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.