Breaking down the Gender Wage Gap
This past week I was (finally) awarded the Chartered Financial Analyst designation, which took me four years to finish. I took the final test while I was 2 months pregnant and spent the night before panicked, not about the test, but about whether or not morning sickness would get the best of me and I would throw up on the person next to me. Looking back, I recognize how difficult it would have been for me to have studied for, and subsequently pass, the tests as a mother. As I write this, my daughter is asleep next to me because motherhood is a 24-7 job. As it turns out, this is a significant contributing factor to the wage gap. As both a working mother and a partner at a growing firm, the wage gap is a complex issue that hits close to home and one that I continually find myself trying to understand better.
April 4th marked Equal Pay Day – the day on which women finally catch up to making, on average, what men made last year. According to the Department of Labor, women who worked full-time made 79% of the median annual earnings for men. As a working woman, I raise my fist in protest! But as an economic enthusiast, I can’t help but wonder how that number breaks down. If we were to dig deeper into the gender wage gap problem, what would we find? Certainly, there is some discrimination against women in the workplace, but are there other factors at work? As it turns out, like many other complex issues in our society today, the answer is yes.
A few months back I was doing some googling on the subject out of sheer curiosity and I came across a Freakonomics radio broadcast on the topic. If you haven’t heard of Freakonomics, it is a fascinating book by Steven Levitt and Stephen Dubner in which they apply traditional economic theory to non-traditional topics (I highly recommend it). The aforementioned radio broadcast was an interview with Harvard economist and female, Claudia Goldin, who has done some influential research on gender economics (you can find the broadcast here). What she has found is when controlling for other variables, the discrimination aspect of the wage gap is actually fairly small. When women and men begin jobs straight out of school with the same level of education and work experience, their wages are pretty much the same which would suggest little discrimination. It’s only later on that the gap begins to show up largely because at that point there are several differences between men and women in addition to gender.
A major difference that contributes to the wage gap for women later in life is what happens when women become primary caregivers for children. Public-policy academic Anne-Marie Slaughter calls this the “care penalty.” An obvious example of this is when a woman leaves the workforce altogether to care for children and upon returning finds herself making less than her male equivalent. But there are also less obvious examples. Some women may continue to work but ask for better hours or more flexibility which may lead to lower pay. Some women choose to go part-time or leave a large, well-paying firm to work at a smaller firm that offers more flexibility but pays less. However it plays out, most women who become mothers shift some of their attention away from their career and towards their children and consequently end up earning less down the line.
Goldin goes on to say that another factor that contributes to the wage gap is occupational preferences, or what she calls “occupational segregation.” The idea here is that certain jobs pay more than others and women tend to pursue lower-paying occupations. In the course of my googling, I landed on the Department of Labor’s page for women in the labor force. There’s a bunch of interesting data there including a list of the most common occupations for women and highest and lowest paying occupations. True to Ms. Goldin’s research, the most common occupations for women (secretaries, administrative assistants, teachers, and nurses) don’t fall on the highest paid list. Instead, the highest paid occupations are typically jobs that are male-dominated.
The good news is that the gap is closing. In 1964 women made only 59.1% of what men made and there were very clear instances of discrimination. Today the number of women graduating with college degrees exceeds men. It’s what they do with those degrees that matter to the pay gap and we should fight for the opportunities available to be equal across both genders. I hope my daughter has the opportunity to be whatever she wants to be when she grows up and that our culture continues to move towards a world in which she is viewed and valued as an equal to her male coworkers. If you’d like to learn more about how the gender gap breaks down, I would encourage you to check out the Women in the Labor Force page on the Department of Labor’s website (here) which has some really interesting infographics on the issue (like this one).
*portions of this article originally appeared on our sister site The Cupcake Club on April 20, 2017.
Dubner, Stephen J. "The True Story of the Gender Pay Gap." Freakonomics. January 7, 2016. http://freakonomics.com/podcast/the-true-story-of-the-gender-pay-gap-a-new-freakonomics-radio-podcast/.