The 1973 Economic Report of the President devotes an entire chapter (ch. 4) to the economic role of women in the United States. In this chapter, the Report recognizes that economic discrimination against women exists and, by the length and thoroughness of the analysis describing its dimensions and consequences, implies that such discrimination constitutes a serious economic (and social) problem. The Report does not attempt to minimize the extent to which job segregation, earnings differentials, higher unemployment rates exist, and the lack of improvement in each component over the last few decades. As economists, we are particularly pleased to have the official imprimatur of an Economic Report on the view that discrimination does indeed exist. Some economists have the tendency to minimize the importance of nonpecuniary forces in influencing decisions made within the firm, and have been reluctant to admit the possibility of discrimination unrelated to real or perceived productivity differences. We believe that a proper analysis of discrimination is yet to come; such an analysis will have to fuse elements of economics, sociology, psychology, and history. Employers do refuse to hire women for certain occupations. Instead they hire men exclusively and pay them more than they would have to pay women of equal ability. The court records are now full of such cases,' but such data will never be explained on the basis of a model which includes in the objective function of the employer only monetary profits. Nor can models which assume that employers' decisions about hiring are based on inborn, unchanging, unexplained tastes do justice to the social forces, both internal and external to the firm, which bear on such decisions. Specifically, it is well known that the average woman college graduate who works full time all year ends up with about the same income as the average male high school dropout. The gross earnings differential works out to be between 35 and 57 percent, depending on the data base used to make the calculation. The Report puts the differential due to discrimination at about 20 percent, but this seems low. In a recent article, Isabel Sawhill reviewed seven econometric studies of male-female earnings patterns. In six of them,2 the differences which could be attributed to discrimination were above 29 percent and ranged up to 43 percent. The seventh study3 estimated the difference which might be attributable to discrimination as 12 percent, but arrived at this figure by classifying as nondiscriminatory the differences in the distribution of men and women among detailed occupations. Since

As women's labor force participation rates have continued to increase, it has become commonplace to argue that the targets that policy planners set for average unemployment rates should be adjusted upwards to correct' for the fact that women's unemployment rates have historically been higher than men's.1 In this paper, we argue that most corrections are based on an oversimplified approach to labor market realities. This approach has tended to promote the attitude that the high unemployment rates of women are an incurable and unregrettable fact of nature, and has also tended to bias policy discussions in a direction that leads to the toleration of overall slack and puts low or zero emphasis on the labor market problems of women. Abstracting from issues of age and race, we may characterize the usual target correction methodology as starting with the estimation of a simple relationship between women's and men's unemployment rates (U, and U,,) such as