Mike Kueber's Blog

April 9, 2014

Gender pay gap

Filed under: Economics,Issues,Law/justice,Politics — Mike Kueber @ 11:56 pm

The issue of the week in D.C. seems to be the gender-pay gap. President Obama and the Democratic Party are up in arms because women earn only 77 cents for every dollar a man makes.  As reported by the Washington Post, President Obama expressed outrage over this inequity while loudly trumpeting two amazingly feeble actions:

  • President Obama will take two executive actions Tuesday aimed at narrowing the wage gap between men and women, forcing federal contractors to let their workers discuss their earnings with one another and to disclose more information about what their employees earn.”

I always assumed that gender pay inequity meant that women made less even though they had a similar job with similar education and experience. But today I read an article by my favorite analyst, Nate Silver, examining the relationship between a state’s gender pay equity and that state’s political philosophy (pro-Obama vs. pro-Romney), and he did his analysis merely by aggregating men and women, without regard to job, education or experience.  In fact, he even suggested that those differences might cause the gap:

  • “The gender pay gap has been the subject of hundreds of academic studies. These studies seek to sort out how much of it has to do with overt or implicit discrimination against women, as opposed to labor force characteristics that are not well accounted for by aggregate statistics. For example, the gender pay gap is narrower when measured by hourly rather than annual wages; that’s because women tend to work fewer hours than men. Men also tend to be concentrated in higher-paying industries. They may have more educational and work experience, and they may have higher-ranking positions within their organizations.”

Based on this caveat from Silver, I commented to a liberal friend on Facebook:

  • I didn’t realize the gender pay gap is based on aggregate numbers. All this time, I thought they were comparing men and women in the same jobs with similar education and experience. Is the Democratic Party suggesting that women should earn as much as men even if men are more experienced and better educated and have a better job?”

My friend suggested that, although Silver used aggregate numbers, perhaps other public-policy researchers tried to compare apples to apples, not apples to oranges. To confirm this, I simply returned to the WaPo article:

  • Obama and his aides often say that women earn 77 cents for every dollar men earn, which compares the annual earnings of women working full-time jobs over the course of a year with the earnings of men working the same amount of time. Some academics argue that the gap between the sexes is smaller if you account for a number of variables, including an employee’s length of time in the workforce, specific occupation and education level. Even the most conservative estimates, however, suggest that women earn 5 to 12 percent less for doing similar jobs as men.”

As usual, WaPo is too generous to the liberal ideology. Wikipedia provides a more balanced description of this issue:

  • 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 choose 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. The raw median wages of men and women are often used in misleading ways to inform public policy, without explaining the reasons behind the gap.
  • 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 study also concluded that while in principle more of the wage gap could be explained by differences between the groups, the data that would be needed to account for additional factors were not available.
  • While the conclusions of the study commissioned by the United States Department of Labor regarding the adjusted wage gap are generally in agreement with other research, there is disagreement on what factors explain the remaining 5–7%. Some studies assert that the remaining gap is due to discrimination, while some others, such as the Department of Labor study above conclude otherwise. Many researchers also believe that the differences between the choices men and women make are actually a result of discrimination or social pressures, with women being discouraged from high paying fields, and men being discouraged from making choices such as prioritizing job satisfaction over pay.

Summary – despite President Obama’s political grandstanding, which even WaPo seemed to recognize, there is nothing here that requires significant government intervention. Ironically, though, I agree with the Executive Orders.  A couple of years ago, my brother Kelly and I got into a big argument regarding whether employees should share salary information. He is old-fashioned about the subject, but I think this type of information is critical to pay equity, regardless of your sex.


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