The Myth of the Wage Gap
Diana Furchtgott-Roth
April 8, 1999, was dubbed Equal Pay Day by the National Committee on Pay Equity, which joined the National Organization for Women and the AFL-CIO to try to persuade the nation that women are paid only 74 cents on a man’s dollar. Their organizational literature proposed stunts such as selling hamburgers for $1 to men but for 75 cents to women; selling cookies with one quarter removed; distributing dollar bills with holes in them to reflect the gaps in women’s pay; and organizing a New Year’s party on April 8 to recognize that women have begun a new year after catching up to men’s earnings from 1998. Such claims draw media attention, but do not accurately describe women’s compensation in the American workplace.
At about the same time, the AFL-CIO and the Institute for Women’s Policy Research (IWPR) released Equal Pay for Working Families: National and State Data on the Pay Gap and Its Costs. This report again propounded the fiction that women are paid only 74 cents on a man’s dollar in the United States as a whole, and presented data for women’s earnings in individual States. In Louisiana, women’s earnings are supposedly 67 percent of men’s, whereas in the District of Columbia women earn 97 percent of men’s wages. In addition, the report looked at the percent of men and women working in different industries, and concluded that “America’s working families lose a staggering $200 billion annually to the wage gap.”
If these groups are to be believed, then American women are still second-class citizens, as they were before they had the right to vote. But before declaring another crisis, it is worth looking at how these numbers were put together and some of the reasons behind the differences.
During the nineteenth century, employers usually operated on the assumption that women in the labor force earned wages that were merely supplemental to household income. This assumption was reflected in women’s average earnings, which, according to most historians, were approximately one-third of men’s in 1820, rising to approximately 54 percent of men’s by the end of the nineteenth century. Women’s average wages continued to rise relative to men’s wages during the twentieth century, reaching 74 percent of men’s in 1998.
The 74 percent figure is derived by comparing the average median wage of all full-time working men and women. To obtain figures for individual states, average wages of men and women within that state are compared. So older workers are compared to younger, social workers to police officers, and, since full-time means any number of hours above 35 a week (and sometimes fewer), those working 60-hour weeks are compared with those working 35-hour weeks. These estimates fail to consider key factors in determining wages, including education, age, experience, and, perhaps most importantly, consecutive years in the workforce. That is why in States such as Louisiana, where it is less common for women to work, and where they have less education and work experience, the wage gap is wider. In areas where it is more usual for women to work, such as the District of Columbia, the gap is smaller. But this average wage gap, as it is known, says nothing about whether individuals with the same qualifications who are in the same jobs are discriminated against.
When discrimination occurs, and, as readers know all too well, it does occur, our nation has laws to deal with it. We need to focus on individuals rather than averages, and apply the Civil Rights Act and the Equal Pay Act to eradicate cases of discrimination as they occur.
How much less do equally-qualified women make? Surprisingly, given all the misused statistics to the contrary, they make about the same. Economists have long known that the adjusted wage gap between men and women–the difference in wages adjusted for occupation, age, experience, education, and time in the workforce–is far smaller than the average wage gap. Even just adjusting for age removes a lot of the gap: in 1998, according to data published in Employment and Earnings by the Department of Labor, women aged 16 to 24 made 91 percent of what men made.
The wage gap shrinks dramatically when multiple factors are considered. Women with similar levels of education and experience earn as much as their male counterparts. Using data from the National Longitudinal Survey of Youth, economics professor June O’Neill found that, among people ages twenty-seven to thirty-three who have never had a child, women’s earnings are close to 98 percent of men’s. Professor O’Neill notes that “when earnings comparisons are restricted to men and women more similar in their experience and life situations, the measured earnings differentials are typically quite small.”
What about the remaining gap, often referred to as the unexplained statistical residual? Economists Solomon Polachek and Claudia Goldin suggest that different expectations of future employment, or human capital investment, may explain the residual. In other words, since 80 percent of women have children, they may plan their careers accordingly, often seeking employment in fields where job flexibility is high and where job skills will deteriorate at a slower rate. This allows them to move in and out of the workforce with greater ease, or to shift from full-time to part-time work, if they so choose. But job flexibility frequently comes at the cost of lower wages in these fields.
Tenure and experience are two of the most important factors in explaining the wage gap. According to the U.S. Bureau of the Census, women on average spend a far higher percentage of their working years out of the workforce than men. As demonstrated by economists such as Francine Blau, Andrea Beller, David Macpherson and Barry Hirsch, this means that upon returning to the workplace, women will not earn as much as their male or female counterparts who have more uninterrupted experience.
There are reasonable explanations for the differences in average wages between men and women. First, in the 1960s and 1970s women received fewer undergraduate, graduate, and professional degrees than men. It was only in 1982 that women began to earn more than half of B.A. and M.A. degrees, as they continue to do today. In 1970 women earned about 5 percent of all law and business degrees awarded, compared with about 40 percent today. These 1970 graduates are now highly paid professionals at the peak of their earning potential, and many more of them are men than women.
Second, many women still choose to major in specialties which pay less. Women get more degrees in public administration and communications and fewer degrees in math and engineering.
Third, many women choose jobs that enable them to better combine work and family, and these pay less than those with rigid or extensive hours. Even in higher-paying professions such as medicine, many women choose to go into pediatrics, psychiatry, and family practice, all lower-paying fields than surgery, which is more demanding in terms of hours.
Many studies link increased numbers of children with decreased earnings. Professor Jane Waldfogel of Columbia University compared the gap in wages between men and women with the same education for two groups, mothers and women without children. She found that in 1991, women without children made 95 percent of men’s wages, but mothers made 75 percent of men’s wages. The difference can be explained by choices of occupations and hours worked, two variables which were not included in her study.
Naturally, there are different explanations for these data. One is that children take time away from women’s careers, both in terms of time out of the workforce to bear the children and in terms of time put into work effort afterwards.
A second explanation is that women who qualify for high-paying jobs–who major in business or math, or who go to the trouble of getting professional training, for example–quite naturally choose to work more. With a high-paying career, it is more tempting to delay having children, or have fewer of them, or none at all.
Of course, many people would say that there is a third explanation: employers discriminate against married women. So wives are paid less for the same work or are forced into positions of low pay. But data show that employers do not pay unmarried women less: why should the employer care if a woman is married? If employers were against marriage, they would pay married men less. But data show that married men are paid more than unmarried men.
If women were systematically discriminated against, as some assert, then some entrepreneur would be able to step forward and take advantage of this. We would see that firms hiring only mothers would make larger profits than others. In the same way, if women were truly paid only 74 cents on a man’s dollar, then a firm could fire all its men, replace them with women, and have a cost advantage over rivals. We do not observe this happening.
Since average wage gaps occur naturally in labor markets for reasons described above, the only way to get rid of such gaps is to require not equal pay for equal work, but equal pay for different jobs. That is called “comparable worth,” and it aims to eradicate differences in pay across male-and female-dominated occupations. In 1999 comparable worth has been proposed by President Clinton in his Equal Pay Initiative, by Senator Harkin in his Fair Pay Act, and by Senator Daschle and Representative DeLauro in their Paycheck Fairness Act.
Under comparable worth plans, a job’s worth would be measured by having officials examine working conditions and the knowledge or skill required to perform a task. These officials would then set “wage guidelines” for male- and female-dominated jobs. These criteria not only favor traditionally female occupations over male ones, but favor education and white-collar jobs over manual, blue-collar work. Neither experience nor risk, two factors which increase men’s average wages relative to those of women, are included as job-related criteria. And men’s jobs are more dangerous–ninety-two percent of workplace deaths are male.
The AFL-CIO/IWPR study calculated the cost of alleged “pay inequity” caused by the predominance of women and men in different occupational categories. The study compared the wages of workers in female-dominated occupations with those in non-female-dominated occupations. The workers had the same sex, age, race, educational level, marital and parental status, and urban/rural status; they lived in the same part of the country and worked the same number of hours; and they worked in firms of the same size in the same industry. The study concluded that women were underpaid by $89 billion per year because of occupational segregation. Without sex, race, marital and parental status, and firm and industry variables, this figure rose to $200 billion per year.
The study boasts an impressive list of variables, but it leaves out two major factors. First, it omits the type of job, saying in a footnote that “no data on the content of the jobs (the skill, effort, and responsibility required by workers who hold them nor the working conditions in which they work) are available” in the data set used. Second, it leaves out the field of education. It is meaningless to say that the earnings of a man or a woman with a B.A. in English should be the same as the earnings of a man or a woman with a B.A. in math. So the study compares workers without regard to education or type of work: secretaries are being compared with loggers, bookkeepers with oil drillers. Such numbers do not present an accurate estimate of wage gaps, and illustrate the difficulties of implementing the comparable worth proposals suggested by legislators.
Advocates of comparable worth deny that they support a centrally-planned economy, and say that all they want to do is stop discrimination against women. But a preference for more time at home with less pay and less job advancement over more time at work with more pay and advancement is a legitimate individual choice for women. Similarly, the choice of some men to retire early and forego additional earnings, a continuing trend, does not prove inequality between young and old. Neither of these phenomena is a policy crisis calling for government interference.
One of the greatest harms that feminists have inflicted on American women is to send the message that women are only fulfilled if their salaries are equal to men’s, and that a preference for more time at home is somehow flawed. Neither men’s nor women’s education and job choices prove social inequality.
The main question in the wage gap debate is whether individuals or employers will bear the costs of women’s personal choices, such as majoring in subjects which command lower salaries, and taking time off to raise children. The practical consequences of forcing employers to bear these costs include less hiring–fewer jobs and more machines. In an international economy that means more jobs abroad instead of at home. Women’s wages made the biggest strides in the 1980s, a time of strong economic growth but one in which the minimum wage shrank in real terms and affirmative action enforcement was not a priority. There are also issues of fairness. Artificial increases in working women’s wages at the cost of lower salaries for men, or higher prices in stores, hurt non-working women who rely on men’s incomes. And why stop at comparable worth for men’s and women’s jobs? Why not have it for jobs between blacks and whites, or the disabled and the healthy, or tall and short people?
The average wage gap is not proof of widespread discrimination, but of women making choices about their educational and professional careers in a society where the law has granted them equality of opportunity to do so. Comparable worth promotes a dependence for women, and a reliance on government for protection. Given women’s achievements, such dependence is unnecessary. American women enjoy historically unparalleled success and freedom, and the progress they have made in the past half century will continue.
Diana Furchtgott-Roth is a resident fellow at the American Enterprise Institute and co-author, with Christine Stolba, of Women’s Figures: An Illustrated Guide to the Economic Progress of Women in America (AEI Press and Independent Women’s Forum, 1999).
COPYRIGHT 1999 U.S. Commission on Civil Rights
COPYRIGHT 2001 Gale Group
