Suppose that a pay equity plan has just been put in place in your organization. The pay equity consulting firm did a job evaluation and assigned points to each of the male-dominated and female-dominated jobs. It then estimated the following male and female pay lines where Y denotes annual earnings, P denotes job evaluation points, and subscripts m and f denote male and female respectively:

Ym=5000 + 100Pm

Y =4000 + 80P

Assume that the average job evaluation score was 300 points in male-dominated job and 200 in female-dominated jobs.

a. Use an Oaxaca decomposition to decompose the average pay differential between male- and female-dominated jobs into two components: a portion attributable to the differences in job evaluation points and portion attributable to differences in pay for the same evaluation points using female pay as base.

b. Use the same decomposition to decompose the average pay differential between male- and female-dominated jobs but this time evaluate the differences in job evaluation points according to the male pay for such points.