The number clamored by female activists and politicians alike is “77 cents on the dollar.” Even in a State of the Union address, President Obama said, “Today, women make up about half our workforce. But they still make 77 cents for every dollar a man earns. That is wrong, and in 2014, it's an embarrassment.” Though the number varies (OECD Employment Database estimate it to be closer to 82 cents), Obama is right; women do make significantly less than men and it is an embarrassment.
However, it is when saying that women earns paid 77 percent of what a man earns for the same work that this number becomes exceedingly controversial — because it is simply not true. The 77 percent number is calculated by dividing the median income of women by that of men and does not account for any variables whatsoever, like professions and time spent working; but for reasons I will explain later, the 77 percent number is still a number we have to take into account when debating the gender pay gap.
Most people claiming that the gender pay gap is a myth cite several reasons to validate their claim. They point out that, statistically, women work less than men, that women go into lower paying jobs because they want more workplace flexibility, and that women choose professions that pay less.
All of these claims do hold some merit, but when factoring in these differences in gender employment patterns, the number is closer to 92 percent (1). An improvement from the previous number, but it still means that there is a 8 percent gap in pay between the genders — nothing I’d give a cheer to. There are a lot of hypotheses in order to explain this mysterious 8 percent gap, but two hypotheses are more prominent than the other: motherhood penalty, and gender discrimination.
The motherhood penalty is a term constantly thrown around in the gender pay gap debate. It refers to when mothers encounter systematic disadvantages in the workforce as a consequence of having, or expecting, children. Whenever we’re talking about the gender pay gap in terms of the 77 percent number, the most prominent economic theory that supports the motherhood penalty is the human capital theory. Because women have to take time off work in order to birth and to care for their child, women detract time from which they could be using in order to gain experience in the workforce, to develop job skills, and to further educate themselves. Furthermore, a consequence of becoming a mother tends to be a want or need for desirable features in the workplace such as paid leave, part-time work hours, and work schedule flexibility.
This does not help to explain the 92 percent number (which accounts for gender employment patterns) however. In a study which helps us make sense of the 8 percent gap, participants were asked to evaluate a variety of job applicants; in the mix, there were applicants which had the exact same experience, gender, race, etc. — except that one of them was a mother, the other was not. The applicant that was a mother was rated less competent, less committed, less suitable for hire, and deserving of lower salaries. However, the opposite effect was found in fathers. Researchers found that fathers are 1.8 times more likely to be recommended for management positions as opposed to mothers who were 8.2 times less likely to be recommended (2).
All in all, studies suggest that women give up approximately 5% of their pay (per child) as a consequence of both loss of human capital and other forms of discrimination towards mothers (3). Is it only mothers who gets discriminated against however? Or does childless women’s paycheck also suffer from discrimination?
In a rational market, one would argue that if women did, in fact, make 92 percent of what a man make for equal work, then no-one would hire men because employers could maximize profit by paying less for labor but having the same productivity. It is overwhelmingly clear, however, that we do not have a completely rational market. A lot of executives and managers do make conscious decisions in their business that may not have the largest monetary gain in order to uphold their beliefs — for example, not serving homosexuals due to religious beliefs.
So then, is there gender discrimination in the work-force? Almost all studies would argue yes, there is. Economist David Neumark ran an experiment similar to the study on motherhood penalty; they created pseudo-applications for waiter and waitress jobs where the applications contained the exact same information with only the gender differing. In low-priced restaurants, women were 40% less likely to get a job interview; in higher-priced restaurants, women were 35% less likely to get a job interview (4).
To conclude, remember when I wrote that we should still keep the 77 percent number in mind when talking about the gender pay gap (I can already see my e-mail inbox filling up from all the hate mail)? Even if the 8 percent gap is closed, we still have a 10-15 percent (depending on which statistics used) gap due to choices and occupation differences — I don’t think that’s very satisfying.
Because of occupation segregation, women generally go into different fields which tends to be paying less than those dominated by men, such as engineering and financial investing (5). However, even in fields like nursing and social service, which is dominated by women, men tend to earn more and disproportionately claim higher paying jobs in those fields. For example, though women are more likely to become librarians, men are more likely to become directors of the libraries (6). Sociologists have, appropriately, named this phenomenon the “Glass Escalator;” as opposed to the “Glass Ceiling” found for women in fields dominated by men.
While women go into these lower paying professions by choice, it’s a choice in accordance with decades of social conditioning. Both women and men are told which jobs “belong” to their gender; as such, both genders get education and jobs which correspond with what society has deemed a male or a female occupation.
When calculating the gender pay gap, the 92 percent number is not a satisfying number to explain the actual gap between our genders. Regardless of the number, we can all acknowledge that there is a gap, and that it is very real.
What should we do about closing the gap? Should we even try to close this gap and have absolute pay equality between the genders? Honestly, as a male, I am not one to say; I do not know whether or not women truly do want the 23 percent gap to be zero percent. Furthermore, it may not even be possible to have that gap shrink to zero due to biological differences. As long as we continue that debate, however, knowing that the pay gap is actually there — then my job is here complete.
Write to the author at: Rothstein@sbeconomic.com
1. Blau, Francine D. & Kahn, Lawrence M., 2016. "The Gender Wage Gap: Extent, Trends, and Explanations," IZA Discussion Papers 9656, Institute for the Study of Labor (IZA).
2. Gangl, Markus; Andrea Ziefle (2009). "Motherhood, Labor Force Behavior, and Women's Careers: An Empirical Assessment of the Wage Penalty for Motherhood in Britain, Germany, and the United States". Demography 46: 341–369.
3. Staff, Jeremy; Jaylen Mortimer (2012). "Explaining the Motherhood Penalty During the Early Occupational Career". Demography 49: 1–21.
4. Neumark, David; Bank, Roy J.; Van Nort, Kyle D. (1996). "Sex Discrimination in Restaurant Hiring: An Audit Study". The Quarterly Journal of Economics 111: 915–41.
5. Blau, Francine D; Kahn, Lawrence M (2000). "Gender Differences in Pay". Journal of Economic Perspectives 14: 75–99.
6. 1992 “The Glass Escalator : Hidden Advantages for Men in the ‘Female’ Professions”, Social Problems, 39, pp.253-267.