage rates. Can you talk a little about how these two topics relate—global poverty and sex segregation of the labor force?

RA: Concern for decent work is the connecting theme and the reason why I worked on these topics. Receiving a living wage is a key component of having decent work. If a worker does not earn a decent wage, it is difficult, and most instances impossible, for her or him to live a dignified life. Occupational segregation represents a form of discrimination to me. When large segments of the labor force are in essence restricted from entering many occupations, freedom of choice is missing.

DZ: The United Nations has set a goal of halving extreme poverty by 2015. They define extreme poverty according to “purchasing power parity”— one U.S. dollar’s worth of spending per day, as established by the World Bank. This seems like a straightforward approach to comparing poverty around the world—why not use the PPP measure?

RA: One dollar or $2, even expressed in supposedly equivalent purchasing power terms (PPP), does not mean the same thing in every country in terms of ability to live.[2] PPP represents average purchasing power and so is not necessarily indicative of differences in the cost of food and other goods and services that the poor use a lot. For example, the $1 poverty line implicitly assumes very little expenditures for heat and housing, which is not possible in many countries.

I agree that $1 a day has a compelling ring to it. Everyone knows what a dollar is and can buy and so can empathize with how poor people must be if they do not have even $1 a day to live on. Unfortunately, this compelling simplicity hides a number of serious conceptual and practical problems. First of all while there is simplicity, there is not transparency. $1 is not really $1 but $1 in ‘estimated equivalent purchasing power parity units’ (PPP). Furthermore, these PPPs are not current PPPs but 1993 PPPs, and the actual poverty line is $1.08 and not $1. My work seeks a poverty line with which I could clearly communicate to laypersons what it means to be poor, in terms of types of food consumed and money spent for non-food needs. Secondly, and most importantly, there are serious conceptual problems with using PPPs to estimate national poverty lines. As the World Bank has said “PPP exchange rates were not designed for the purpose of making internationally comparable poverty lines, but rather for making comparisons of average national income and consumption.” It would be better to have national poverty lines that have a clear and consistent normative basis. Third, there is an important practical empirical problem with $1 a day poverty lines, and this is that they do not provide reasonably accurate national poverty line estimate for particular countries. The reason is that the poverty lines that countries themselves set vary greatly in terms of PPP. The original $1 PPP set by the World Bank, for example, was based on six national poverty lines that, while averaging around $1 PPP, ranged from as low as $0.61 PPP to as high as $1.14 PPP. Indeed, the World Bank says “the PPP rates are required only for forming regional or global aggregates.” It is implicitly assumed that regional and global estimates are correct on average because of counterbalancing overestimates and underestimates of national values. Fourth, national PPPs are themselves prone to important measurement errors, especially when they are re-benchmarked, but also when they are adjusted over time for inflation (in part because the inflation rate of goods and services consumed by the poor and non-poor differ). This is most likely to be a problem in high inflation countries. Lastly, I wanted poverty line estimates for all countries, and not just for the lower income countries for which the $1 and $2 a day poverty lines are appropriate. So you can see that there a number of reasons why I do not use the World Bank PPP methodology.

DZ: Your most recent paper provides alternative international poverty lines, using nutritionally equivalent market baskets to establish comparable poverty lines across countries. One assumption is that higher-income countries consume higher-fat, higher-protein diets, and spend a greater share of their income on non-food necessities. This gets into the thorny issue that what’s considered a necessity in one country-- a car, or a television—may be a luxury in another. Is it meaningful to compare poverty across countries when we can’t agree on what it means to be poor?

RA: That’s true—in my methodology, national poverty lines increase in real terms along with development level. What’s considered poor in Bangladesh is different from what’s considered poor in South Korea. This makes sense to me, and it is consistent with the national poverty lines that countries set themselves. Actually, I think that people within every country can agree more or less on what poverty is, and the consensus poverty line increases with development and per capita national income. But what is considered acceptable in any given society changes over time and with development, either because some goods and services become new necessities (such as TV or health care technologies), and/or society’s view of a minimum acceptable standard changes (such as going from mud or stick houses to houses with central heat and inside toilets). We can see the problem with being rigid and never changing a poverty line after it is set except to adjust for inflation. The United States’ official poverty line has not been changed in real terms since the 1960s. As a result, the official poverty line in the United States is now much too low. Very few people in the United States would believe that a family of four is not poor with an annual household income of around $20,000. Yet this is what the U.S. government would say. A similar thing has happened in India, where the official poverty line has not changed in real terms since the 1970s. Yet according to Indian expenditures data, the poverty line would have been approximately 49 percent higher in rural areas and 23 percent higher in urban areas if the poverty line had been set in 1993 instead of in 1973.

Using the PPP model, let’s take a look at what $1 a day would buy in the United States, and so how meaningful it could even possibly be for the United States. According to my calculations, the very basic nutritious model diet that non-poor people in poor countries are assumed to eat in poverty line calculations (assuming that people make their own bread and only eat a meat meal every two weeks) cost $0.99 per person in 2001 in the United States. On top of this, Americans would need money for a place to live, as rent-free slum housing or free rural housing is rarely an option here. Money would also be needed for heat in most of the United States. The reality is that someone in the United States is not able to live on $1 a day even trying to live like a poor Indian. So, it is meaningless to talk about using $1 or even $2 a day poverty line for the United States, and this has nothing to do with having greater expectations about necessities.

DZ: Your poverty lines are higher than the World Bank’s (and hence the UN’s), and higher than most internal national measures. That means that your yardstick finds many more people in poverty in the world than do others. Why does this matter? We know that world poverty is an enormous problem, and collecting the resources to tackle it is a daunting task, whether we’re talking about 10% of the world population or 50%. What impact does accurate measurement have on policy and on people’s lives?

RA: I should start by saying that while it is true that my national poverty lines are substantially higher than the $1 and $2/day poverty lines, so are the poverty lines that countries themselves set. So it is not as if I am overly generous in my estimates. And it is important not to lose sight of how basic are my poverty lines in poor countries-- such as only allowing one meat meal every two weeks.

I think that accurate measurement matters, because it is important to know the dimension of the problem one is dealing with. Whether 10% or 20% of the population is poor might be almost irrelevant from a policy point of view in the sense that in either case there is big problem out there needing attention. Indeed, in situations where 10% or 20% of the population are affected, the problem is so big that it is unlikely to be eliminated in the immediate future. I guess what I have always believed is that policy choices and resource allocations benefit from more accurate measurement of the phenomenon under consideration. If we learned that the problem is bigger than we thought, hopefully additional resources would be allocated to reducing it. If we had better estimates, it is likely that monitoring of progress would be improved and this in turn would hopefully improve resource allocations in the future.

DZ: You’ve taken your work on poverty lines a step further, and by factoring in family size and the number of workers in a family, established a living wage for each country. The phrase “living wage’ is all over the media right now. What does it mean in an international context?

RA: The concept of a living wage is the same in all countries. Workers should be able to support a family on their wages. In the words of Franklin Delano Roosevelt, this should be at a living standard that is “decent according to the standard of the time.” This means that while the level of a living wage will vary across countries, the living wage principle that workers should be able support a family on their labor is the same in all countries. International variations will be due to differences in what is considered to be a decent living standard, a reasonable household size to support, and how many household members should work.

DZ: In the U.S., we’re seeing a growing living wage movement at the same time that we’re finally likely to raise our minimum wage nationally. What’s the difference between the two? How does the US compare to other countries in terms of setting wage floors that are at or near living wages?

RA: Both living wages and minimum wages share the objective that workers should receive a sufficient wage so that they and their families can have an acceptable standard of living. Living wages and minimum wages differ, however, in three important respects. First, different criteria are used to establish their level. A living wage is normatively based for the most part, being mainly concerned with needs of workers and their cost of living. Indeed, many proponents of a living wage see it as a right that is independent of prevailing economic or labor market considerations. A minimum wage, on the other hand, is concerned with more than the needs and living costs of workers and families. It is also concerned with factors such as the general wage level in a country, the relative living standard of social groups, and economic factors such as economic growth and employment. Second, the processes used to establish living wages and minimum wages differ. Minimum wages are set in a political process (e.g., by parliament in a democratic country) and so necessarily take into consideration competing interests and power. A good illustration is provided by the first national minimum wage in the United States set in 1938. Whereas President Roosevelt argued for 40 cents an hour, he had to settle for 25 cents an hour to get the legislation passed. A living wage, on the other hand, while not immune from political interests and power (e.g., when set by a city), is mainly based on needs and living costs of workers and their families. Thirdly, minimum wages and living wages almost always cover different populations. Minimum wages are set for large entities such as countries and regions/states within countries, while living wages are set by much smaller entities such as cities, companies and universities that feel that the statutory minimum wage is too low.

Compared to other developed countries, the United States has an unusually low minimum wage relative to a reasonable living wage. According to my calculations of an internationally comparable American living wage (that is purposely conservative), the current federal minimum wage [$5.15] is well less than half of a living wage. It is therefore not surprising that raising the federal minimum wage has become such a hot button political issue recently.

DZ: What’s next for your research, and what issues still need to be explored in the realm of gender, wages, and poverty?

RA: On occupational segregation, I am hoping to be able to do a series of papers on how and why occupational segregation varies around the world using a much larger and more up-to-date data set. First I will need to figure out how to increase the international comparability of national data, since countries use different occupational classification systems.

I’m also interested in what has been happening in recent decades to men in the U.S. Decreasing occupational segregation in recent decades has come about to a large extent because women have been entering what were previously almost exclusively male occupations. There has not been much of a tendency for men to enter what are almost exclusively female occupations. But you cannot continue to have rapid reductions in occupational segregation in the future if integration remains largely one sided. Another topic worth exploring and analyzing is the relationship between percent female in an occupation and average wage rate in that occupation. In particular, how does an increasing percentage of women in an occupation affect the wage in that occupation, and how do observed relationships vary across countries?

For internationally comparable poverty lines and living wages, I would like to mention three issues worth investigating. The extent to which typical public goods such as health care and education are free or highly subsidized varies quite a lot across countries. This not only affects the international comparability of national poverty lines and living wages, it also affects the international competitiveness of companies. It would therefore be very useful to document the private cost of education and health care to individuals in different countries. Second, it is not obvious how best to update national poverty lines and living wages on a regular basis. As noted in response to an earlier question, many countries such as the United States wait a long time before they revise their official poverty line. As a result, their official poverty line eventually becomes quite out of date. But how to regularly revise a national poverty line and living wage rate, yet be able to demonstrate progress towards a goal, needs serious thought. Thirdly, living wage rate estimates are necessarily based on assumptions such as an appropriate living standard and household size a worker should be able to support. It would be worth investigating using household surveys what actual people in different countries feel are appropriate assumptions and not to rely solely on the assumptions governments and researchers make.

Samples of Dr. Anker’s work that are downloadable include:
>> “A new methodology for estimating internationally comparable poverty lines and living wage rates”
>> “Conceptual and research frameworks for the economics of child labour and its elimination”
>> “Women's access to occupations with authority, influence and decision-making power”
>> "Measuring decent work with statistical indicators"
>> "Towards gender equity in Japanese and Nordic labour markets: a tale of two paths"