Society and Culture

The gender pay gap is a media myth

Image credit: Official White House Photo (Wikimedia Commons)

Image credit: Official White House Photo (Wikimedia Commons)

Last week, the American Association of University Women (AAUW) released a study on the gender pay gap, the claim that women are paid less than equally-qualified men. The AAUW study limited itself to new college graduates, hoping to show that a pay gap exists even before women marry and bear children, which most academic studies find to be the main drivers of gender pay differences. The AAUW study generated the headline result – the only one that really matters – that new female college grads are paid only 82 cents for each dollar of male earnings.

To its credit, AAUW went further by factoring in male/female differences in college major, hours worked, etc. Having done that, the pay gap shrinks to less than 7 percent. This indicates that, at most, discrimination lowers female wages by 7 percent.

But in preparing for an NPR program discussing the study, I ran some quick numbers using data from the Census Bureau’s American Community Survey. I limited myself to full-year private sector workers with a bachelors degree who were ages 21 to 26 in 2009-2010. Within this group I controlled for age, race, Hispanic and immigrant status, detailed geographic location, weekly work hours, college major and occupation. Controlling for college major accounts for the fact that men tend to choose majors that lead to higher earnings later in life. Controlling for occupation captures “compensating wage differentials” for positive or negative aspects of the job. For instance, dangerous or unpleasant jobs may pay more, while jobs offering flexible hours or more generous benefits might pay less. Including all these controls, the gender pay gap for young college grads drops to around 1 percent.

Even then, do my results mean that discrimination reduces pay by 1 percent? Hardly. It’s well known that women negotiate over pay less aggressively than men. Better negotiating tactics could easily generate a 1 percent pay difference. More broadly, the 1 percent figure denotes the unexplained pay difference – simply because the data we have can’t explain it doesn’t mean the difference is due to discrimination. Better data might explain even more of the difference. Moreover, even if discrimination exists – and it surely does, even if its overall effects aren’t huge – the cure of greater government control over the labor market might be worse than the disease.

The real failure here isn’t with analysts, who long have shown common perceptions of the gender pay gap to be vastly exaggerated. This study from the Federal Reserve Bank of St. Louis summarizes why the pay gap may be smaller than we think. The fault lies mainly with the press, who irresponsibly assert massive gender pay discrimination that doesn’t truly exist.

31 thoughts on “The gender pay gap is a media myth

  1. My Husband & I are both employed, and work the same hours, only difference is His job is dangerous, And I sit at a desk. he brings home $600.00 a week I bring home $500.00 to 600.00. No difference, But in Hours He works about six hours a week less:)

    • Good point. Men are much more apt to take either dangerous jobs, longer hours and weekends, or jobs that keep them away from home a long time, and the resulting constricted labor applicant pool results in better pay for those male dominated jobs. This is not discrimination, it is individual choice, interacting with the free market.

  2. You forgot to factor in who is making most of the hiring decisions. It’s usually white male executives that make the final hiring decisions and as you probably know through statistical data gathered people tend to hire people who look like them. Men have always had the philosophy that men need to make more than women in order to care for their families. However, during this age of chronic divorce rates most men don’t even have a family and only send child support when it’s court ordered. So please be sure to include all the data before drawing conclusions.

    • Brenda, You’re probably right that white males make most of the hiring decisions. But if you can really hire a woman for 72 cents on the dollar (as is claimed for the female population as a whole), a white male who wished to make money would hire only women. The supposed difference in labor costs is huge, enough to double the profit margin of most businesses. Other businesses would realize this, so to compete they’d have to hire women to, and they way they’d do this is to increase wages — instead of paying 72 cents on the dollar, they might pay 73 cents. And over time, wages would be bid up to the level that matched women and men’s productivity. The short story here is that gender pay discrimination isn’t just wrong, it’s unprofitable — and unprofitable practices tend to get corrected.

      • Andrew
        I think you hit the nail on the head. If the “wage gap” were real, the way to get weathy would be to start a company and only hire women. Not only would you have greater margins, but you would massively undercut all of your competitors and drive them out of business. Once you have conquered that market, you move on to another and another and another. Before long, you are the richest human being on Earth…… All because everybody else apparently would rather engage in sex discrimination rather than make money! And I was told that business men were all just greedy pigs who only care about money…… If the wage gap is real…. Apparently not

    • You don’t factor in who does the hirering when doing a statistical analysis of what the pay difference actually is between similar job positions. You may bring it up to explain a difference revealed by statistical analysis–but if no such difference ends up being revealed, it is a red herring.

  3. Why aren’t there more female only enterprises? If the assertion is really true, there is an opportunity to extract profits, until such differences are eliminated. This is a particularly profitable opportunity if the gap is as large as reported by the popular press.

  4. A great example would be a comparison of school bus drivers to long-haul truckers. Both require similar skill sets (ability to drive a large vehicle efficiently and safely), but one requires long periods away from home. If you look at the demographics, truckers are predominantly men and school bus drivers are predominantly women. The desire for most women to be the primary caregiver for children drives them to seek and accept positions that will accomodate that desire. Consequently, there is a large pay gap between truckers and bus drivers.

    If you would then “correct” this by legislating that pay for truckers and school bus drivers are equalized, the end result is that many more men would pursue the bus driver position, and many more women would be forced into trucking. So who would benefit from this legislation? Certainly not the children. Some women would make more money, but a lot more would curse their fate as truckers. I guess single men would make out like bandits in this scenario.

  5. There is no need for any of this research. Businesses will hire the most cost effective staff. Anything else is pure stupidity. If it turns out that women earn less than men, it is because the female input is worth less. These statistical analyses are a waste of time and serve only to keep academics with no real world skills in jobs.

    • Its not just employment for academics. Its also a bogus excuse for leftists to buy female votes by proposing market distorting laws, and full employment for trial lawyers to file lawsuits using those bogus laws.

  6. I cannot wait for this gender pay gap difference to be resolved. That means men will be saving a ton of money as there will no longer be the need to pay for all the dates. Right?

    • I used the 2009-2010 ACS data, since it includes controls for college major. I used Stata to run the numbers since the dataset is pretty big, but you probably could use Excel. However, I think the IPUMS website downloads only in Stata or SPSS format (I may be wrong on that).

  7. Simple economics

    If any company could get equally qualified and productive women to work for up to 25% less then they would ONLY employ women

  8. If we select any large group and then divide it by any standard — gender, height, eye color, preference for NFL or NHL — we’ll find that very few measures of the two groups are identical. If the controlled pay difference between men and women is 1%-ish, the difference is probably just the artifact of measurement itself.

  9. Andrew,

    You should post links to or the raw data and its source for everyone to make their own conclusion. A short post on subject is not a enough to judge veracity.

    Alex

    • Alex, A valid point but not easily done. You can download the data from the IPUMS website and run your own regressions with the same or different controls, but for something as data-heavy as this it’s not easy to simply produce a link.

        • Strepsi, follow the link in the story to the St Louis Federal reserve study. It’s not the same methodology or data set but shows similar results i.e. that when you begin to control for variables such as career choice and work attachment they saw the wage gap drop significantly. Factoring in non-wage benefits closed the gap even more:

          “Economists Eric Solberg and Teresa Laughlin applied an index of total compensation, which accounts for both wages and benefits, to analyze how these benefits would affect the gender gap.7 They found a gender gap in wages of approximately 13 percent. But when they considered total compensation, the gender gap dropped to 3.6 percent.”

        • yeah, well at least he knows how to do the math. unlike Obama who thinks it is “cool” that he’s dumber than a sixth grader. Smartest. President. Ever. My. @$$.

  10. The gender pay gap is just another politicization of a lie, much like the global warming scaremongering. They’re both easy to debunk, but it’s all the left has got because their real agenda is so abhorrent.

  11. I think what you are missing in this statistical analysis is that some of your controls (choosing jobs with predictable or flexible hours, little travel, higher security) are reflections of choices that women are forced or socialized to make due to their role as caregivers. To a certain mindset, this unfairness is something that the state needs to address.

    As long as men and women choose to act differently, there is a need for reform. In the quest for cosmic fairness, one can never think too big.

    • I think you mean, as long as men and women ARE different. The act differently because they are different, different physical structure, different hormones, different needs and desires. No, most women cannot be both caregivers and business professionals. But neither can most people, men or women, be both doctors and engineers, lawyers and architects, investment bankers and automobile assembly line workers.

      Caregiving is a career, like any other, one of the career choices that women are free to make or not make. Women should decide which career they want, devote their full time to it and eschew the feminist claptrap that women who choose to be housewives and mothers are somehow diminishing themselves or fulfilling less than their full potential.

    • While the effects of social norms and biology are important to consider, it’s also important to distinguish between them and actual pay discrimination. If an employer pays equally qualified women less, then that’s discrimination and is illegal. If other factors cause women workers to be less qualified and to be paid less as a result, it might be a number of things and society might want to address it, but it’s not pay discrimination and the employer shouldn’t liable. Moreover, making the employer liable would have counterproductive effects for women.

    • Controlling for occupation is the problem I see with the analysis here. Once you have an occupation, you’ve already been hired (with a specific starting salary), which means that you have just eliminated an opportunity to see sexism in the hiring process, which is part of the fundamental issue. By controlling for things like college major, grades, hours worked, etc. I think we see a more realistic picture of the job market for female grads.

  12. As long as it’s politically useful to claim that a pay gap exists, faulty studies that only look at a few factors will continue to be taken seriously by those who don’t know any better.

    There are as many as 25 reasons why the pay gap exists that have nothing to do with employer discrimination that are documented in the book, “Why Men Earn More” by Warren Farrell.

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