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The wage gap is a myth

Overview

The most basic way to look at differences in pay between the genders is to look at the median wages of men and women. However, this comparison is of limited usefulness because men and women exhibit very different characteristics for many of the factors that affect pay. For example, men tend to work in fields with higher average pay, and tend to work more hours per week. Because of these differences, in order to determine what effect discrimination has upon the wages of men and women in the workplace the differences in career choices must be accounted for. One must also determine what portion of those differences is caused by career decisions and what portion is caused by employer discrimination in hiring and promotions.

A study commissioned by the United States Department of Labor, concluded that: "There are observable differences in the attributes of men and women that account for most of the wage gap. Statistical analysis that includes those variables has produced results that collectively account for between 65.1 and 76.4 percent of a raw gender wage gap of 20.4 percent, and thereby leave an adjusted gender wage gap that is between 4.8 and 7.1 percent." The Consad Research Corporation study concluded that additional data was needed in order to obtain a better understanding of the factors causing the gender wage gap.

In addition to the dispute over the causes of the portion of the wage gap attributed to measurable known factors such as job position, hours worked, experience, and education, there is disagreement on what factors explain the remaining 5–7%. Some studies assert that the remaining gap is due to discrimination, citing studies that show that replacing a man's name with a woman's name on a resume reduces the salary offered and lowers the employers opinion of the candidate's experience, and studies that showed that women are discriminated against in salary negotiations.

Gender pay gap over time

Looking at the gender pay gap over time, the United States Congress Joint Economic Committee showed that as explained inequities decrease, the unexplained pay gap remains unchanged. Similarly, according to economists Francine Blau and Lawrence Kahn and their research into the gender pay gap in the United States, a steady convergence between the wages of women and men is not automatic. They argue that after a considerable rise in women's wages during the 1980s, the gain decreased in the 1990s. A mixed picture of increase and decline characterizes the 2000s. Thus Blau and Kahn assume:

with the evidence suggesting that convergence has slowed in recent years, the possibility arises that the narrowing of the gender pay gap will not continue into the future. Moreover, there is evidence that although discrimination against women in the labor market has declined, some discrimination does still continue to exist.

A wide ranging meta-analysis by Doris Weichselbaumer and Rudolf Winter-Ebmer (2005) of more than 260 published adjusted pay gap studies for over 60 countries has found that, from the 1960s to the 1990s, raw wage differentials worldwide have fallen substantially from around 65 to 30%. The bulk of this decline, however, was due to better labor market endowments of women. The 260 published estimates show that the unexplained component of the gap has not declined over time. Using their own specifications, Weichselbaumer and Winter-Ebmer found that the yearly overall decline of the gender pay gap would amount to a slow 0.17 log points, implying a slow level of convergence between the wages of men and women.

Another meta-analysis of 41 empirical studies on the wage gap performed in 1998 found a similar time trend in estimated pay gaps, a decrease of roughly 1% per year.

According to economist Alan Manning of the London School of Economics, the process of closing the gender pay gap has slowed substantially and women could earn less than men for the next 150 years because of discrimination and ineffective government policies. A 2011 study by the British CMI revealed that if pay growth continues for female executives at current rates, the gap between the earnings of female and male executives would not be closed until 2109. Women Chief Financial Officers (CFOs) are paid 16% lower on average as compared to their male counterparts.

According to the most recent analysis prepared for the U.S. Department of Labor:

Although additional research in this area is clearly needed, this study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.

The differences in the opinion of a variety of different sources, economists and think tanks have led many to believe that corrective action may be necessary in the future if evidence is found that widespread discrimination is happening in the work place among every business, but until hard evidence is provided things ought to stay the same.

By country

United States

In the United States, the gender pay gap is measured as the ratio of female to male median yearly earnings among full-time, year-round (FTYR) workers. The female-to-male earnings ratio was 0.77 in 2012, meaning that, in 2012, female FTYR workers earned 77% as much as male FTYR workers. Women's median yearly earnings relative to men's rose rapidly from 1980 to 1990 (from 60.2% to 71.6%), and less rapidly from 1990 to 2000 (from 71.6% to 73.7%) and from 2000 to 2009 (from 73.7% to 77.0%).

The raw wage gap data shows that a woman would earn roughly 73.7% to 77% of what a man would earn over their lifetime. However, when controllable variables are accounted for, such as job position, total hours worked, number of children, and the frequency at which unpaid leave is taken, in addition to other factors, a U.S. Department of Labor study conducted by the CONSAD Research Group found in 2008 that the gap can be brought down from 23% to between 4.8% and 7.1%.

The gender pay gap has been attributed to differences in personal and workplace characteristics between women and men (education, hours worked, occupation, etc.) as well as direct and indirect discrimination in the labor market (gender stereotypes, customer and employer bias etc.).

The estimates for the discriminatory component of the gender pay gap include 5% and 7% for federal jobs, and in at least one study grow as men and women's careers progress. One economist testified to Congress that hundreds of studies have consistently found unexplained pay differences which potentially include discrimination. Another criticized these studies as insufficiently controlled, and said that men and women would have equal pay if they made the same choices and had the same experience, education, etc. Other studies have found direct evidence of discrimination in recruitment. For example, fewer replies to identical resumes if sent by women with children than by men with children and more jobs for women when orchestras moved to blind auditions (though the data was mixed on this, since, in normal orchestra interviews, women were preferentially chosen over men for some instruments, such as the flute).

Canada

A study of wages among Canadian supply chain managers found that men make an average of $14,296 a year more than women. The research suggests that as supply chain managers move up the corporate ladder, they are less likely to be female.

Australia

In Australia, the gender pay gap is calculated on the average weekly ordinary time earnings for full-time employees published by the Australian Bureau of Statistics. The gender pay gap excludes part-time, casual earnings and overtime payments.

Australia has a persistent gender pay gap. Between 1990 and 2009, the gender pay gap remained within a narrow range of between 15 and 17%. In August 2010, the Australian gender pay gap was 16.9%.

Ian Watson of Macquarie University examined the gender pay gap among full-time managers in Australia over the period 2001–2008, and found that between 65 and 90% of this earnings differential could not be explained by a large range of demographic and labor market variables. In fact, a "major part of the earnings gap is simply due to women managers being female." Watson also notes that despite the "characteristics of male and female managers being remarkably similar, their earnings are very different, suggesting that discrimination plays an important role in this outcome." A 2009 report to the Department of Families, Housing, Community Services and Indigenous Affairs also found that "simply being a woman is the major contributing factor to the gap in Australia, accounting for 60 per cent of the difference between women’s and men’s earnings, a finding which reflects other Australian research in this area." The second most important factor in explaining the pay gap was industrial segregation.

European Union

At EU level, the gender pay gap is defined as the relative difference in the average gross hourly earnings of women and men within the economy as a whole. Eurostat found a persisting gender pay gap of 17.5% on average in the 27 EU Member States in 2008. There were considerable differences between the Member States, with the pay gap ranging from less than 10% in Italy, Slovenia, Malta, Romania, Belgium, Portugal and Poland to more than 20% in Slovakia, the Netherlands, Czech Republic, Cyprus, Germany, United Kingdom and Greece and more than 25% in Estonia and Austria.

In the UK, the most significant factors associated with the remaining gender pay gap are part-time work, education, the size of the firm a person is employed in, and occupational segregation (women are under-represented in managerial and high-paying professional occupations.) When comparing full-time roles, men in the UK tend to work slightly longer hours than women in full-time employment. Depending on the age bracket and percentile of hours worked men in full-time employment work between 1.35% and 17.94% more hours than women in full-time employment.

In October 2014 the Equality Act 2010 was augmented to force employers who lose a gender pay gap tribunal to undergo an equal pay audit.

Impact

Pensions

The European Commission argues that the gender pay gap has far-reaching effects, especially in regard to pensions. Since women's earnings over a lifetime are on average 17.5% (as of 2008) lower than men's, these lower earnings result in lower pensions. As a result, elderly women are more likely to face poverty: 22% of women aged 65 and over are at risk of poverty compared to 16% of men.

Economy

A 2009 report for the Australian Department of Families, Housing, Community Services and Indigenous Affairs argued that in addition to fairness and equity there are also strong economic imperatives for addressing the gender wage gap. The researchers estimated that a decrease in the gender wage gap from 17% to 16% would increase GDP per capita by approximately $260, mostly from an increase in the hours females would work. Ignoring opposing factors as hours females work increase, eliminating the whole gender wage gap from 17% could be worth around $93 billion or 8.5% of GDP. The researchers estimated the causes of the wage gap as follows, lack of work experience-7%, lack of formal training-5%, occupational segregation-25%, working at smaller firms-3%, and being female as the remaining 60%.

An October 2012 study by the American Association of University Women found that over the course of 47 years, an American woman with a college degree will make about $1.2 million less than a man with the same education. Therefore, closing the pay gap by raising women's wages would have a stimulus effect that would grow the U.S. economy by at least 3% to 4%. In contrast, the $800 billion economic stimulus bill passed by Congress in 2009 is estimated to have grown the GDP by less than 1.5%. Women who are paid more will likely spend that money to support themselves and their families, because so many women live in poverty. Women currently make up 70 percent of Medicaid recipients and 80 percent of welfare recipients. By increasing women's workplace participation from its present rate of 76% to 84%, as it is in Sweden, the U.S. could add 5.1 million women to the workforce, again, 3% to 4% of the size of the U.S. economy.

Economic theories

Neoclassical models

In certain neoclassical models, discrimination by employers can be inefficient; excluding or limiting employment of a specific group will raise the wages of groups not facing discrimination. Other firms could then gain a competitive advantage by hiring more workers from the group facing discrimination. As a result, in the long run discrimination would not occur. However this view depends heavily on strong assumptions about the labor market and the production functions of the firms attempting to discriminate. Firms which discriminate on the basis of real or perceived customer or employee preferences would also not necessarily see discrimination disappear in the long run even under stylized models.

Monopsony explanation

In monopsony theory, wage discrimination can be explained by variations in labor mobility constraints between workers. Ransom and Oaxaca (2005) show that women appear to be less pay sensitive than men, and therefore employers take advantage of this and discriminate in their pay for women workers.

Effect of job choices

In Canada it is shown that women are more likely to take up employment opportunities which greatly contrast the ones of men. About 20 percent of women between the ages of 25 and 54 will make just under $12 an hour in Canada. The demographic of women who take up jobs paying less than $12 an hour also a proportion that is twice as large as the proportion of men taking on the same type of low-wage work. There still remains the question of why such a trend seems to resonate throughout the developed world. One identified societal factor that has been identified is the influx of women of color and immigrants into the work force. These groups both tend to be subject to lower paying jobs from a statistical perspective. Men are more likely to be in relatively high-paying industries such as mining, construction, or manufacturing and to be represented by a union. Women, in contrast, are more likely to be in clerical jobs and to work in the service industry. These factors explain 53% of the wage gap.

Effect of socialization

Another social factor, which is related to the aforementioned one, is the socialization of individuals to adopt specific gender roles. Job choices influenced by socialization are often slotted in to "demand-side" decisions in frameworks of wage discrimination, rather than as a result of extant labor market discrimination influencing job choice.

Anti-discrimination legislation

According to the 2008 edition of the Employment Outlook report by the OECD, almost all OECD countries have established laws to combat discrimination on grounds of gender. Examples of this are the Equal Pay Act of 1973 and Title VII of the Civil Rights Act of 1964. Legal prohibition of discriminatory behavior, however, can only be effective if it is enforced. The OECD points out that

herein lies a major problem: in all OECD countries, enforcement essentially relies on the victims’ willingness to assert their claims. But many people are not even aware of their legal rights regarding discrimination in the workplace. And even if they are, proving a discrimination claim is intrinsically difficult for the claimant and legal action in courts is a costly process, whose benefits down the road are often small and uncertain. All this discourages victims from lodging complaints.

Moreover, although many OECD countries have put in place specialized anti-discrimination agencies, only in a few of them are these agencies effectively empowered, in the absence of individual complaints, to investigate companies, take actions against employers suspected of operating discriminatory practices, and sanction them when they find evidence of discrimination.

In 2003, the U.S. Government Accountability Office (GAO) found that women in the United States, on average, earned 80% of what men earned in 2000 and workplace discrimination may be one contributing factor. In light of these findings, GAO examined the enforcement of anti-discrimination laws in the private and public sectors. In a 2008 report, GAO focused on the enforcement and outreach efforts of the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (Labor). GAO found that EEOC does not fully monitor gender pay enforcement efforts and that Labor does not monitor enforcement trends and performance outcomes regarding gender pay or other specific areas of discrimination. GAO came to the conclusion that "federal agencies should better monitor their performance in enforcing anti-discrimination laws."

See also

• Equal pay for equal work
• Feminization of poverty
• Glass ceiling
• Global Gender Gap Report
• Lowell Mill Girls
• Material feminism
• Motherhood penalty

For other Wage Gaps:

• Racial wage gap in the United States

General:

• Economic inequality
• Gender inequality
• Income inequality metrics
• International inequality

References

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12. Woolcock, Nicola. Women will earn the same as men – if they wait 150 years. The Sunday Times, July 28, 2006.
13. Goodley, Simon (2011-08-31). "Women executives could wait 98 years for equal pay, says report". The Guardian. London. Retrieved August 31, 2011. While the salaries of female executives are increasing faster than those of their male counterparts, it will take until 2109 to close the gap if pay grows at current rates, the Chartered Management Institute reveals.
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Further reading

• Barry, Richard, "Why Women Earn Less Than Men," Pearson's Magazine, vol. 25, no. 3 (March 1911), pp. 293–300.
• Chase, Max (2 February 2013). Female CFOs May Be Best Remedy Against Discrimination. CFO Insight
• Goldin, Claudia (2008). "Gender Gap". In David R. Henderson (ed.) (ed.). Concise Encyclopedia of Economics (2nd ed.). Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267. {{cite encyclopedia}}: |editor= has generic name (help)
• O'Neill, June Ellenoff (2002). "Comparable Worth". In David R. Henderson (ed.) (ed.). Concise Encyclopedia of Economics (1st ed.). Library of Economics and Liberty. {{cite encyclopedia}}: |editor= has generic name (help) OCLC 317650570, 50016270, 163149563

External links

• Gender pay gap statistics by Eurostat of the European Commission
• Visualisation of Global gender pay gap
• Assessing the Gender Gap in the Film Industry
• Video Tutorial: NamSor extension for RapidMiner to measure a Genger Pay Gap and other Diversity Analytics
• UK Gender Salary Comparisons for Graduates 6 months after leaving University. (Based on over 650,000 students)

• Gender equality
• Income distribution
• Employment compensation
• Economic inequality
• Feminism