With Equal Pay Day on April 9 and the Fisher v. University of Texas at Austin affirmative action case pending in the US Supreme Court, gender- and race-based discrimination continues to simmer in public discourse. The debates over competing views of the scope and causes of these wage gaps raise key questions for federal employment policy. Are wage gaps created by predatory employers, or do gaps reflect differences in work experience, cognitive strengths, and choice of occupations and work settings? And what reforms should policymakers pursue to address the roots of these gaps?
Lost in the hand wringing and the call for more stringent government action are the facts that show considerable economic progress for minorities and women over the years. In 1940, the average weekly wage of adult black men was only 45% as much as that of white men. Over the next 20 years – a period with little or no federal anti-discrimination policy – the wage ratio increased to 61%. That change was accomplished through relative gains in the education of African Americans, combined with the mass migration of blacks out of the South to other parts of the country where wages were higher and discrimination less pervasive. Between 1960 and 1980, progress continued and the wage ratio rose to 75%, aided by the passage of Title VII of the Civil Rights Act. The wage gains of black women were even more striking, starting from a black-white ratio of 41% in 1940, rising to 66% in 1960 and to 96% in 1980.
Although African Americans have gone on to gain distinction in many fields, there has been little change in these overall ratios since 1980. Some groups attribute the stagnation of the male racial wage gap to persistent racism. But many economists point to changes in the economy over the past 25 years that have led to wage premiums for high-level cognitive skills. Among all groups there has been increasing inequality tied to skills acquired in higher levels of schooling and especially in fields such as engineering, science, and finance. For a variety of reasons, blacks enter the labor force with lower cognitive skills than whites. For example, black college-bound students score about 100 points lower on the various components of the SAT than white students. Studies have found that the pay gap between white and black workers is fully explained when differences in scores on tests of cognitive skills such as the AFQT (Armed Forces Qualifications Test) are included as part of the analysis. In other words, black and white workers with similar educational background and test scores are found to have similar earnings. Notably, and consistent with the wage premium for high skills, some non-white minorities, notably those of Asian origin, are among the highest-paid workers in the United States. They are also among the most highly educated groups in the economy.
What about the gender gap in wages? In 1960, the ratio of women’s earnings to men’s was 59% and it remained at about that level through the 60’s and 70’s. The stagnation of the ratio attracted the ire of the growing women’s movement and inspired a button memorializing the 59% gap. The ratio had seemingly been immune to the Civil Rights Act of 1964 and the growth of federal anti-discrimination measures. But the gap began to narrow quite rapidly in the 1980s as women acquired more years of continuous work experience and more pertinent work preparation. In 2011, the labor department reported a gender wage ratio of 81%.
The gender wage gap, unlike the racial wage gap, is mainly related to choices that women make between home and the workplace. Working women typically have had as much education as male workers. In fact, in recent years women have been acquiring more years of education than men, particularly at the post graduate level, and that education gives them greater access to relatively high-paying occupations. But women also value time spent with their children and as a consequence are more likely to work part-time, to take more career breaks than men, and therefore to accumulate fewer years of continuous work experience. Occupations and job situations that allow for part-time work and convenient schedules pay less. For reasons such as these, childless women who never marry earn more than married women and as much as similarly situated men.
Studies that adjust for such factors as differences in work experience and job demands find little if any gender pay gap. Nonetheless, women’s advocacy organizations continue to call for legislation that would directly impose measures to close to the gap. The most recent example is the Paycheck Fairness Act, which has failed to garner the votes needed for passage. A particular call to arms of women’s groups is the fact that only a small percentage of women reach the “top”. But should society do something to push women into aiming for high level, high paying executive jobs that would limit time spent with children while evening the difference in the sexes? Sheryl Sandberg, author of the best seller “Lean In” and herself a COO of Facebook, urges us to move in that direction. But do we know enough about the value of mother-provided childcare and the losses that might emerge?
In today’s world, employer discrimination is not an important reason for either the race or gender gap in pay. But what useful role then can there be for federal anti-discrimination policy? The passage of Title VII of the Civil Rights Act led to the dismantling of the open segregation that was entrenched in the South with significant effects on the earnings and job opportunities of African Americans. But in the ensuing decades, the activities of the federal agencies charged with implementation have not had any perceptible positive effects. In fact, the Office of Federal Contract Compliance (OFCCP), in a vain attempt to engineer equal outcomes, imposes racial and gender quotas on federal contractors. Yet Title VII called for equality of opportunity and outlawed the implementation of quotas. It is time to rescind the Executive Order that sustains the OFCCP.
Learn more about pay gaps at Thursday’s AEI event “Lower Pay: Are Race and Gender to Blame?”