Monday, April 7, 2014

Myth: Women earn less than men for the same work.

During his State of the Union Address, President Obama stated “women make up about half our workforce. But they still make 77 cents for every dollar a man earns. That is wrong, and in 2014, it’s an embarrassment.” Is it true that there is a gender wage gap? A better question is: Do people who work different jobs, with different skills, and different work hours earn different amounts of money? The answer is yes.

That 23% difference between what men get paid and what women get paid is calculated by simply dividing the average earnings of women by the average earnings of men. Thus, the 23%number is an apples to oranges comparison that is so superficial that it is rendered meaningless. The reality of the situation is that there are numerous variables which determine how much a person is paid. Experience, education, where they work, how long they work, if they are married, etc are all important factors yet the 23% number completely ignores them.

There are many reasons why on average, men earn more than women. Here are some:

-Men work more dangerous jobs. Dangerous jobs tend to pay highly in order to attract people to take them. In 2009, the rate of fatal occupational injuries per 100,000 full times workers was 5.5 for men and 0.6 for women [1].

-Men tend to work more in higher paying industries. For example, engineering (any type) is one of the highest paying jobs in the country. Not coincidentally, around 90% of engineers are males. On the other hand, the least well-paying jobs in the US are those of social work, studio arts, early childhood education, drama and theater, etc. And unsurprisingly, women make of the majority of these workers. [2]

-Men tend to work longer hours. “[In 2009] Average hours for men were 41.3 per week, whereas women worked 35.6 hours per week on average.” [3] Additionally, 44% of full time workers are women compared to 56% which are men. [4] 

-Part time workers tend to earn less, even among women. "The hourly pay of women who work part-time has been found to be 20 percent lower than the hourly pay of women who work full time, even when comparing women with the same levels of education and the same family circumstances such as being married, divorced, or with children" [8] Additionally, "Part time workers not only earn less total pay, they are also paid less per hour and are less likely to be promoted. There have, and continue to be, more women than men who are part-time workers" [8]. 

-Many women take years out of the labor force to bear children. This time out of the labor force seriously diminishes the market value of their labor. Mothers tend to have lower wages than childless women.[5]

-Marriage is also a significant factor in determining wages. Studies have found that married men earn more money (around 16% more) than non-married men even when controlling for factors like education, age, number of hours worked, etc. [6] Research generally finds that marriage has a negative or insignificant effect on women’s wages [5].

It is obvious that there are numerous factors which have a hand in determining how much a worker is paid. A true, apples to apples comparison would analyze the wage difference between men and women of the same job with similar education, marriage status, skills, etc. Luckily, researchers have done this. Here are the findings:

- “[A]mong workers who have never been married and never had children, women earn 117% of what men do. (This factors in education, hours worked and age.)” [7]

- “Among college educated, never married individuals with no children who worked full time and were from 40-64 years old- that is, beyond child bearing years-men averaged $40,000 a year in income, while women averaged $47,000” [8]

-"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." [9]

The findings are clear, when individuals of similar qualities are compared, the gender wage actually favors women. Thus, the gender wage gap is undoubtedly a result of individual choices, not gender discrimination. Anyone who cites the 23% gender wage number is simply ignoring the fact that there are other determinants of worker’s wages besides gender. And even then, there doesn’t appear to be any evidence that gender even plays a role in how workers are compensated for their labor.

Parting thoughts: Intuitively we should know that paying people less because of their gender is a downright terrible idea. If women were equally as productive as men but paid less by their employers, no one would hire men because it would be a complete waste of money to pay more for the same amount of production. In reality, employers compete for workers and value workers based on said worker’s productivity. If a company can make profits by hiring women at higher wages than companies who discriminate against them, they sure as hell are going to do that regardless of their own prejudices. In a market economy, discrimination based on sex, race, etc is punished. Any employer engaging in discrimination must accept the fact that he will lose productive employees to his competitors or lose valuable customers to competitors who don’t discriminate against people based on superficial attributes like race, sex, etc. Either way, discrimination is a financially unwise decision that most companies refuse to make.

[4] Authors calculations based on this data:
[8] Sowell, Thomas. “Economic facts and fallacies”

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