Are women paid less than men?

August 14, 2009

Diana-FurchtgottRoth.jpg — Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-

One of the concerns of working women is the “pay gap” – the alleged payment to women of 78 cents for every dollar earned by a man.  But there are more behind these numbers than first meets the eye, because women work different hours, major in different subjects, and choose different careers.

The 78 percent figure comes from comparing the 2007 full-time median annual earnings of women with men, the latest year available from the Census Bureau.  The 2007 Department of Labor data show that women’s full-time median weekly earnings are 80 percent of men’s.

Just comparing men and women who work 40 hours weekly, without accounting for differences in jobs, training, or time in the labor force, yields a ratio of 87.2 percent, with a smaller pay gap.

These wage ratios are calculated from government data and do not take into account differences in education, job title and responsibility, regional labor markets, work experience, occupation, and time in the workforce.  When economic studies include these major determinants of income, rather than simple averages of all men and women’s salaries, the pay gap shrinks even more.

A report by Jody Feder and Linda Levine of the Congressional Research Service entitled “Pay Equity Legislation in the 110th Congress,” declared that “Although these disparities between seemingly comparable men and women sometimes are taken as proof of sex-based wage inequities, the data have not been adjusted to reflect gender differences in all characteristics that can legitimately affect relative wages (e.g. college major or uninterrupted years of employment).”

Many academic studies of gender discrimination focus on the measurement of the wage gap.  Dozens of studies have been published in academic journals over the past two decades.  These studies attempt to measure the contributing effects of all the factors that could plausibly explain the wage gap.  The remaining portion of the wage gap that cannot be explained by measurable variables is frequently termed “discrimination.”

Generally, the more information about women that is included in the analysis, the more of the wage gap that can be explained, and the less is the residual portion attributable to “discrimination.”  An analysis that omits relevant information finds a greater unexplained residual, and concludes that there is more discrimination.

Simple wage ratios do not take into account other determinants of income.  A female nurse might earn less than a male orthopedic surgeon.  But this would not be termed “unfair” or “discrimination” because the profession of surgeon requires more years of education, the surgeon might work different hours from the nurse, and the nurse might have fewer continuous years of work experience due to family considerations.

Baruch College economics professor June O’Neill, in an article published in 2003, shows that when data on demographics, education, scores on the Armed Forces Qualification Test, work experience, child-related factors, and percent female in the occupation are analyzed, the wage ratio becomes 97.5 percent, an insignificant difference.

In another study, Professors Marianne Bertrand of the University of Chicago and Kevin Hallock of Cornell University found almost no difference in the pay of male and female top corporate executives when accounting for size of firm, position in the company, age, seniority, and experience.

Lower pay can reflect decisions—by men and women–about field of study, occupation, and time in the workforce.  Those who don’t finish high school earn less.  College graduates who major in humanities rather than the sciences have lower incomes.  More women than men choose humanities majors.

Employers pay workers who have taken time out of the work force less than those with more experience on the job, and many women work fewer hours for family reasons.  When women choose jobs that allow more flexibility and less travel in order to accommodate family, they find that they end up earning less.

Yet a choice of more time out of the workforce with less money rather than more time in the workforce with more income is not a social problem.  A society that gives men and women these choices, as does ours, is something to applaud.

Although documented cases of discrimination exist, and are rightly settled in the courts, when all the factors behind the pay numbers are calculated, men and women earn about the same.

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