Lies, Damned Lies and Statistics: The Wage Gap

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Next in Lies, Damned Lies and Statistics Series: Part 7: Roger Maris’ Asterisk
Previous in Lies, Damned Lies and Statistics Series: Part 5: Female-Male College Gap
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Now we turn from the mostly meaningless college gap to the mostly nonexistent wage gap. It is quoted ad-nauseum that women make 75 cents for each dollar a man makes for the exact same work (it used to be 59 cents, now it ranges from 75 to 80). In response to this, Nancy Pelosi helped push through congress the Fair Pay Act. (1) Furthermore, April 20th, 2010 not only represents a day we should all get stoned out of our gourds, it’s “Equal Pay Day.” This holiday (of sorts) symbolizes how far into 2010 a woman would have to work to make what a man makes in 2009 alone. (2) Obviously this is a sign of discrimination; as Jessica Valenti, founder of Feministing.com, states rather bluntly, “the wage gap is like a big f*ck you to women.” (3)

Unfortunately (for Jessica, fortunately for every other woman in the country), even a faint knowledge of business or economics should immediately raise a degree of skepticism about this dubious claim. I’ll let John Stossel ask what should be the obvious question:

“Suppose you’re an employer doing the hiring. If a woman does equal work for 25 percent less money, businesses would get rich just by hiring women. Why would any employer ever hire a man?” (4)

Of course, by itself, this means nothing

Of course, by itself, this means nothing

Many people seem to believe that businessmen, (I mean businesspeople, sorry), care about nothing other than making money. However these same people also seem to believe businesspeople discriminate against everyone but white, Protestant, straight men with no handicap and well parted hair. So apparently, businesspeople do have values other than making money: they are racist, sexist, xenophobic, homophobic, Islamophobic, Christian fundamentalists. Well, at least they have some principles, right?

The truth is that businesspeople discriminate in favor of the color green; money. Market economies discriminate mightily against those who discriminate. If it were true that men make approximately 33% more for the same work, companies that predominantly hired women would crush companies that predominantly hired men. Ask any business owner what would happen if he or she could decrease his or her labor expenses 25% and he or she would tell you he or she would soon be hiring his or her competitor’s employees (as his or her competitor’s employees would be unemployed, because his or her competitors got crushed).

Discrimination assuredly exists, but for such a large wage gap to be present, there are really only four options for someone to believe: 1) There is an all-encompassing agreement among business owners throughout the entire country, both male and female, to discriminate against women, thereby preventing any one business from undercutting another by hiring only women at 75 cents on the dollar. To believe this puts you in the company of the wildest conspiracy theorists. 2) Profits are not particularly important to a business, so business-humans can hire based on just about anything they want. This would make you one of the dumbest people on the planet. 3) Women aren’t as productive as men and therefore, while doing the same job, women provide less output (approximately 25% less) than men do. This would make you a pretty run-of-the-mill sexist. 4) This statistic is wrong.

Before continuing on, I should note that this discussion will not deal with discrimination that may occur with regards to hiring or promoting. Glass ceilings and pink ghettos will not be discussed. The fallacy here is that men and women are paid vastly different amounts for doing the exact same work. As you will soon see, the “same work” has a very flexible definition indeed.

What we need to recognize is that having the same job, (or the same type of job, as these statistics are often based on), does not infer that one does the “same work” and should be paid equally. For example, there is a much greater demand for business professors than history professors, so business professors will be paid more. Furthermore, the longer someone’s had a job, the more they will usually get paid. And obviously, the more hours they put in, the more they will get paid. And when the position is paid by commission, any discrimination that occurs would be by the consumer, not the business-homosapiens who employ them.

Once we recognize these things, we can start to come to grips with what is actually happening. First, we cannot assume that men and women have the same career aspirations in the aggregate. Second, we have to look at what happens when men and women get married, namely, we must investigate the marital asymmetry hypothesis.

Let’s start with the types of jobs men and women seek. As mentioned with regards to the college gap, men and women tend to seek different professional aims and career goals. Men are much more likely to take on dangerous positions, as evidenced by the fact that 93% of workplace fatalities are men. (5) Hazardous conditions usually come with hazard pay. Men are also more likely to take jobs in uncomfortable conditions, which brings a premium as well (if you ever watch an episode of Dirty Jobs, you’ll quickly notice there aren’t a lot of women on the show).

Professor James T. Bennett compiled 20 major reasons for the wage gap, which include some of the following:

  • Men go into technology and hard sciences more than women.
  • Men tend to take more stressful jobs that are not “nine-to-five.”
  • Men are more likely to work longer hours, and the pay gap widens for every hour past 40 per week.
  • Women are nine times more likely than men to drop out of work for “family reasons.” Less seniority leads to lower pay.
  • Men work more weeks per year than women.
  • Women place greater value on flexibility, a humane work environment, and having time for children and family than men do. (6)

None of these things are either right or wrong, they just represent different choices. What it does mean, though, is that we cannot say women are paid less for doing the same work when men typically work longer, less flexible hours in more dangerous and uncomfortable positions. Warren Farrell’s calculations highlight the difference between the average hours worked, concluding that men who work full time work an average of 44 hours per week, while women who work full time average 41 hours per week. This represents a bigger difference than you’d immediately think, as a person who works 44 hours a week makes approximately 100% more than someone who works 34 hours a week. Warren Farrell concludes that this accounts for 70% of the wage gap in and of itself. (7)

Furthermore, some of the explanations Professor Bennett discusses represent the single biggest difference between the genders when it comes to wages: marital asymmetry. In other words, marriage tends to increase a man’s earning potential and reduce a woman’s earning potential. Regardless of whether it’s right or wrong, women typically take up more responsibilities at home than men do. Since women usually spend more time at home, they have less time to work, and thereby their earning potential is reduced. Since men have many of their domestic responsibilities taken care of for them, they have more time to work and thereby their earning potential increases. Economist Thomas Sowell elaborates:

“Not all domestic responsibilities can be shared equally, such as having babies, which is not an inconsequential thing since the existence of the human race depends on it. What it means is that women make choices that make a lot of sense for them. For example, the choice of occupations… women tend not to go into occupations in which there’s a very high rate of obsolescence. If you’re a computer engineer and you take five years out to have a child and [raise him] until the age you can put him in daycare, well my gosh, the world has changed. You’d have to start way, way back. On the other hand, if you become a librarian, a teacher or other occupations like that, you can take your five years off and then come back pretty much where you left off.” (8)

CS = Computer Science

CS stands for Computer Science

While more women go to college than men, women typically go into fields that have less earning potential. In 2005, women received more than 60% of the doctorates in education, but less than 20% of the doctorates in engineering (9). Men are over-represented, proportionally, in business, finance, accounting, engineering, computer science and medicine, the fields with the highest earning potential. Denise Venable, of the National Center for Policy Analysis, further proves this point showing that, “in general, married women would prefer part-time work at a rate of 5 to 1 over married men.” (10) Additionally, women over 25 years of age have held their current job for an average of 4.4 years vs. 5 years for men and pay raises come with seniority (11). This makes sense when we look at it in terms of the marital asymmetry hypothesis. And again, a higher earning potential doesn’t mean better, it’s simply means different. A career in education is likely more interesting, fulfilling and flexible than a career in finance, but it comes with less money. It’s all about the trade-offs folks.

never married

Women who work between 1-34 hours earn more than men

The marital asymmetry hypothesis and specifically, child rearing, seems to be of huge importance here. And luckily, there is an easy way to test the importance of it; namely compare the wages of never-married women to that of never-married men. In 1982, never-married women earned 91% of what never-married men did. (12) In 1971, never-married-women in their thirties earned slightly more than never-married men (13). Today, among men and women living alone from the age of 21-35, there is no wage gap. (14) Among college-educated men and women between 40 and 64 who have never married, men made an average of $40,000 a year and women made an average of $47,000! (15)

This should pretty much end any question about whether or not the wage gap exists. Certainly there is discrimination, but it’s not as simple as comparing gross wages. If we do that, we’d have to come to some very strange conclusions. For example, Asian Americans make more money than white Americans do on average (16); do business-mammals-with-the capacity-for-higher-cognitive-abilities discriminate against white people in favor of Asians? Since 1960, and continuing through today, black women with a college degree earn more than white women with a college degree. In 1970, black women who had graduated college earned 125% of what white women who had graduated college earned. (17) Would anyone like to stand-up and make the argument that employers discriminate against white women in favor of black women? I didn’t think so.

So let’s just go one step further and get all controversial: should men and women be paid equally across the board? The answer is more complex than one would expect. People, in general, should be paid as individuals, so however productive an individual is should determine his or her pay. Therefore, in jobs where men typically have an advantage, say jobs requiring physical strength, odds are the average man will be more productive in that profession than the average women, and therefore should typically get paid more regardless of the other factors mentioned above. In jobs where women have a natural advantage, say jobs requiring an excellent memory (yes, much to the chagrin of every straight man in the history of the world, the ladies typically have a better memory, if this bothers any guys out there, worry not, you’ll probably forget about it fairly soon) (18), women will typically be more productive and should therefore get paid more. However, this only applies when discussing aggregates. The differences within each gender are far greater than the differences between the genders. Everyone should be paid based on their individual productivity. It simply means we have to be very careful when we are interpreting wage data.

Finally, let’s get one last thing straight, which should be completely obvious, but apparently isn’t: being a stay-at-home mother, or father for that matter, is morally neutral. It all depends on what the individual wants. If a woman gains fulfillment from raising her kids, taking care of the home and perhaps having a part-time job or being involved in her community in another way, than staying at home is what she should do. If, on the other hand, she would prefer a career, then there is a problem. Same goes for career woman who would prefer to stay at home with the kids. And the same thing applies for men as well.

Certainly there are other issues that come into play, mostly financial, and every relationship requires some give and take, but the general principle holds throughout. I find it ironic that liberals, who often decry materialism, tend to judge equality based solely upon materialism (in this case, wages). Take your standard family unit: father, mother and 2.3 kids. There are a host of tasks that need to be completed, some family members bring in an income and others do not. This in no way infers that one type of work is superior to the other, since both types need to be completed. Now, I’m not a big fan of strict gender roles because it’s collectivist thinking; it’s gender socialism. But still, however these tasks are delved up is morally neutral (assuming it’s a similar amount of work), it all depends on the individuals involved. And we shouldn’t be denigrating the work that doesn’t come with a dollar sign attached to it.

Unfortunately, that’s what we’re implicitly doing when we see the wage gap for what it is: a comparison of apples and oranges. Certainly discrimination exists, but the market grinds away at it with ruthless tenacity. The concept that women earn 75 cents on the dollar is simply a bogus statistic that simultaneously denigrates work done at home and implies the need for some very nonsensical policies.

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Lies, Damned Lies and Statistics Series

Part 1: A Primer
Part 2: Income Stagnaton
Part 3: All Fiat Currencies Fail
Part 4: Iraq War Casualties
Part 5: Female-Male College Gap
Part 6: Male-Female Wage Gap
Part 7: Roger Maris’ Asterisk
Part 8: Women Do All the Work but Men Keep All the Money
Part 9: The BMI
Part 10: A College Degree is Worth One Million Dollars

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(1) “Lilly Ledbetter Fair Pay Act of 2009,” Wikipedia.org, retrieved September 18, 2009, http://en.wikipedia.org/wiki/Lilly_Ledbetter_Fair_Pay_Act_of_2009
(2) See “Equal Pay Day,” National Committee for Pay Equity, http://www.pay-equity.org/day.html
(3) Jessica Valenti, “Equal Pay Commercial,” Feministing.com, December 15, 2008, http://www.feministing.com/archives/012716.html
(4) John Stossel, “The wage gap, give me a break,” Townhall.com, June 22, 2005, http://townhall.com/columnists/JohnStossel/2005/06/22/the_wage_gap,_give_me_a_break
(5) “Table 4. Fatal occupational injuries by selected worker characteristics and selected event or exposure, 2008,” Bureau of Labor Statistics, Last Modified August 25, 2009, http://www.bls.gov/news.release/cfoi.t04.htm
(6) Quoted in Thomas DiLorenzo, “Every Feminist’s Nightmare,” Lewrockwell.com, December 3, 2008, http://www.lewrockwell.com/dilorenzo/dilorenzo160.html
(7) Warren Farrell, “Why Men Earn More,” Cato Book Forum, February 1, 2005, http://www.cato.org/event.php?eventid=1834
(8) Thomas Sowell, “Thomas Sowell – Gender Bias and Income Disparity: A Myth?” Uncommon Knowledge with Peter Robinson, retrieved September 18, 2009, http://www.youtube.com/watch?v=8EK6Y1X_xa4
(9) Thomas B. Hoffer, et at., Doctorate Recipients from United States Universities: Summary Report 2005, Chicago: National Opinion Research Center, pg. 16, University of Chicago, Copyright 200
(10) Denise Venable, “The Wage Gap Myth,” National Center for Policy Analysis, April 12, 2002, http://www.ncpa.org/pub/ba392
(11) Ibid
(12) “Current Population Reports,” Series P-60, No. 132, Bureau of Labor Statistics, Washington D.C.: U.S. Government Printing Office, 1982, pg. 161
(13) “The Economic Role of Women,” The Economic Report of the President, 1973 Washington D.C.: U.S. Government Printing Office, 1973, pg. 103
(14) Anita U. Hattiangadi and Amy M. Kahn, “Gender Differences in Pay,” Journal of Economic Perspective, pg. 58, Autumn 2000
(15) Warren Farrell, Why Men Earn More, Pg. 16-17, Amacom, Copyright 2005
(16) “Income Stable, Poverty Rate Increases, Percentage of Americans
Without Health Insurance Unchanged,” U.S. Census Bureau, August 30, 2005, http://www.census.gov/Press-Release/www/releases/archives/income_wealth/005647.html
(17) Richard Freeman, “Decline of Labor Market Discrimination and Economic Analysis,” Table 1, American Economic Review, pg. 281, May 1973
(18) See “Sex Differences in Episodic Memory,” Current Directions in Psychological Science,  Volume 17 Issue 1, Pg 52-56, http://www3.interscience.wiley.com/journal/119411612/abstract?CRETRY=1&SRETRY=0

10 Comments

  • comicoffee


    This study underscores why it’s important for both sexes to be able to take time off for the birth and raising of a child. Currently, it’s a self-perpetuating cycle: the woman is the only one in the family with the ability to take off months for parental leave (many men do take time off, but it’s less time and usually comes out of accrued vacation), so when she returns to work, she’s less competitive for top projects and promotions compared to others who never took the time off. If both parents took equal time off, there wouldn’t be this gender discrepancy.

  • fineshoes


    @comicoffee

    However legitimate your criticism of gender roles and time off work for childcare may be, this article underscores that because it’s not the aim of the article to analyze the fairness or source of such decisions, but rather how such decisions affect the gender wage gap.

    The point of the article was to address the fallacy that is committed when citing that misleading statistic, nothing less, nothing more.

  • Andy


    I studied this a few years ago at a large public sector organisation (>5,000 employees). Tthe organisation had a pay structure of grades, with incremental pay points within each grade (usually about 5 points per grade). If an employee performed adequately, they moved up a point each year. This system means that there should be no systematic differentiation between pay.

    Yet men were paid (on average) significantly more. This was because men were more likely to be more senior. And if we looked at the recruitment statistics, men were less likely to get jobs they applied for, but tended to apply for more jobs.

    If we controlled for grade, some grades still showed a bias towards higher pay for men. In particular, the admin grade had significantly higher pay for men – because women had much shorter service with the organisation, on average (remember, employees could get from bottom to top in only four years).

    This seems to suggest that there are significant differences in behaviour that can’t be explained by systematic discrimination. And yes, I agree that generally the idea behind the pay gap really is a bit nonsensical: in this case, there appeared to be a pay gap until we compared pay for equal levels of work. This may hold true more generally in some areas of employment. This only leaves recruitment policies – and in this case, women appeared to be more likely to get jobs they applied for.

    That said, there are certainly some areas of work that still have major problems with equal pay – for example, the legal profession actively discriminates because they can get away without disclosing pay (at least, so people tell me).

  • Andrew


    I don’t know about the legal profession, but I will say you’re analysis squares with mine completely. Not controlling for variables is simply inexcusable. You might as well say that younger people are discriminated against since older people are typically paid more.

  • Optimist


    “While more women go to college than men, women typically go into fields that have less earning potential.”

    Sorry bro, there are plenty of surveys out there that show that the median salary for a woman is less the median salary for a man IN THE SAME FIELD. Here’s a very comprehensive study that tracks earnings by 171 majors, by gender and by race/ethnicity:
    http://www9.georgetown.edu/grad/gppi/hpi/cew/pdfs/whatsitworth-complete.pdf

    • Casey


      IN THE SAME FIELD doesn’t tell the whole story. If a man and a woman with the EXACT same education and date of hire work at the same company until they are 55, there are many reasons that a pay gap might develop. Women have kids and many decide to take at least some time off with each child. If the average married woman takes a year off for each kid, she will end up making less than a man “doing the same job” simply because she has less years of service. At to this measurable effect, the fact that many women stay away from jobs that require large amounts of travel, long hours at the office, lots of stress, etc for family reasons, and you begin to understand the intangibles that add up to a wage gap. I am so thankful that my wife had a choice to take on an education job with an online school when we had our kids–she is now home whenever our three kids are home–but it came with a reduction in pay–a reduction male teachers generally do not seek. But it is not accurate to say that she has been discriminated against because male teachers with the same number of years of service–in the exact same field, make more than her.

  • Andrew


    I make 20 points and you take on one to supposedly refute the whole argument. You’re really good at arguing aren’t you…

  • Pingback: Thomas Sowell on the Male/Female Wage Gap | Swift Economics

  • Beth


    I know I am late in the game, but anyone coming across this piece (well done, by the way) may wonder about the gap between male and female earnings in the same field as noted by Optimist.

    There is a theory that states that many times women don’t ask! They don’t ask for higher starting salaries, they don’t ask for bonuses, they don’t ask for promotions. The idea for them is that their hard work will be recognized and rewarded. Men on the other hand never stop asking, they ask for more money, more promotions, more responsibility. This could be part of the reason for the issue. Check it out here: http://www.womendontask.com/

    Thanks again for this piece and the sources you provided.

  • Pingback: Maddow Wage-Gap Myth | The American Conservative Union

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