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opinion | Jodi Beggs

‘Equal pay for equal work’ isn’t so simple

Last Tuesday, President Obama’s State of the Union address reiterated the statistic that working women in the United States “make 77 cents for every dollar a man earns” and went on to call for “equal pay for equal work.” Obama was promoting the Paycheck Fairness Act, which would require employers to prove that any wage disparity is based on differences in skill, background, or other relevant traits — rather than on gender.

It’s hard to argue that gender equality and fair pay aren’t laudable goals. Less clear, though, is whether the legislation on offer would actually address the root cause of gender pay disparity. Luckily, science can help answer that. (Spoiler: Of course, the answer is no, but it’s still important to know why.)

It’s helpful to start by unpacking the 77-cents figure a bit. It’s a very basic aggregate statistic, reflecting the experiences of full-time workers overall. It doesn’t control for gender differences in occupation, level of education, hours worked, and so on. It’s wildly incorrect, therefore, to interpret this figure to mean that employers deciding that a woman’s labor comes at a discount because she likely has ovaries or, in historical parlance, is just working for “pin money.”

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Government data collection enables economists to refine the gender comparison by looking specifically at younger cohorts of workers. Younger women are achieving the same (or higher) levels of education as men, and they have much more freedom in their occupational choices than did earlier generations. According to Harvard economist Claudia Goldin, the gender pay gap narrows to upwards of 90 cents on the dollar for younger, white, college-educated workers at the beginning of their careers after controlling for education levels and hours worked.

This higher ratio suggests that the combination of occupation and explicit gender discrimination accounts for at most a 10-percent initial pay discrepancy between men and women, at least for some demographic groups. Historically, occupation has explained a significant portion of the overall pay disparity between men and women, which doesn’t leave much room in the data for explicit gender discrimination at the early stages of a career to be a main driver of the earnings differential.

Unfortunately, the pay gap for all age cohorts widens dramatically as people get older, meaning that women are falling behind in earnings as they get farther into their careers. Since differences in education and occupation don’t systematically reappear as people get older, there must be another feature of labor markets that accounts for the difference.

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To identify the culprit, Goldin looks at gender pay gaps within a number of different occupations. What she finds is striking: Gender pay gaps within occupations are even more substantial than differences across occupations, and such gaps are wider in occupations where a high priority is placed on long and inflexible hours and large penalties are enacted for gaps in work history. For example, Goldin notes that lawyers who work 80 hours per week generally earn more than twice as much as lawyers who work 40 hours per week. (This phenomenon can be viewed as the penalty for entering what is colloquially known as the “mommy track.”) Goldin also alludes to the fact that there’s no such thing as a part-time management consultant. Not surprisingly, jobs requiring a JD or MBA are among those with the highest gender pay differentials.

What this data suggests is that there isn’t a “gender discrimination” problem so much as a “family logistics” problem and that women don’t need to be protected so much as enabled. In many occupations, workplace flexibility either comes at a price or is nonexistent, which causes caregivers to face a disproportionate financial penalty or drop out of the workforce altogether. For those who drop out, the penalty is exacerbated in occupations where work history gaps are heavily penalized.

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Given that women are disproportionately responsible for child care and home duties, it’s not surprising that women are more likely to trade compensation for work flexibility and work-life balance, leading to gender pay differentials. Interestingly, this logic suggests that the gender pay differential would decrease substantially if men and women were equally likely to take on primary child care responsibilities. (This hypothesis is bolstered by the observation that the gender pay differential between men and non-married women without children is almost negligible.)

In occupations where inflexibility and long hours are not actually necessary in order to work efficiently, such practices distort the labor market and lead to higher earnings for those who are willing and able to sacrifice flexibility and balance at the expense of workers who prioritize flexibility and work-life balance. From the perspective of a family unit, this is not necessarily much of a problem, since the higher earnings from the inflexible partner can counteract the lower earnings from the partner who sacrifices compensation for flexibility. Single parents, on the other hand, have a lot to gain from increases in workplace flexibility.

Employers can play a role. Creating a more flexible workplace could be a profitable way to enable a larger pool of employees to reach their full potential (and, by extension, to eliminate much of the gender pay differential). Whether a company chooses to give workers that flexibility, however, depends heavily on whether decision makers benefit enough from the existing labor market structure to have an interest in perpetuating unfair practices. Workers have a role, too — the more both men and women assert flexibility as a priority and “vote their feet,” the more incentive employers have to provide it.

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From a policy perspective, it is theoretically possible to mandate workplace flexibility in order to bring about convergence in earnings for caregivers and non-caregivers. Unfortunately, this approach also has some significant downsides. First, identifying occupations that truly require inflexibility and long hours (and should thus be exempt from such a mandate) is likely prohibitively difficult. Second, mandating flexibility would actually hurt those who don’t prioritize flexibility — since they would likely see lowered earnings without getting anything that they value in return.

As is true in many cases, crafting effective laws is complicated once the details of a problem are uncovered, which makes not thinking about it too hard and focusing on statistics like the 77-cents figure far more appealing. Unfortunately, simple and effective rarely go hand-in-hand on policy that brings about sweeping change. In this dilemma, women’s pay will be most helped by paying attention to the details.

Related:

Jonathan Schlefer: Economists’ long-held beliefs make income inequality worse

Joanna Weiss: Can a simple idea mean big change for women?

2013 | Opinion: Closing the wage gap in Boston


Jodi Beggs is an economics lecturer and assistant director of research for the CREATE initiative at Northeastern University.