Analyzing Wage Determinants and Salary Disparities at SAFECORP Using STATA

Problem Description:

Discrimination in salaries is a growing concern in many companies, where certain individuals are paid less due to factors unrelated to their job performance, such as race, gender, and education. In this STATA assignment, we investigate whether wage discrimination exists at SAFECORP. Specifically, we aim to identify if there is a salary gap between minority and majority employees and determine the key factors influencing wages.

Solution

Introduction

Wage discrimination in the workplace, which involves paying certain individuals less based on non-job-related attributes, is a major concern in various companies. It limits the development of employees' talents and skills, hampers motivation, and creates an uneven career landscape. In this memo, we examine the possibility of salary discrimination at SAFECORP. Our analysis investigates whether a wage gap exists between minority and majority employees, explores which employee characteristics affect salaries, and assesses whether these differences can explain variations in wages.

Data and Methodology

We conducted our analysis using a random sample of 474 employee records. We focused on employees' annual salaries as the primary outcome. The following individual characteristics were considered as explanatory factors: work experience, current position at SAFECORP, highest grade of formal education completed, gender, and minority status. Our analysis employed various statistical tests, including t-tests for salary comparisons, Pearson's Chi-square test for differences in characteristics, and regression analysis to explain salary disparities among minority employees.

Findings

1. Salary Disparities
• The average annual salary for majority employees is approximately $72,046.6, while minority employees earn an average of $57,427.9. The absolute difference in annual average wages across the two groups is $14,618.7, which is statistically significant.
2. Correlation Analysis
• Correlations reveal that current position and education level are positively associated with salaries. Managers tend to earn more than clerical and custodial workers. Employees with higher education levels also earn more.
• Work experience has a negligible association with remuneration, and gender is negatively associated with salaries. Male workers receive higher pay than female workers on average.
3. Comparison of Characteristics
• Gender imbalance: The minority group consists of 61.5% males and 38.5% females, while the majority group is more evenly distributed, with 52.4% males and 47.6% females.
• Education: The minority and majority groups have similar education levels, with minor differences that are not statistically significant.
• Position: A significant difference exists in employee positions at SAFECORP. Only 3.8% of minorities hold managerial positions, compared to 21.6% in the majority group.
4. Factors Explaining Wage Disparities
• Holding a managerial position at SAFECORP is associated with a $53,717.0 higher salary compared to being a clerical worker.
• Gender-based discrimination: Being a female worker is associated with $10,965.6 less salary than being a male worker. Gender discrimination somewhat mitigates the wage gap but is insufficient to ensure salary equality at SAFECORP.

Conclusion

In conclusion, our analysis indicates a significant wage gap between minority and majority employees at SAFECORP. Employee characteristics such as current position, education level, and gender play crucial roles in determining average salaries. Years of experience have minimal impact on remuneration. Differences in position and gender between the majority and minority groups significantly contribute to wage disparities. Position discrimination exacerbates the wage gap, while gender-based discrimination slightly mitigates it.

Appendix I

Figure 1: Average Annual Salaries of Majorities and Minorities ($)

Source: SAFECORP and authors’ calculations P-value < 0.01 for t-test of the difference in average annual salaries for majorities and minorities.

Table 1. Correlation of Average Annual Salaries and Characteristics of Employees

Table 2. Basic Characteristics of Majority and Minority Employees

Source: SAFECORP and authors’ calculations p < 0.01, ** p < 0.05, *** p < 0.10 for a chi-square test of the association of this characteristic with majorities versus minorities comparison