It is a widely held view that women are discriminated against in wages and employment in the marketplace. When I first published research on this subject in 1984, the statistic often cited was that women earned on average less than two-thirds of what their male counterparts earned. In addition, other statistics showed that women were not evenly represented in all occupations. For example, women held over 95 percent of nursing and secretarial positions, but less than a third of the jobs in engineering, construction and the technical professions.
Such statistics were commonly used as evidence of widespread discrimination against women in the marketplace. Now, nearly 40 years later, gender disparity in wages (the “gender gap”) is still seen as a phenomenon of discrimination. The US Census, in 2019, measured the female wage at 84 percent of the male wage—up significantly from the 66 percent of 40 years ago..
Figure 1: Trends in Male and Female Wages
This was mostly a consequence of the increase in female labor force participation in this period. Nonetheless, the mantra remains in vogue that wage discrimination is the cause of the remaining gender gap in wages. Indeed, a 2017 Pew Research Center survey reported that 42 percent of working women said they had “experienced gender discrimination at work” and “one-in-four employed women said they had earned less than a man” doing the same job. US Census staff, in a 2020 survey study, seem to attribute the gap to biases in occupation. This blog argues that true discrimination was an overstated cause of the wage gap 40 year ago when I first studied it, and remains so today. This blog is not about wage differences. It is about true discrimination, which involves employers who are biased to the point they are willing to sacrifice productivity and profits by overpaying men or failing to hire qualified women.
The reasons that I am dubious about the role of discrimination is simple. First, in a competitive labor and product market, competition exerts strong forces to punish such discrimination. If a firm truly could hire females who were exactly as productive as males and save 15 to 40 percent of its wage costs in doing so, that firm would have a serious cost advantage over its competitors. According to the NYU Stern database of 7,000 US firms, the median rate of profit is just 6 percent. Prejudiced employers, by failing to economize on labor, would be driven out of the marketplace by more profitable, unprejudiced employers.
Second, gender differences in pay can also arise, of course, because of readily measurable, objective differences in factors that make males and females differentially productive. Such factors include education, specific job experience, specific training, tenure in the work force, and other so-called human capital characteristics. Numerous studies have found that such differences in human capital endowments explain much of the Census-defined gender wage gap. The study by Blau and Kahn is one of many such recent studies.
The third factor is that the wage gap is the consequence of voluntary choices. I believe it is unreasonable to expect that wages, labor force participation, and the complexion of careers are unaffected by voluntary behavioral differences of the the genders. Ofek and Haim and this author demonstrated decades ago that the interruption of employment (by either males or females) results in a depression of wage rates by 5 to 10 percent, for each year of interruption. Interrupting paid employment to have and raise children is a voluntary behavior that is particularly important to women, and bound to influence wages and careers.
Voluntary Behavior: Is this the Last Word in the Wage Gap Debate?
In 2018, Bolotnyy and Emanuel, obtained confidential data on the activities and time billings of male and female transit drivers at the Massachusetts Bay Transportation Authority (MBTA). The MBTA’s transit operators are all covered by the same employment agreement. The seniority of the genders is the sole determinant of work opportunities. Thus, men and women face the same choices among “schedules, routes, vacation days, and overtime hours, among other amenities.” In other words, there is virtually no opportunity for management to discriminate in favor of one gender over the other.
Nevertheless, a weekly earning gap persists. Specifically, female operators earn only 89 percent of that of the male operators. This wage gap is eerily close to the wage gap found by others in more complex and discretionary settings after controlling for human capital and work interruption differences. Detailed examination of the causes for the persistence of the wage gap suggest that women have different preferences. Relatively speaking, women appear to dislike working weekends, holidays, and split shifts more than men. Women also trade off the desirable routes against desirable schedules in different ways. All of these and other behaviors have a link to operator compensation and, thus, to the appearance of a wage gap.
On balance, the authors explain the persistence of a wage gap by the fact that women appear to value time and flexibility more than men. Both of these aspects of voluntary behavior could be common to many job settings. Additionally, because promotion is based on tenure only in the MBTA setting, the study fails to support the common view that the female wage gap exists because managers apply differential and discriminatory promotion standards to men and women. Indeed, if voluntary behavior has such a significant effect on relative male-female wages in the MBTA setting, the common assertion that such wage gaps observed elsewhere are due to discrimination deserves serious reconsideration.
Sources:
Mincer, Jacob, and Iliam Ofek, 1982. “Interrupted Work Careers: Depreciation and Restoration of Human Capital,” The Journal of Human Resources, Vol. 17, No. 1, pp. 3-24.
Pozdena, Randall. 1984. “Women’s Wages” Weekly Letter, Federal Reserve Bank of San Francisco, June 8, 1984.
Blau, Francine D., and Lawrence M. Kahn. 2017. "The Gender Wage Gap: Extent, Trends, and Explanations." Journal of Economic Literature, 55 (3): 789-865
Pew Online Survey, Gender discrimination comes in many forms for today’s working women, December 14, 2017 https://www.pewresearch.org/fact-tank/2017/12/14/gender-discrimination-comes-in-many-forms-for-todays-working-women/
Bolotnyy V, Emanuel N. (2020). Why Do Women Earn Less Than Men? Evidence from Bus and Train Operators. Harvard University Working Paper,
Foster, Thomas B., Marta Murray-Close, and Lean Christin Landivar. 2020. “An Evaluation of the Gender Wage Gap Using Linked Survey and Administrative Data,” US Census Bureau for Bureau of Labor Statistics, November, 2020.
Gender pay gap in U.S. held steady in 2020 | Pew Research Center, accessed 5/31/21.
