The “gap”

To begin with, the statistic that a woman makes eighty cents on the dollar that a man earns for the same work is simply false. It is a common misinterpretation of the unadjusted gender wage gap, which compares the median salaries of men and women that work full-time; Thus, a more accurate representation would be to say that the median salary for women is twenty percent less than the median salary for men. In 2018, it was reported that a women’s median salary was roughly 22% lower than men’s in America.

The statistic that allows us to compare earnings for the same job done over the same industry and experience level is the adjusted, or controlled pay gap. This difference is much smaller, but still exists. Reports on this gap differ, with some sources listing the gap at as high as 5.4% and others as low less than 1%(Payscale).

It is important to note that the shrinking of the wage gap when it is adjusted does not negate its existence. The Institute for Women’s Policy Research use the phenomen poverty to help illustrate the importance of broad picture statistics “Black and Hispanic populations in the United States have higher poverty rates than the white population. When analyses control for education, place of residence, type of job, and many other factors, the remaining differences in poverty rates are smaller but not gone. [This does not negate the fact that] black and Hispanic Americans are disproportionately more likely to live in poverty.” The multi-faceted explanation of the gap, and the factors that contribute to it, allow us to better understand how to solve it, but do not negate the gap’s existence.

These two figures are both important but provide different insights. Earnings signify how individuals are valued socially and economically, which means that looking at these statistics can help to draw broader conclusions about men and women at work. The adjusted gap analyzes the potential role of gender discrimination in differential pay for equivalent work, while the unadjusted gap provides a bigger picture that includes differences in opportunity. Both tell an incomplete story, though – they don’t reveal how the gap changes over time or differs by industry, which are key nuances to better understand why a gap exists and how to solve it.

Causes

The explanation for the gender wage gap is multi-faceted. Historically, differences in human capital, i.e. education and experience level, were a large factor. But, with gender convergence over time, these differences have all but closed and hold little bearing on the gap (Goldin, Glassdoor); Furthermore, evidence on differences in psychological and cognitive abilities have shown only modest effects as well (Our World in Data). The most recent data places two main factors at the heart of the cause: the motherhood penalty and occupational sorting. Economist Henrik Kleven of Princeton University notes: “The one thing which is not changing is the effect of children. This is very persistent and constant. All the other sources are declining, but the child effect sticks, and that ends up taking over as the key driver.”

The motherhood penalty

Figure 1 illustrates the adjusted wage gap of women and men with college degrees over time. In Figure 1, we see that the gap starts small, but increases as each cohort of women enters their thirties. ‘The difference in earnings by sex greatly increases during the first several decades of working life,’ researcher Claudia Goldin says. One big change happens in this time frame – motherhood.

Motherhood has a vast impact on a variety of life decisions, and in turn the outcome of mother’s work lives. Motherhood leads to salary-damaging career interruptions and even shapes what professions mothers choose to work in.

When a child is born, women take on a disproportionate share of child-rearing tasks (Pew research center ADD STAT?). “According to data from time diaries, women on average spend about the same number of hours each week doing paid and unpaid work, while men devote more hours to paid work.” 22 As such, women are much more likely than men to take time off after a child is born (see figure 2). Men, on the other hand, are more likely to work when they have young children.14

According to Payscale, this higher likelihood of time off greatly impacts women’s earnings. On average, a person who was unemployed for less than three months faces a 3.4 percent wage penalty, while an individual who has not worked in over a year experiences a 7.3 percent penalty.

Moreover, women face a penalty for simply being mothers. Research from sociology professor Michelle Budig shows that men’s earnings increased more than 6 percent when they had children (if they lived with them), while women’s decreased 4 percent for each child they had – the motherhood penalty and the fatherhood bonus. A study that takes all elements of motherhood into account, including career interruptions, places the penalty at 9-18% per child. NCBI *harvest for sources Budig believes this data paints a broader picture about societal norms and beliefs. “Employers read fathers as more stable and committed to their work; they have a family to provide for, so they’re less likely to be flaky. That is the opposite of how parenthood by women is interpreted by employers. The conventional story is they work less and they’re more distractible when on the job.”

Motherhood even shapes what jobs women choose to take. Goldin and Kleven show “that when one looks at the data on occupational choice in some detail, it becomes clear that women disproportionately seek jobs, including full-time jobs, that tend to be compatible with childrearing and other family responsibilities.” Our World in Data (Kleven)Vox

This brings us to our next factor, occupation sorting.

Occupation sorting

A 2017 study from the Journal of Economic Literature vs. Blau and Kahn (2017) concludes that occupation and industry sorting explains 32% of the overall pay gap, meaning that it plays a huge role. *Glassdoor 2016 w/ more recent data puts it at 54% Blau Women are poorly represented at the top of the talent pipeline; American census figures show that women make up only 26% of highly paid chief executives, and by mid-career, men are 70 percent more likely to be in executive roles than women (Payscale).

Skeptics of this “opportunity gap” will say that women choose to enter low income positions. But, according to Ariane Hegewisch, the Program Director Employment & Earnings at the Institute for Women’s Policy Research, “The issue isn’t choice, it’s constraints on choice. There are a lot of constraints on women entering higher-paying professions, from discouragement in schools and not having any role models, to broad social effects, like hostile work environments through harassment and discrimination.” Time “In other words, there may be larger reasons why a woman has a lower level of education or works in lower paying field than her male cohorts. Perhaps she was steered away from certain majors when she was in school, or can’t work in an industry like law or finance because of care-taking responsibilities.”

Fortune

The differences in wage gap by industry reveal the importance of flexibility of scheduling. Goldin concludes that “certain hours are more important than others in some jobs – and those jobs have especially high wage gaps.” Vox Goldin uses the simple example of scientists compared to business women to illustrate this:

(Figure 3). In Figure 3, the points lower down the graph show a higher gap. Business has a much higher gap than science. This is because the hours a business woman works are important; in order to satisfy her employer, she needs to be available when clients need her. Scientists, alternatively, are evaluated on the completion of their work, regardless of when it was done. Here, we see that flexible work is more accessible to working mothers, leading to a lower wage gap. In fact, women make up x% of part-time workers.

Discrimination

In most analyses of the wage gap, there is a certain amount of the gap that is unexplained residual. Blau and Kahn (2017) lists this at 38%. Our World in Data notes that “The gender pay gap is not a direct metric of discrimination. However, evidence from different contexts suggests discrimination is indeed important to understand the gender pay gap. Similarly, social norms affecting the gender distribution of labor are important determinants of wage inequality.” A variety of societal factors could have bearing on the labor market, whether it be stereotypes that lead to lower aspirations or weaker professional networks (stat about more likely to get recommendation).

While hard to quantify, gender discrimination exists in today’s workplace; 4 in 10 women say they have experienced gender discrimination at work. Pew Research Center ; Furthermore, studies of managers assigning bonuses to fictional profiles of male and female employees showed a systemic allocation of lower bonuses, even though the bonuses were supposed to be awarded on merit. Fortune

This helps us to better understand why a for-profit company might hire a man over a woman. A company doesn’t necessarily look for the most cheapest worker, but instead the most qualified. Discrimination discounting women coupled with potential career interruptions from motherhood puts women at a clear disadvantage.

Policy as a solution

Improving the gender wage gap would have vast consequences. 42 percent of U.S. mothers are primary breadwinners, so closing the gap would not only help mothers support their families but would also promote contributors to the national economy. AAUW We are in need of solutions, but is important to keep the capacity of policy in perspective. Policy needs to be focused on root problems within the workplace instead of just the over-arching systems in order to be effective. ‘Well-intentioned policies backfire 98 percent of the time,’ Goldin argues.

The Bastiat Principle

In economics, we must take into account the visible and foreseen effects of an action. Mandated paid family leave may seem beneficial to mother and child on the surface, but could in fact lead to harmful consequences.

Mandating benefits could in fact shift those costs to the workers; companies will choose cheaper male labor that will cost them less in benefits. Or, female laborers will require temps to take over their position, also inflating costs. Either way, a corporation would either hire fewer women or decrease their pay. As ex-President Obama’s director of the National Economic Council Larry Summers wrote, mandated benefits induce employers “to hire workers with lower benefit costs.” Thus, while women should be free to negotiate for maternal leave, mandating the policy could have harmful consequences.

Support Mothers

In her research, Budig found that publicly funded, high-quality child care helped to shrink the motherhood penalty. NYTimes For parents of young children, particularly those who are low-income, the lack of affordable, high-quality early childhood programs can prevent working parents from ensuring that their families are cared for while they fulfill the demands of their jobs and can inhibit their long-term success. Accessible and reliable child care is essential for working parents to maintain employment, but comes at a high cost that could be cut. Legislation such as the proposed Strong Start for America’s Children Act supports working families by investing in high-quality, sustainable early learning environments for children. This enhances women’s ability to keep a job, excel in the workforce, and lower the gender wage gap.

Reform jobs – make hours equally valuable

Political consultant Mary Matalin wrote, “Having control over your schedule is the only way that women who want to have a career and a family can make it work.” Goldin’s works suggests that making hours more flexible — and workers more interchangeable — will help make jobs more accessible to women. Vox

Pharmacists are an example of a profession where big change in flexibility and scheduling has been made that has benefited women. Many careers have begun to reshape how they schedule and organize workers. “Primary care doctors, for example, have shifted away from running one-person practices to joining larger, multi-doctor offices, allowing them to become more interchangeable.”

Shift Mindsets

An important part to closing the wage gap is empowering women to work towards any occupation and ending work-place discrimination. We need to do away with impostor syndrome – the phenomen “in which people — usually high-achieving professionals — don’t consider themselves qualified for their position and convince themselves that they’ve cheated their way into it,”(Ann Friedman).

These social norms can be changed – we’ve seen the evolution in education over the last century. Increasing transparency and accountability can be done by making every company report on their salary data, a policy that the U.K. enforces. Movement like #metoo

Conclusion

In conclusion, the statement that “a company may hire a woman for four-fifths of what a man would earn, to do the same job and do it just as well” is false, but the claim that the median salary of a woman is four-fifths that of a man’s is true. While the explanation for gender wage gap is multi-faceted, two main factors are the motherhood penalty and occupational sorting. Change truly can be made in the future, if we strive to enact policy that helps make jobs more accessible to women and secure childcare while they are at work.