According to a TV election ad last year, “President Obama knows that women being paid 77 cents on the dollar for doing the same work as men isn’t just unfair, it hurts families.” Do the data support the president’s claim? Not at all.
For example, the Bureau of Labor Statistics (BLS) releases an annual report on the “Highlights of Women’s Earnings” (since the report looks equally at data for men’s and women’s earnings, one might ask why the report isn’t simply titled “Highlights of Earnings in America?”… but perhaps the answer is obvious). Here’s the opening paragraph from the most recent BLS report “Highlights of Women’s Earnings in 2012″ that was released a few weeks ago:
In 2012, women who were full-time wage and salary workers had median usual weekly earnings of $691. On average in 2012, women made about 81 percent of the median earnings of male full-time wage and salary workers ($854). In 1979, the first year for which comparable earnings data are available, women earned 62% of what men earned.
How do we explain the 23% gender pay gap claimed by Obama, or the fact that women working full-time earned only 81 cents for every dollar men earned in 2012? Here’s how the National Committee on Pay Equity explains it:
The wage gap exists, in part, because many women and people of color are still segregated into a few low-paying occupations. Part of the wage gap results from differences in education, experience or time in the workforce. But a significant portion cannot be explained by any of those factors; it is attributable to discrimination. In other words, certain jobs pay less because they are held by women and people of color.
Let’s investigate the claim that the gender pay gap is a result of discrimination by looking at some of the labor market data by gender in the BLS report for 2012:
1. Among full-time workers (those working 35 hours or more per week), men were more likely than women to work a greater number of hours (Table 5). For example, 26% of men worked 41 or more hours per week in 2012, compared with only 14% of women who worked those hours, meaning that men were almost twice as likely as women to work 41 hours per work or more. Further, men were also about three times more likely than women to work 60-hour weeks: 5.3% of men worked 60 hours per week in 2012 compared to only 1.8% of women who worked those hours.
Also, women were more likely than men to work shorter full-time workweeks of 35 to 39 hours per week: 12% of women worked those hours in 2012, compared to 5% of men who did so.
Comment: Because men work more hours on average than women, some of the raw wage gap naturally disappears just by simply controlling for the number of hours worked per week, an important factor not even mentioned by groups like the National Committee on Pay Equity. For example, women earned 81.2% of median male earnings for all workers working 35 hours per week or more, for a raw, unadjusted pay gap of 18.8% for full-time workers (Table 5). But for those workers with a 40-hour workweek, women earned 87.7% of median male earnings, for a pay gap of only 12.3%. Therefore, once we control only for one variable – hours worked – and compare men and women both working 40-hours per week in 2012, about one-third of the raw 18.8% pay gap disappears.
2. The BLS reports that for single workers who have never married, women earned 95.8% of men’s earnings in 2012, which is a wage gap of only 4.2% (see Table 1 and chart above), compared to an overall unadjusted pay gap of 19.2% for workers in that group. When controlling for marital status and comparing unmarried men and unmarried women, more than 78% of the unadjusted 19.2% wage gap is explained by just one variable (among many): marital status.
3. Also from Table 1 in the BLS report, we find that for married workers with a spouse present, women earned only 76.6% of what married men with a spouse present earned in 2012 (see chart). Therefore, BLS data show that marriage has a significant and negative effect on women’s earnings relative to men’s, but we can accurately assume that marriage is a voluntary lifestyle decision, and it’s that personal choice, not necessarily labor market discrimination, that contributes to much of the gender wage gap for married workers.
4. Also in Table 1, the BLS reports that for young workers ages 20-24 years and 25-34 years, women earn 89% and 90.2% of their male counterparts (see chart), respectively. Once again, controlling for just a single important variable – age – we find that about half of the overall unadjusted raw wage gap for all workers disappears for young workers.
5. In Table 7, the BLS reports that for full-time single workers with no children under 18 years old at home (single workers includes never married, divorced, separated and widowed), women’s median weekly earnings were 95.2% of their male counterparts (see chart). For this group, once you control for marital status only, you automatically explain 76% of the unadjusted gender earnings gap.
6. Also in Table 7, the BLS reports that married women working full-time with children under 18 years at home earned 76.3% of what married men earned working full-time with children under 18 years (see chart). Once again, we find that marriage and motherhood have a significantly negative effect on women’s earnings; but those lower earnings don’t necessarily result from labor market discrimination, they more likely result from personal family choices about careers, workplace flexibility, child care, and hours worked, etc.
7. If we look at median hourly earnings, instead of median weekly earnings, the BLS reports in Table 8 that women earned 86.4% of what men earned in 2012, which accounts for almost one-third of the raw 19.8% gender earnings gap that exists for weekly earnings. And when we look at young workers, women ages 16 to 19 years earned 97.9% of the hourly wage of their male counterparts in 2012, and for the 20-24 year old group, women earned 92.0% of what men earned per hour. Also in Table 9, we see that for never married hourly workers of all ages, women earned 92.3% of the hourly earnings of their male counterparts in 2012, which explains about half of the unadjusted 13.6% gender difference in hourly earnings.
Bottom Line: When the BLS reports that women working full-time in 2012 earned 81% of what men earned working full-time, that is very much different than saying that women earned 81% of what men earned for doing exactly the same work while working the exact same number of hours, with exactly the same educational background and exactly the same years of continuous, uninterrupted work experience. As shown above, once we start controlling individually for the many relevant factors that affect earnings, e.g. hours worked, age, marital status and having children, most of the raw earnings differential disappears. In a more comprehensive study that controlled for all of the relevant variables simultaneously, we would likely find that those variables would account for almost 100% of the unadjusted, raw earnings differential of 19.8% lower earnings for women reported by the BLS. Discrimination, to the extent that it does exist, would likely account for a very small portion of the raw gender pay gap.
For example, in a 2005 NBER working paper “What Do Wage Differentials Tell Us about Labor Market Discrimination?” by June O’Neill (Professor of economics at Baruch College CUNY, and former Director of the Congressional Budget Office), she conducts an empirical investigation using Census data and concludes that:
There is no gender gap in wages among men and women with similar family roles. Comparing the wage gap between women and men ages 35-43 who have never married and never had a child, we find a small observed gap in favor of women, which becomes insignificant after accounting for differences in skills and job and workplace characteristics.
This observation is an important one because it suggests that the factors underlying the gender gap in pay primarily reflect choices made by men and women given their different societal roles, rather than labor market discrimination against women due to their sex.
To claim that a significant portion of the raw wage gap can only be explained by discrimination is intellectually dishonest and completely unsupported by the empirical evidence. And yet we hear all the time from groups like the National Committee on Pay Equity, the American Association of University Women, the Institute for Women’s Policy Research, and President Obama, President Jimmy Carter and Terry McAuliffe that “women are paid 77 cents on the dollar for doing the same work as men.” And in most cases when that claim is made, there is almost no attention paid to the reality that almost all of the raw, unadjusted pay differentials can be explained by everything except discrimination – hours worked, age, marital status, children, years of continuous experience, workplace conditions, etc. In other words, once you impose the important ceteris paribus condition of “all other things being equal or held constant,” the gender pay gap that we hear so much about doesn’t really exist at all.
I think President Obama deserves another 4 Pinocchio rating for his statement in bold above, and for ignoring the empirical evidence from his own Department of Labor that explains much, or all, of the gender differences in wages. In 2012, PolitiFact gave Obama’s claim a rating of “Mostly False.”