Another contemporary economic myth is that
women make 75 cents for every dollar men make
because they’re discriminated against in
labor markets. Like other myths, this does
have a kernel of truth to it. So for example,
if you add up all the incomes of women and
divide by the number of women in the labor
force and then do the same thing for men,
what you’ll find is, on average, women do
make about 75% of what men do.
What’s happening here is not discrimination
in the labor market, but differences in the
choices that men and women make (about investing
in their knowledge, their education, their
skills, and their job experiences) that lead
to them getting paid different salaries.
Economists talk about people’s human capital.
By human capital, we mean the knowledge, the
skills, the education, and the job experience
that people have. And economics argues that
people get paid wages according to that human
capital. It turns out that men and women invest
very differently in their human capital, and
we can see that in four different ways.
First of all, educational choices: Men, for
example, tend to go into fields like engineering;
women tend to go into social sciences, into
psychology, into nursing, and so, where men
are making higher salaries as engineers or
perhaps in the business world, women tend
to end up in jobs in which their salaries
are somewhat lower. So even though they may
have the same years of schooling, the different
choices they’ve made about their majors
lead to them working in different areas and
getting paid differently.
Secondly, men and women have different expectations
about work. For example, if women expect down
the road to take time off to raise children,
they’ll make different choices today about
what kinds of skills they acquire than if
they imagine they’ll be working full time
for the rest of their lives. And we know,
historically, that many women in the 1960s
and 70s didn’t imagine that they would be
working full time at age 40 and ended up making
choices that led them to have jobs when they
were working at age 40 that didn’t pay as
well as it might have otherwise. Younger women
today, of course, are more likely to imagine
themselves working at age 40 and, therefore,
make different investments today.
Another difference between men and women is
full- versus part-time work. Women are much
more likely than men to work part time. Men
are more likely to work full time. And part-time
work, even for the same kinds of jobs, tends
to pay less than full-time work. And women
tend to prefer part-time work more than men
because women still tend to take on the majority
of the responsibility for children and the
home.
Finally, men and women differ in terms of
their tenure on the job or the way in which
their careers get interrupted. If it’s the
case that women take time off from the workforce
to raise children, that will have an impact
on their salaries down the road.
So we put these four things together, what
we get is that the difference between men
and women’s pay is not a result of labor
market discrimination but of the choices that
men and women make before they enter the labor
market, or even when they’re in the labor
market, about the kinds of jobs they want
to have and the way they want to balance a
family and work.
Studies that have tried to control for all
these factors have shown that if you take
a man and a woman (same experience, same education,
same job) and compare their salaries, what
you find is that women make about 98% of what
men do, so that gender wage gap pretty much
disappears. And in some jobs women actually
make more.
Now it might well be the case that women are
being discriminated against or that sexism
is a problem in the choices that women make.
For example, girls are guided away from math
classes and guided into other kinds of classes.
It’s also certainly the case that our expectations
about women’s roles versus caring for children
in the household, men’s roles about caring
for children in the household are very different.
If we think those are poor choices, if we
want to see women’s pay more equal to men,
what we need to do is convince more women
to go into areas such as the sciences and
mathematics and engineering, and we need to
convince men to take more responsibility for
children and the house. When those begin to
even out, we’ll see wages begin to even
out as well. But in the mean time, whatever
choices men and women make, the wages they’re
paid in the market will reflect the productivity
associated with those choices and are not
the result of discrimination.