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 at the University of Michigan's Flint campus.
Mr. Biggs
is a resident scholar at AEI.
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