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The '77 Cents on the Dollar' Myth About Women's Pay
Once education, marital status, and occupations are
considered, the "gender wage gap" all but disappears.
April 8 is "Equal Pay Day," an annual event to raise awareness
regarding the so-called gender wage gap. As President Obama said in
the State of the Union address, women "still make 77 cents for
every dollar a man earns," a claim echoed by the National Committee
on Pay Equity, the American Association of University Women and
other progressive groups.
The 23% gap implies that women work an extra 68 days to earn
the same pay as a man. Mr. Obama advocates allowing women to sue
for wage discrimination, with employers bearing the burden of
proving they did not discriminate. But the numbers bandied about to
make the claim of widespread discrimination are fundamentally
misleading and economically illogical.
In its annual report, "Highlights of Women's Earnings in
2012," the Bureau of Labor Statistics states that "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% of the
median earnings of male full-time wage and salary workers ($854)."
Give or take a few percentage points, the BLS appears to support
the president's claim.
But every "full-time" worker, as the BLS notes, is not the
same: Men were almost twice as likely as women to work more than 40
hours a week, and women almost twice as likely to work only 35 to
39 hours per week. Once that is taken into consideration, the pay
gap begins to shrink. Women who worked a 40-hour week earned 88% of
male earnings.
Then there is the issue of marriage and children. The BLS
reports that single women who have never married earned 96% of
men's earnings in 2012.
The supposed pay gap appears when marriage and children enter
the picture. Child care takes mothers out of the labor market, so
when they return they have less work experience than similarly-aged
males. Many working mothers seek jobs that provide greater
flexibility, such as telecommuting or flexible hours. Not all jobs
can be flexible, and all other things being equal, those which are
will pay less than those that do not.
Education also matters. Even within groups with the same
educational attainment, women often choose fields of study, such as
sociology, liberal arts or psychology, that pay less in the labor
market. Men are more likely to major in finance, accounting or
engineering. And as the American Association of University Women
reports, men are four times more likely to bargain over salaries
once they enter the job market.
Risk is another factor. Nearly all the most dangerous
occupations, such as loggers or iron workers, are majority male and
92% of work-related deaths in 2012 were to men. Dangerous jobs tend
to pay higher salaries to attract workers. Also: Males are more
likely to pursue occupations where compensation is risky from year
to year, such as law and finance. Research shows that average pay
in such jobs is higher to compensate for that risk.
While the BLS reports that full-time female workers earned 81%
of full-time males, that is very different than saying that women
earned 81% of what men earned for doing the same jobs, while
working the same hours, with the same level of risk, with the same
educational background and the same years of continuous,
uninterrupted work experience, and assuming no gender differences
in family roles like child care. In a more comprehensive study that
controlled for most of these relevant variables simultaneously—such
as that from economists June and Dave O'Neill for the American
Enterprise Institute in 2012—nearly all of the 23% raw gender pay
gap cited by Mr. Obama can be attributed to factors other than
discrimination. The O'Neills conclude that, "labor market
discrimination is unlikely to account for more than 5% but may not
be present at all."
These gender-disparity claims are also economically illogical.
If women were paid 77 cents on the dollar, a profit-oriented firm
could dramatically cut labor costs by replacing male employees with
females. Progressives assume that businesses nickel-and-dime
suppliers, customers, consultants, anyone with whom they come into
contact—yet ignore a great opportunity to reduce wages costs by
23%. They don't ignore the opportunity because it doesn't exist.
Women are not in fact paid 77 cents on the dollar for doing the
same work as men.
Administration officials are (very) occasionally challenged on
their discrimination claims. The reply is that even if lower
average female pay is a result of women's choices, those choices
are themselves driven by discrimination. Yet the choice of college
major is quite free, and many colleges recruit women into
high-paying science or math majors. Likewise, many women prefer to
stay home with their children. If doing so allows their husbands to
maximize their own earnings, it's not clear that the families are
worse off. It makes no sense to sue employers for choices made by
women years or decades earlier.
The administration's claims regarding the gender pay gap are
faulty, and its proposal to make it easier for women to sue
employers for equal pay would create a disincentive for firms to
hire women.
Mr. Perry is a scholar at the American Enterprise Institute
and professor of economics and finance